Member Info for Deepvalue85

I don't normally delve in to conspiracy... it just seems so odd.

The valuation vs market cap just does not make sense.

I think you could be spot on here Temuchin.

The question I have is... do potential bidders understand the situation and know this is the game JD has been playing all along and have been waiting for this announcement. It seems like this has been the strategy of JD from the get go. Basically, go through the motions to make it look like he intends to bid, then process the rule 9.1 waiver and off to the races. The thing is, if you have specialists working for the potential aquierers, they will no doubt be aware of these tactics and have been waiting. Could be all conspiracy but it has certainly got me thinking.

I have certainly reassessed my appraisal of Julian Dunkerton.

Hi Dean01,

Interesting views. However, from my perspective points 1-3 are largely conjecture (please feel free to correct me).

RE timeliness of events. I remember my brother selling his business and, if I recall correctly, it took the best part of six months to complete, and that was a private company. I suppose what I am saying is I prefer to deal in things that are important and knowable. I would think this deal is of equal complexity, if not more so. I therefore think that to predict the date of which the business receives a firm intention to bid is neither knowable or important, probably due to my biased interest being the asset, not the outcome. Are you a trader out of interest? That might be why we have philosophical differences in approach.

I am not an expert on the takeover code as I rarely get involved in buyouts. Purely out of intrigue, does anyone know unequivocally what the time threshold is for this potential bid? I.e, maximum number of times can Julian request an extension? It would be interesting to model a hypothetical IRR calculation.

Just a couple of questions...

What reasoning are you using for your hypothesis that the deal is taking too long? Or is impatience and uncertainty that is clouding judgement?

Secondly, why does it matter? The job of the investor is to work out what the company is worth and whether to part with £X now for £Y in the future.

Because buying a business doesn't take five minutes.

Time has no correlation to the outcome of a successful bid.

Thank you

Hi Temuchin,

Thank you for the post.

Could you please advise what a UPSI is?

Thank you.

1) does an extension change the value of the business?

2) does an extension change the probability of outcome?

Thank you dean01,

I appreciate your analysis.

However, I would revist your second paragraph. I am not sure you have fully thought through your logic.

Dean01,

I'm not sure I agree with your assessment re odds and potential outcomes.

The way I see it CURRENTLY, is that it is a 50/50 probability based on a bid or no bid scenario. So, if you are an investor, and not a trader, the outcomes are:

1) company doesn't receive a bid. (Share price can do what it wants, but doesn't change the intrinsic value of the business).

2) company gets bought for a reasonable approximation of intrinsic value.

If the company doesn't receive a bid, then it is time to reassess the investment thesis.

I would like to hear your rebuttal to that, and the logic behind it please.

Dean01,

We're Direct line group in a bid situation before the previous offers were rejected but not declared?

Are the rules different in a bid situation? I.e, takeover code applies?

Hi SIMPLYALPHA,

That makes perfect sense.

Thank you for such a good explanation.

Hi SIMPLYALPHA,

Why do you think they have changed the structure of their position?

Am I right in saying long exposure is equal to short exposure and that they are a market maker? Please correct me if wrong.

Thanks

Does circa £75m a year in revenue... hardly comps.

Not mine.

In the short run, the market is a voting machine, in the long run, its a weighing machine.

I reckon £150m debt finance and approximately £53m for the remaining equity. Could be way off though.

Was the founder trying to regain control of the company he started?

The company now sells for less than 1x normalised fcf.

Gary,

I see your thinking... not bad. Board being stuck between a rock and a hard place, Betting on an extension which will cause a further dislocation between price and value, with the bonus being if the deal collapses its a nice kicker.

Have you considered the other variables at play though?