Member Info for Hounddog10

I can’t get beyond the paywall into The Telegraph article but in 2022 there were about 45,000 locker stations (APMs) in the UK. Probably about 50,000 now. Each locker station probably has an average of at leat 20 lockers and each locker I have read (a figure I had mentally got to before reading) can handle 200 parcels per year. Seems intuitively correct - 1 to 2 day turnaround time for each parcel.

So 200m or so parcel handling ability. 2022 total UK parcel volume 5.1bn. So sure still small but growing quickly and may well take out some of the most difficult rounds. Also need to remember PUDO shops which probably can handle maybe 20 parcels a day and may be more significant than the lockers.

In my area I recently matched the postie as I walked for about a mile. He had only to deliver to about twenty addresses but quite spaced out so he had to drive his van to each house or couple of houses and there are a few with long driveways. It took about an hour. Can’t imagine RM made any money out of it.

https://www.parcelandpostaltechnologyinternational.com/analysis/analysis-pudos-and-lockers-to-dominate-the-european-last-mile.html

I had a quick look at the interest they would have to pay. It is based on SoFR (currently 5.32%). There is then a commitment fee of 50bps already running from 19 December and escalating to 75bps six months from that date. Then a margin of 3.5% up to 3 months from when the loan is drawn escalating to 4.25% after 5 months.

So say around 10% on the $150m loan. The loan will be in Saturn (Bidco) which will have no money. So payment of this interest amounting to $15m per year will be from cash transfers from Shanta.

It seems increasingly clear that this is a flip as otherwise the one year bridging loan would not be structured with escalation clauses to encourage the loan to be repaid as quickly as possible.

The loan is explicitly described as a bridging loan - but to what? I rather suspect something very similar to what you have outlined. I think Sustainable Capital, Lombard and Zurrin know this (or it has been intimated to them) and so they are knowing forced sellers.

I think the Patels have discovered an absolute gold mine under their feet and are not willing to let the opportunity pass without attempting to get their hands on it. None of the reasons given as to why it is beneficial for shareholders, the company or the employees stack up.

Yes, I think those are fair points. I do wonder how much extra capacity the Patels have in finance to pay for a higher bid. They are basically borrowing almost the whole of the bid price. Do they have another facility (doubtful) or money at the holding ETG level? I am not sure they will have too much firepower.

I think that is almost certainly the future. The letter box is nearly redundant technology but people have not quite yet moved away from it. RM and the other carriers should actively promote parcel lockers at homes. It is not just quicker delivery but preventing theft, damage and fraud which must cost the delivery firm and retailer a lot in admin hassle and potential compensation. I think Evri (and probably others) discriminate on missing/damaged parcels as to whether the household had a parcel locker.

Also the lockers will really ramp up. I currently live in a fairly rural area and in the last few months a joint Evri/DPD locker site now keeps the Amazon lockers company at the train station (which is hardly used) and a newly opened BP service station sports Inpost lockers. The surrounding hinterland for these lockers is, I would guess, not much more than 200 or so households. I suspect all the firms will install as fast as they can with the major constraint being getting suitable sites.

Not sure what the CWU will think of it. Potential for a lot of job losses.

The nagging issue is whether there is something, some threat, in the background which is not being disclosed except in the most oblique and general terms. In particular why is Sustainable Capital bailing?

Similarly why would Zurrin not hold his ground when he is already leaving? Why did Leslie’s father bail last year on the uptick during the last takeover attempt?

Sustainable Capital says that it is a very long term investor for eg US universities. See article at bottom of link which seems to be the best public info on SC.

https://www.sustainablecapital.mu/

Gam appears to have sold a small part of its position for 17p….. perhaps it is a typo.

Pacifico

Berenberg are certainly involved in the stitch up but it is Liberum who are Shanta’s advisers and who are recommending the acquisition to us shareholders.

Does not say too much except that RM sees this as one of the directions of travel and that they want to catch up with rivals.

Happy Boxing Day to all.

https://www.ft.com/content/7d220d6e-b1cd-450b-86eb-c3d7e064480a

I had a bit of a skim through the lending agreement and a few points were notable:

(1). They are borrowing $150m which is all but around $20m of the bid cost. This is a highly leveraged buyout.

(2). The repayment date for the loan is the earlier of 19 December 2024 or six months after the first utilisation date on the loan (likely May 2024 if the takeover goes ahead). So much the same either way. The loan is a short term bridging facility (as described) which then raises the question as to how are they going to refinance or will they on sell Shanta?

(3). There is a £450m net worth covenant for the ETC Holdings group which is the Guarantor of the loan. ETC is a Mauritius company so difficult to get hold of accounts. But the £450m implies that bringing in Shanta - very roughly Shanta has an NAV of £150m, more or less matched by the bid loan - introduces more leverage into ETC (unless ETC already has over a 1 to 1 ratio of borrowings to NAV).

None of this seems to suggest that ETC has the wherewithal to easily finance Shanta’s development going forward (a major reason given in the bid announcement). In fact, as equity is being swapped out for debt in the buyout it is loading Shanta up with a great deal of debt.

Also, as a conglomerate, ETC has no pre-existing mining experience.

They signed a confidentiality agreement at end June 2023, being (not coincidentally) the first month that Singida went into commercial production and when Shanta became substantially de risked. The agreement was so that confidential internal Shanta material could be handed over for the purposes of due diligence and no doubt more specifically to assist raising finance. Although, it is not unusual to sign such an agreement what is unusual is for the potential acquirer to have been given six months to sort itself out. This is particularly so as Shanta is a straightforward company and that Patel is an insider and must know the business intimately. Given so many parties are involved in a takeover (at least two advising banks, two sets of lawyers, the debt financing bank and their lawyers etc.) it is very difficult to control leaks over that period of time. This may at least partially explain the muted market reaction to Shanta’s excellent future prospects and the persistent selling into strength that has happened in the last six months.

I would have thought it is, at best, marginal that the Board has satisfied its fiduciary duties in allowing one related party bidder so much time to assemble their bid, particularly when it must have become clear it was going to be at a low price and be launched over the Xmas period in order to run down the timetable on any counter bids. Similarly, other means of bolstering the share price eg dual listing on TSX or AUX were categorically ruled out by Zurrin despite him constantly pointing out the valuation gap between AIM and those other markets in his presentations. It is not expensive to do a dual listing. A couple of million dollars if you are not raising money.

Shanta is being taken out by Indians. Mauritius is simply the standard tax shelter for India in investing elsewhere in the world.

Oh, yes sorry misread it. It is Berenberg. However, it says something that they are short.

Saturn (Bidco) seems to have opened up a short position??

All who were at/over 1% as at yesterday have to disclose their positions (but note they have 10 business days to do so). Anyone acquiring a 1% position (or more) going forward has to disclose.

Https://www.thetakeoverpanel.org.uk/wp-content/uploads/2022/04/Summary-of-provision-of-Rule-8-July-2021189117.3.pdf?v=21May2018

I have about 1m shares (put in £120k with average price of about 11p I think - split between ISA and pension so need to check - some problems on access at the moment). I will almost certainly be voting against. We need to track what happens in January with offer document. It should have to be (a bit) more explanatory as to what is going on. - but I doubt it will help that much. There seems to me to be something going on in the background that is not being disclosed (except in very general terms) and which I think has compelled Sustainable Capital, Lombard and Zurrin to sell out. Except for Lombard I really can’t understand why they would do so. Lombard is recent and can make a quick buck and move on but Zurrin and Sustainable are long term “investors” in the broadest sense. Why sell now when even in a year it could be so much better?

I know some people (particularly Millenials and Gen Z) will not like the racial connotation but there are very different business practices around the world. Some may want to dodge this difficult social issue and to hide behind a spreadsheet. It is unlikely that these people have ever physically gone to “emerging market” countries and have had some basic contact as to the culture, In many ways the West is the outlier in trying to treat everyone at arm’s length. For most places it is about family and close friends. Be aware of that.

Appendix 3 of the RNS shows Zurrin, Sustainable Capital and Lombard supporting the bid by way of irrecovables/letter of intent. I really cannot work out why it is in their interest absent some undisclosed matter that could be damaging to Shanta.

Actually, ignore my posts on this. Sorry. Patel has always had a fairly significant minor stake. However, there is something very strange going on in the background. I cannot understand how Sustainable Capital, Lombard and Zurrin have signed up to this deal. It has the feeling that there exists some loosely barely articulated downside that could hit the company if they did not. Extremely difficult to know what is going on.

Sorry, significant correction - 363k shares is clearly not 30% of the company but other questions still stand.