Member Info for Hounddog10

They are getting out of a business line (bulk annuities) where they feel they do not have sufficient scale and presumably is not particularly profitable or possibly is loss making. They will be disposing of not only assets of £6bn but liabilities of (probably) around the same amount which are funding those assets.

The backstop date is when the current Scheme goes out of existence. It is a mechanism to put a limit to the length of time a company can be under siege.

I believe the court date can be shifted out to (at the latest) early October. This is the backstop date in the Scheme Document and is a requirement of the Takeover Rules. There are two court dates. The first is the court MEETING which really is only to approve the vote and say that a Scheme can go forward (this is what has been delayed). It is an administrative process and is held at the company registrar’s office rather than in full court. There then has to be the court HEARING. This is a proper court hearing to evaluate the Scheme before a judge. I don’t think that much notice has to be given and its timing is dependent on getting preconditions satisfied (the difficult ones being regulatory clearances in Tanz and Kenya - who knows what goes on in that process). However, the court HEARING is normally about a month after the court MEETING. Obviously the more the vote/MEETING gets delayed the more the preconditions are likely to be already satisfied and so the court HEARING can happen quickly after the court MEETING.

The backstop date relates to the date of the court HEARiNG. The Scheme becomes perfected and active once the (approved) resolution of the court HEARING is delivered to the Guernsey Registrar of Companies. That usually happens the business day after the court HEARING.

So theoretically this can go on for months, but I think resolution, one way or another, will happen this month.

Shanta delivers up all its silver from NLGM under a silver streaming financing agreement which only expires in early 2026. So no benefit there. Not sure much, if any, silver at Singida.

Numbers are small though at NLGM.

Thanks. However, I don’t see it in the RNS section of this bulletin board. Odd. You would have thought this board feeds from the same RNS source as the London Stock Exchange.

Yes, sorry I was not very clear that they bought over 4 million shares on the 29th and their overall holding is around 44m (over 4%). I cannot remember a previous form 8.3 from them and as you have to disclose once above 1% it rather begs the question as to whether they should have disclosed before.

Some significant post close trades at around 13.3p. Presumably off market being reported. Indicative of accumulation by, probably, a hedge fund. Another hedge fund has now entered the fray - Sand Grove Capital has bought around 4 million shares (over 4%). For some reason the Form 8 RNS does not appear here (I learnt about this from another bulletin board and had to go to the London Stock Exchange’s website to see the RNS). Samson and Caisses have been accumulating over the last few days (and that is post vote). With Sand Grove they now all own about 11.5%. It is highly likely that this trio will determine outcome as that size of holding is enough to block an undesired level of bid given that not all shares will be voted on.

I think it is worth clarifying that they had the vote (on the 27th). It is the court meeting which they have delayed. As far as I am aware the only purpose of that court meeting is to formalise the outcome of the vote before the court. In legal terms therefore although the vote has occurred it does not exist.

Harrogate. Thanks. I am sorry to be rather pessimistic but I am afraid there is not too much we can do about them withholding resources and production data. The problem is that there is no specific rule that they are breaching. The quarterly updates they have complied with so far and I expect them to do that again for Q1. However, those are technically voluntary. On the R&R, Singida and WK updates (I have lost track of WK - they don’t seem to have promised anything) it is very difficult to pin them down on deliberate delay because, again, there is no rule and they can always say that they are waiting on the lab for assay results

I think it is possible that they may try to get Shanta off the market before the Q1 update in, usually, third week April. If they do the court meeting at end March, they may be able to do the court hearing quickly thereafter and then Shanta gets taken off AIM the next day. I can imagine they would like to do that because they will get questions from analysts on the conf call associated with the Q1 update about promised information if it has not been released. Zurrin, of course, no longer willing to face the PIs.

My sense is that this is likely to get sorted out, one way or another, quite soon. The hedge funds are not in it for the long term and as time goes on Shanta will be forced to put out more information which is likely to make the Patel bid look even worse. As others have pointed out it should be generating $25m EBITDA a quarter, so the cash starts to mount up in the balance sheet. However, this is a Scheme so there is no Day 60 rule (put up your final offer or shut up). The backstop date for the Scheme to lapse if the court hearing has not happened is early October so theoretically this could run for some time - although I would be very surprised if it did.

I think it was interesting that Caisse bought more on Wednesday (after the vote) so they seem determined. It is worth tracking the form 8s. They show any prior day dealings by investors with more than 1% (plus also the market makers associated with the bid - Berenberg and Liberum have to show any positions they have - and they will not want to be caught on the wrong side of things). The form 8s have to be submitted via RNS by 3.30pm the day after the dealings.

Yes, the hedge funds may well have done that. I hadn’t thought of that tactic.

I think the current vote does not count until it is formalised at the Court meeting. So effectively it does not exist at the moment. I suspect the vote was not lost by a big margin - or otherwise the Patels would have upped their offer beforehand. In other words I would guess they had hoped it would go through.

They will be able to launch a new offer off the existing Scheme Document but it will require a new vote with 21 days notice.

In the last presentation (Q4 2023 in January 2024) they had promised the Singida drilling results before Q1 2024 results. That was a delay from previously when in the presentation before that (Q3 2023 presentation in October 2023) Singida was due out in January. Something is going on.

Actually, to clarify the way the Patels can walk away is by going to the adjourned court meeting with the failed vote. However, the timing of the current adjournment seems to be to allow a week to get to an acceptable price for the hedge funds.

I am not sure if, legally, they can keep adjourning the court meeting and so buy more time. Seemingly they can do this at the last minute so even if they cannot sort out a new price in the next week it may be that they can wait to the day before the adjourned court meeting and adjourn again.

Complex situation.

I did have a look at the lending agreement a while ago to see what would happen if they switched to a contractual offer. While I did not follow through all the definitions in a very long agreement it seemed clear to me that the agreement did envisage them going to a 51% contractual offer even though obviously that just gives control and not buying the whole company.

The security is over the Patels’ holding company (including, Shanta if bought).

It is worth noting that for a contractual offer the voting basis is different. You have to get 51% of ALL shares not just those that vote.

Obviously the vote failed. I am not sure if the adjournment is because they don’t want to publish the result of the vote or if they had gone to the court meeting the Scheme would have been deemed to have legally failed and they would have to start over again. Perhaps for both reasons.

If the Patels are to succeed they will have to have another vote on a higher offer. The required notice for a vote is three weeks. That implies they will be trying to get agreement on a new price in the next week. They have made a mess of this because normally, if things are not going a bidder’s way, the price is upped before the vote.

They cannot just walk away - against Panel rules on creating a disorderly market. They will have to go to a new vote. The Patels will not care what the Panel thinks but the advisers do and some of the directors eg Chairman has affiliation to the UK. The consequences for advisers in having a client breaching Panel rules can be serious.

The NatWest shares will doubtless be offered to the public at some sort of discount to the market price. Remember it is the Government that owns these (already EXISTING) shares so they will effectively be giving away the shares on the cheap - so the taxpayer pays.

This does not (directly) impact NatWest. It would if NatWest was issuing NEW shares at less than market value. However, that is not what is slated to happen.

The vote has already happened at around 1pm today. The result will be known on Thursday.

I think at a total 3.21p in 2018 (the last normal pre-Covid year) the dividend was too high if they wanted to run a buyback programme (which clearly they do as that is the preference of the institutions). It was too high because of one-offs that they did not anticipate. In fact in 2019 they terminated early their £1.75bn buyback programme not using £600m of it. This was because of unanticipated PPI charges. Since then they have had:

- a pension deficit that increased at the 2019 triennial review to £7.6bn from £7.3bn

- an unexpected £500m termination charge to get out of the Standard Life contract to go with Schroders

- an unexpected £1bn on HBOS Reading

They have preferred to keep the buyback at circa £2bn (same really as with AHO’s approach) but rebase the dividend. I think this is because they want to be rock sure they can maintain it and keep it going up at a pleasing yet maintainable trajectory.

The good news is that most of the one-offs are behind Lloyds. The major uncertainties are the cars, the £1bn tax case and the Visa/Mastercard indemnity (£400m?).

If 2024 broadly follows 2023 then I would have thought they will have £4.5- 5.5bn surplus capital (pre one-offs). Say £5bn. That would be enough to raise the dividend by 10% (cost of dividends - £2bn) do a £2bn buyback and leave £1bn for other. That could potentially go, if needed, to a £1.5bn provision on the cars (net of tax it is a bit over £1bn) or £1bn as a special dividend (1.5p).

I don’t think they will raise the interim dividend by much more than 10% as they will not know the FCA review by then.

Interesting that, as the market maker on the Saturn side, Berenberg is now carrying quite a high number of Shanta shares (2.6m). Would assume that they are not, at the moment, anticipating a price drop or they can offload them to someone.

Someone asked about share issues for Lloyds’s various share schemes. Past issuance can be found in note 40 (page 301) of the Accounts.

2023 668m shares

2022. 794m

2021 183m

As another person said, the block listings RNS also help. The block listings are, however, just listing the shares and not issuing and allotting them (which will come later). At 31 December 2023, across the five share schemes, Lloyds had block listed 819m shares which were available for issue and allotment (RNS - ‘Replacement Block listing Interim Review on 20 Feb at 2.05 pm. They seem to struggle to get these Block Listing RNSs accurate as that was their third attempt).

Of course they could block list and issue and allot more shares in the year but likely the opening 31 December 2023 position is indicative of what they will issue this year.