The long wait for a Bid

Sunday, 22nd November 2009 14:44 - by Boredmum

How many times have we all seen news of a bid being made for a company? I’m not just talking about official news. At times it may be a newspaper article or even the dreaded bulletin board (chat forum) rumour. A lot of times these bids come to something, many other times they fall through. I have previously bought into companies exclusively for the possibility of someone taking them over - and hopefully paying a premium to do so. The thing I want to discuss today is the length of time that this can take to happen. Take Minerva (TIDM code: MNR); I traded it a couple of times when rumours started to circulate of a bid being made around the 50p mark. Well, I last sold that one back in early July as I was bored waiting for it. Just this week that offer was finally made. I bought Silence Therapeutics (TIDM code: SLN) way back in July 2008 in anticipation of a bid. Finally, in September 2009 the shares were suspended pending possible merger. What about Caledon Resources (TIDM code: CDN)? I call this my ‘bank account’ as I continually take money out, go elsewhere, sell and return, over and over and over again. That is how long the bid is taking. Coolabi (TIDM code: COO) was one that I held (not for a bid), but news came of a reverse takeover and shares were suspended for 6 months. After the shares resumed trading, it came with news that the takeover was off. The moral of this story is only buy in for a takeover if you have time on your hands, you don’t need access to your funds and have the expectation that it may not even come off. On that basis, be sure that the company in question can go it alone. A lot of times a cash call is needed. Many of these bids are made as companies have value, but little in the way of funds. The ‘plus’ side is, of course, that an offer usually comes at a premium. Not always, as Pentagon Protection Plc (TIDM code: PPR) proved this week, but usually an offer will come at a premium to the current share price.