Member Info for 1GW_

Going back to the original financing deal (see RNS of 11th Feb 2011, "Balance Sheet Restructuring") which gave rise to the convertibles I see the condition is not that an offer is made, but that it becomes unconditional. So I don't think the dilution has been triggered just by SPD making the mandatory offer, since that offer is conditional. That's unless the trigger was changed subsequently - because I don't see why it would be reported otherwise in the annual report.

"In addition, £40 million of indebtedness under the Existing Revolving Credit Facilities will be released (and corresponding commitments of the Lenders cancelled) in consideration for the allotment and issue of 166,878,704 Convertible Shares to the Group's Lenders. The Convertible Shares may be converted into Ordinary Shares at the option of the holders of the Convertible Shares in the event that: (i) the Company's volume weighted average Ordinary Share price rises above 23.97 pence for a period of one month between the 2nd and 10th anniversary of the date of issue of the Convertible Shares; or (ii) in the event that an Offer becomes wholly unconditional (regardless of the share price performance of the Company). The rights and restrictions attaching to the Convertible Shares will be set out in the Proposed Articles of Association, including a prohibition on the Company making, paying or declaring dividends or other distributions in excess of 50 per cent., in aggregate, of the Group's net income in respect of any particular financial year. Dividends and other distributions are not permitted under the terms of the New Lending Facilities."

Hoping to get the deal rejected in the R1 vote is a real david vs goliath ask unless Lombard Odier come out against the merger (or a counter-bidder emerges) I think.

If you look at those who gave either commitments or letters of intent you're at 54% of the 62% declared, if my records are right, i.e.:
25.3% Toscafund
14.1% Lombard Odier
9.9% R&M
5.2% Viex/Singer

Then it's probably reasonable to assume Schroders and Norges Bank will vote for the merger since they have bigger positions in Taptica. So that would take it to 58% of the 62% declared.

In theory, even if the 38% undeclared is mainly PIs, you could get the 25% (of shares voted) needed to block the Scheme, but it seems very unlikely to me. Many PI's may not feel strongly enough or knowledgeable enough to vote, and some may not even be aware that they can vote if their shares are held in a nominee account.

So I still think LO holds the key. Edenbrook could get some publicity by coming out strongly against the deal, but their position is too small (and perhaps their UK profile not high enough) to have much chance of success I would have thought unless they can get LO onboard.

Of course, if a counter-bidder comes in with an offer, or even a declared intention to offer subject to seeing the books, then it would be a very different position.

The only other wrinkle I could really see is if Edenbrook are somehow able to get an injunction against completion (until the case is settled) as part of their litigation in the US. Presumably they will feel it's going to be easier for them to get the proceeds of any financial settlement judgement against R1 while the parent company is still UK-registered and subject to some US SEC regulation.

And I have to say, I think I personally would be indifferent about a shortish delay if it resulted in full disclosure of R1 (FY19) and Tap (FY18) results before the vote. While I feel that merger almost certainly is in the interests of R1 shareholders (so the sooner it completes the better in one sense), I would feel better if I could see, in audited results, that both companies had performed broadly as expected.

This is an interesting thread. It prompts the question of whether big IUC contract awards have been delayed or whether tly just hasn't been winning them, or has just been winning a part of them?

In response to UpTheJunction's listing of 2018/19 awards, stt1 came back and said that Vocare were actually part of the Devon Doctors contract (Somerset). In Somerset, Vocare have the 111 service I think (of course they used to have the out-of-hours contract as well but withdrew following poor ratings), and have recently received an improved rating of "good" (Wellington House).

So is this idea of really big IUC contracts for Vocare, with not much competition, a bit misleading? Even where the contract awards overall are big, is Vocare likely to end up with just a piece of them as part of a consortium? And if there is a preference to award to incumbents, isn't it going to be some time before Vocare's reputation is sufficiently improved to make it really competitive when challenging incumbents?

Press Release: 07/03/2019

This looks like "good" news at least.

BaNES, Swindon and Wiltshire 111 receives 'good' rating from CQC

https://www.vocare.org.uk/news-070319.php

So is that an admission that there's still a long way to go? They are still in the business of transforming delivery of the service?

"Vocare are looking for a senior clinician with experience in service improvement to join its National team. Reporting directly to the Director of Quality and Nursing the post holder will play a pivotal role in the delivery of a transformation programme focusing on the delivery of integrated urgent care services. "

No, that wasn't my trade today. Still a holder, although much reduced position.

The market isn't acting as though it expects any problems with the merger. R1 pretty much trading at fair value, with no consistent discount for completion risk or premium for counter-offer that I can see.

On the other hand, there is no declared arb player as far as I can see (i.e. no-one who has a long-short position which would reflect the merger terms) so who is driving the R1 price to fair value? The market makers? Toscafund and LO?

If LO and/or Edenbrook are planning anything, I would have thought they need to get it out in the open next week. Together they have a bit over 25% of the declared positions (16.5% out of 62%) according to my records, so effectively a blocking vote if only the declared positions vote. And even some of the declared positions may not vote, looking at typical AGM votes. But they wouldn't want to leave it to chance that abstentions would be enough for them to block.

So I would have thought they want to make their case (if they have one) to other shareholders. Declared shareholders they can cover in private, but PIs and non-declared shareholders they presumably need a public approach for.

So a counter-bidder to emerge or an appeal from Edenbrook/LO earlyish next week I would have thought if anything is going to happen. But as I said at the start, the market doesn't seem to be expecting anything.

1 trade for 26k shares at 12.00p. Not much obvious positivity on display from the market today.

Incidentally, as I read the resolution, the minimum price tly is allowed to pay for each share bought in a buyback under the AGM resolution is 10p (par value).

So we're perhaps not all that far away from the market testing this buyback resolution to the limit. If the share price dips below 10p and the company still doesn't implement a buyback then it's going to look awfully like a bluff that's been called, isn't it?

It's encouraging to see there hasn't been a rush of existing holders to sell at the current premium being offered to the SPD price. So I think it's fair to say that existing holders would agree that fair value should be well above where we are today.

The board will be limited by the takeover code I think in terms of what they can say about current year results, with failry tight restrictions on "profit forecasts" and profit estimates". If they are expecting good year-end figures then they might want to accelerate the auditing of end-year accounts so that they can then disclose these. I don't know what the rules are on allowing someone like Edison access to data and "steers" during a takeover period, but they could presumably revisit previous analysis based on publicly available information.

What's the end-game though? That's the key thing isn't it? Is there any chance of SPD and the board being able to sit down and negotiate a deal which does give Findel holders proper "fair value" plus a premium for control? I can't believe it makes sense for SPD to sit there with over 30% of the company but all sorts of restrictions on access to data and input to strategy. And given where the share price currently sits, now might be as good a time as any for SPD to try to close this out. They could offer a very generous premium over the current price and still presumably be well within what they might have estimated as the total acquisition cost when they first bought in at £2/share or so.

Skindle, the numbers stay as they are unless or until some of the convertible shares get converted. That extract from the annual report suggests conversion is now at the option of the holders provided that the SPD offer counts as an "offer for the company". If the shares don't convert by 22nd March 2021 then they become deferred shares which the company can buy back for "a nominal value".

So the offer appears to be a gift to the convertible holders and I would expect them all to choose to convert (on the basis of my reading of that summary of the terms in the annual report). As they do, the number of shares in issue will rise and the company presumably will give further 2.9 notices.

The fact that Findel has had to issue a revised 2.9 notice identifying the existence of the convertibles suggests to me that the board and its advisors were unaware of (or had forgotten about) the terms of the convertible shares when the first notice was issued.

So I think we can expect to get declarations from the 1%+ owners of the remaining convertible shares. I wouldn't have thought those who have already declared (ordinary shareholdings) would have to give new declarations just because the shares in issue change, but they would if they deal and would have to use the correct "shares in issue" number at that time.

Skindle - the dilution, if the convertibles are converted, will reduce everyone's % holding of ordinary shares (compared to the current declared positions) because it will create more ordinary shares.

By remaining 63% I mean 63% of current Ord shares plus (100% of) those created from the convertibles. And by greater cost I mean greater as a %: £13m on £88m vs £13m on £139m.

SPD appear to have valued the offer on the basis just of the ordinary shares in issue (86m shares x £1.61/share = £139.2m).

But if the interpretation in my previous post is correct, they would also have to buy the 8.3m ordinary shares created by conversion of the convertibles wouldn't they? Which would raise the value to £152.6m.

And the increased cost for them of implementing the offer is even greater, since they already have 37% of the current ordinary shares. So the cost of the remaining 63% becomes £101m instead of £88m, if my interpretation and calculations are correct.

It looks to me as though the SPD offer may have triggered a roughly 10% dilution by converting the convertibles into ordinary shares. So everything else being equal, that probably merits a 10% fall in the share price from "fair value" before the offer?

"The following rights are attached to convertible shares:
• The shares may be converted into 8,343,935 ordinary shares at the option of the holders of the convertible share in the event that:
(i) the Company’s volume weighted average ordinary share price rises above 479.4p for a period of one month during the period commencing on 22 March 2013 and ending on 22 March 2021;
(ii) an offer is made for the Company (regardless of the share performance of the Company)."

He was the non-exec with a finance background.

stt1 - there's a big difference between being "expected to sell" and dumping at such a relatively low price (i.e. relative to the price prevailing at the time of completion of the Vocare deal).

I spoke to Wendy directly about the likelihood of the Harrisons selling out at the price then prevailing at the AGM. Have you spoken to anyone who actually knows them or is it just your own theory that they would always have intended to sell even if the price crashed to the level it has?

I guess that's one of the key execution risks on Vocare.

It seems to me Totally want to up the quality of the service they provide and at the same time up the profit margins. So far, they've clearly had some success on quality, as evidenced by the ratings improvements. I think it's reasonable to assume a by-product of that is that they've built some additional cost into the equation. But that means they need to up the rates they bid, not only to improve the profit margins on the business as it was, but also to earn a return on any additional cost they've put in.

What happens if the market doesn't allow that? i.e. if by bidding at levels they believe provide sensible profit margin they can't win enough business? Isn't it possible that the Harrisons feared that was happening and that was behind their decision to sell up?

I've bought some more. Seems like a crazy price to me given the clear interest of SPD in the company and the huge institutional base. I suspect the price was dragged down to some extent by knowledge or fears of the City Financial need/desire to sell, although I don't understand why someone other than SPD didn't snap them up given the apparently good trading position the company finds itself in.

The SPD mandatory offer isn't really a put option here because I don't think they will get to the required level of acceptances and so won't be required to buy any under the offer. But the fact that they bought at 161p to me clearly indicates a desire for control, which ultimately I think they will end up having to purchase at a premium.

Skindle - City Financial in Enteq, not Toscafund.

Skindle - for City Financial I suggest you google what's happening with them, if you want to see why they might have sold. They also sold out of NTQ, one of my other investments, taking a big hit on the published bid/offer.

As for Toscafund, I don't know - that surprised me as well, given I thought they were probably instrumental in bringing in SPD in the first place and setting this up for SPD eventually to pay a premium for control.