Member Info for Hounddog10

Last sentence: “There is a good deal that could change.”

2/2

If you do not accept the offer but it goes through you will not be automatically bought out. Technically you will end up being a shareholder in a private company, which is highly unattractive as you will not be able to trade your shares and have limited information as to what is going on. The exception to this is if acceptances get to 90% at which point under Company Act provisions DK can forcibly buy you out at the offer price.

It should be noted that DK will almost certainly WANT to buy everyone out. He doesn’t want random minority shareholders left on the shareholder register. The only reason he has set 75% (rather 90%) as the precondition for a successful takeover is because that is the minimum level at which he can take the company private and he probably thinks it will be difficult to get to 90% initially (which is often where the acceptance threshold is set). I think if he gets to 75% but not 90% he may be able to make additional offer(s) (at the same offer price) to buy out any recalcitrant shareholders. I have seen this done before but don’t count on it.

The shares are trading at around 320p ie 40p below the offer price because there is uncertainty as to whether the offer will be successful. This is due to whether shareholders will vote in favour, the extended timetable, the almost certain new UK government which may take a different view of the takeover, general uncertainty over other regulatory clearances etc. The CWU’s demand for employee ownership is also something else that has now been thrown into the mix.

The decision for shareholders at the moment is whether to hang on and hope the offer is successful/might DK end up offering more/another bidder come in (unlikely in my view but a technical possibility) or to sell in the market and take the current price. If the offer is unsuccessful then it is highly likely the share price will fall back and be valued on fundamentals rather than a potential bid premium. And remember under Takeover Rules DK cannot come back for 12 months.

Just some thoughts not advice. There is a good deal t

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Here are a few comments to amplify on simx’s post.

The CURRENT timetable is that acceptances for DK’s offer have to be in by 1pm on 25 August. As I have posted before this is really an interim timetable to comply with the Takeover Panel’s standard rules to get everything done by the normal “Day 60”, being 25 August (which is known to be impossible given the needed regulatory clearances). Things are already set up to push back that date back with a review date on the timetable on 2 August (so look out for a RNS/notification around that date). Whatever happens they say they will give 14 days notice of when the last day is to put in your acceptance if you so wish (be particularly aware of looking out for that notification).

One thing to watch is that any broker or custodian you use might, for administrative reasons, require you to get your acceptance in rather earlier than the official deadline so it is sensible not to leave it to the last minute or at least check what their requirements are.

Although, as is normal, DK is asking for acceptances as early as possible I think most shareholders, particularly the institutions (who, of course, will decide things), will likely sit on their hands until towards the end of the acceptance period before submitting acceptances.

If you accept the offer then you are contractually bound to sell your shares to DK (you can, potentially, reverse that decision prior to the final acceptance date but it will likely involve broker costs (and ignorance from their admin teams) and is much less advisable than waiting until you are sure what you want to do).

If you accept and agree to sell to DK this does not mean that you will automatically get the 360p offer price plus the 8p final dividend, as both are conditional on the offer going through. DK has stipulated for the offer to succeed, as it is currently structured, it needs 75% acceptances. So you will ONLY get the 360p + 8p if the offer gets to that level of acceptances (ie essentially it is accepted by the majority of institutions). If the required acceptances are not achieved the total offer falls away as does DK’s obligation to pay you 360p + 8p for your shares and for you to sell your shares. Note also that, even if the offer is successful, the 360p + 8p will only be paid sometime in Q1 2025.

It is worth noting that in the Offer Document they have to repeat and reaffirm, withdraw or restate any extant profit forecasts for IDS (or major component businesses). They have reaffirmed their forecast for RM for 2024-5 that IDS will show an operating profit for that year. However, this is before VR costs, is “adjusted” and obviously excludes interest costs and tax (if any).

In respect of the €500m revenue forecast for GLS for 2026-27 that has now been withdrawn due to uncertainty over macro economic factors. They clearly felt sufficiently uncertain not to restate it.

DK can buy. Explained in bullet points five and seven under 6.1 of the link. The offer is being done by way of a contractual offer and not by a scheme of arrangement.

https://resourcehub.bakermckenzie.com/en/resources/global-public-ma-guide/europe-middle-east-and-africa/united-kingdom/topics/takeover-tactics

Timings are set out on pages 12 to 13 of the Offer Document. It hinges around so-called Day 60 in the Takeover Code. Day 60 is the date (60 days after issue of the Offer Document ie today) when an offer has to be declared unconditional. For this to happen the offer must have enough valid acceptances (or effectively votes) and all conditions to the takeover, usually regulatory, have been satisfied. In other words the Panel sets a 60 day timetable to get everything done.

Day 60 is 25 August 2024 and all acceptances by shareholders in favour of the takeover should be in by 1pm.

However, Day 60 on 25 August 2025 is an already known unrealistic timeline given the needed regulatory clearances so it will almost certainly be extended (the target date for completion is Q1 2025). The date for the Panel to consider extending the timeline is 2 August 2024. That will almost certainly happen.

Acceptances can start to go in now but I would expect most to sit on their hands for a while and only put in any acceptances closer to 25 August 2025 (or indeed later). As indicated this date will almost certainly be extended. In any event 14 days notice will be given of any final voting date.

DK has until Day 46 (11 August 2024) to up his offer if he wants to. However, that is a deadline that can be moved subject to agreement by the Panel.

It is going to be a long haul.

Https://www.internationaldistributionservices.com/media/12347/offer-document.pdf

Sunak has wrongfooted a lot of people with his election announcement. Himself being one of them.

If I have got my day count right then tomorrow is the last day for DK to get the Offer Document out (28 days from the Announcement of the offer). Usually a vote on the takeover happens 21 days (plus maybe an extra two days to allow for posting of documents) after the Offer Document is issued. 21 days is the minimum notice period. Then, in this type of takeover the offer is meant to be have been approved and be unconditional 60 days after the date of the Offer Document or otherwise it fails. This is known as Day 60. The Takeover Panel’s rules are designed such that target companies are not left in limbo for an excessive period. It is also usually in the bidder’s interest to try to complete as soon as possible in case circumstances change.

However, obviously there is no hope, given the many regulatory clearances that have to be obtained across multiple countries, that this will be wrapped up by Day 60. They have already said completion is envisaged in Q1 2025 and will have asked the Panel to accede to that timetable. There are other complicating timing issues such as the almost certain change in government, dealing with the recent CWU’s demands and the fact that having a vote in lateish July is not particularly good timing to get City people onside as they are on holiday or thinking about their holidays. So it is not entirely clear when the vote will be - but it is not tied to the AGM which I think some have said is in September.

DK has some time before the vote to raise his bid, if he needs to or is inclined to do so.

We should know the timing of the vote tomorrow as it will be set out in the Offer Document. Another feature of the Offer Document is whether DK has managed to round up any shareholders to vote in favour either through an irrevocable undertaking or letter of intent. That is potentially an important indicator of where things might be going.

From an article in The Times today it seems that Ward is pushing hard, ahead of a meeting with DK, for part ownership by employees of RM. No doubt he is not envisaging the employees will put any money in - so a free carry. He also wants to have a much bigger say for the employees (ie him) in running the business. I can’t see DK agreeing to that. The free carry might not be too bad but Ward will oppose anything that reduces jobs and DK is very keen on PUDO which will do that.

How Ward thinks he can improve the RM business when he was in denial for so long about its £1m a day losses is difficult to grasp.

Laurier got a 18% pay increase last year, Bristow 10%.

Another Times article. Kretinsky clearly doing the press rounds. Not much new to say. Emphasis on the £400m investment for out-of-home. He is meeting Dave & Co next week and seems to think (or say) he is on the same page as them in terms of investing in the business. I fear he will be sorely disappointed. I am not sure he fully appreciates their visceral hatred of capitalism and shareholders. They will see investment in out-of-home as meaning less jobs which, in the longer term, is right. However, I don’t think posties need to be too worried because, short term, there are enough jobs to go around iand QoS needs to be improved. RM can largely downsize jobs through natural attrition which is at least 10% per year. However, for the CWU it will mean the loss of those vital subs.

One interesting point in the article is that in a survey by Retail Economics of those aged under 45 75% see a locker as their preferred choice for delivery or returning goods.

https://www.thetimes.co.uk/article/daniel-kretinsky-royal-mail-takeover-interview-c7v5w8wfh

AbjectPerformer

Very broadly £30k of the £50k should be tax free. However, it appears that if some of it is in lieu of notice then that is subject to income tax and NI. See link below. I had remembered it as being somewhat simpler than that - a straight £30k allowance but perhaps the rules have changed.

There is also the matter of the £12,750 personal allowance. You should get a full year’s allowance even if not having worked for a full year. As the personal allowance in tax calculations for monthly salary payments assumes working for a full year (so is spread over 12 months) if you do no further work it is likely tax will have been overpaid on the £25k earned.

Can’t easily see you having to pay at 40%.

Just very general comments. Probably best to ask your HR department. They can do something useful for once.

https://www.gov.uk/redundancy-your-rights/tax-and-national-insurance

Article in The Times saying that Kretinsky intends to invest £400m in RM to establish 20,000 PUDOs (presumably locker stations). In full year results IDS gave emphasis to out-of-home but mainly in respect of GLS. However, they did say they were planning 10,000 locker stations for RM but initially it seemed only for DO. I would guess that was to appease the CWU and that moving to PU would require a new agreement with the CWU when the current agreement comes up for renegotiation in April 2025.

https://www.thetimes.co.uk/article/royal-mail-news-daniel-kretinksy-takeover-latest-qr6j5qq37

The short term risk/reward ratio is not particularly compelling - 35p on 335p. So a bit over 10% in about 8 months if the deal goes through.. The share price will likely fall back quite a bit if the bid fails.

I am not sure, given reading the press, this will get past the shareholder vote and then there is the matter of regulatory clearances, CWU etc.

Of course Kretinsky could raise his bid but he is already bound into some expensive commitments.

Yes.

2p 2024 final dividend - if you hold shares on 23 August 2024. Paid 30 September 2024.

8p special dividend. Have to hold shares when VESA offer goes unconditional (expected Q1 2025) ie if the bid is successful. Not paid if the bid fails. To be paid 14 days after offer goes unconditional ie with the £3.60 buyout of the shares.

VESA now has 28 days to get an offer document out (at the moment we only have a formal RNS announcement). Bidders generally use all that time. From that there needs to be 21 days to the vote to give shareholders time to consider the vote. It is also customary (although somewhat less so now given the internet) to add two days for posting for those who want physical documents (would assume there will be a reasonable number in IDS’s shareholder base that would want that). I will leave it to others more expert than myself to consider whether two days is currently the right length of time.

So around seven weeks or so to the vote.

Oligarch

As this is takeover by contractual offer DK can vote his shares (not the case using a Scheme). However, note that really he is after 75% because only at 75% can he delist the company. As the bid is currently constructed it needs 75% but DK could, with the consent of the Panel, modify that (doubt he would want to). There needs to be a vote even if shareholders formally or informally say they will support. Non voting shareholders do not count either for or against.

I should clarify that if VESA did make further offer(s) to get to the 90% it would be at the £3.60 bid price.