RE: Mitch6 Jan 2023 18:46
Info - very well done
You may have missed it but i posted below about a week ago. All of the assets we are buying are held by tailwind Mecure so that is key 60:40 split. The way the consideration was split in SQZs RNS supports a 60:40 split
Tailwind is a holding company, and all the producing assets were transferred to a subsidiary called Tailwind Mistel in mid-2019.
The accounts of both companies deem it a management requirement to assess the ongoing carrying value of any deferred tax asset.Pages 32 and 33 Note 9 of Mistrals accounts 31st December 2021 should be of interest.
“Tailwind Mistel has unutilised losses of $609m (2020 $685m) and the forecast profits of Tailwind Mistral Operations are sufficient to allow this deferred tax to be recognised in full” So far so good !!
The accounts themselves only show a deferred tax asset of $83m (this would be a benefit to Serica on acquisition) which has been determined by Mistral Directors. Why ?
Answer because the company has taken advance capital allowances on earlier activity it has created a deferred tax liability. The accounts show
DT liability being accelerated capital allowances = ($223m)
DT asset from $609m losses effective rate 39% = $242m
Other DT assets re timing differences = $64
Overall asset on 31st December 2021 = $83m
Based on all published information the professional opinions of both Tailwind Directors and Auditors the maximum benefit to any aquirerer of Tailwind would be $83m at Dec 2021.
With 2022 being a year of super profits I doubt anything positive on tax is left for Serica.
The RNS quotes the source of the figures below as tax returns.
Its completely disingenuous and just not right to ignore the accounting view and the deferred tax liabilities from accelerated capital allowances which we will have to pay.
Sorry but the inclusion of the note on tax losses stinks of desperation to try and sweeten a terrible deal. No wonder the FD didn’t say anything.
Tailwind had some $1,366 million of brought forward UK Ring Fence Corporation Tax losses and $1,202 million of Supplementary Charge losses as of year-end 2021[10].
The interest that Mecuria hold in Tailwind is ambiguous.
They were allotted 667 redeemable preference shares in July 17 ranking Pari pasu with the 1,000 shares of the holding company NSV.
Prior to these accounts were unaudited and vague and no evidence of what Mecuria paid for their holding.
The inference is with 1,667 shares Mecuria hold 40.1% and Holding company 59.1% .
What strikes me as odd from the RNS is Mercure (a 40% holder) get shares at £2.78 valued in the RNS as £367m
Holding company NSV (60%) lose £277m of debt and get £58.7m = £335m.
Why does the 40% interest (Mecure ) have consideration of £367m and the 60% only get £335m ?
The answer I suspect in SQZ will inherit several liabilities not referred to in the deal (NSV losses them completely but Mecure still has them hence the structure of the deal)
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