Member Info for Hounddog10

@Slimsid

That sort of very detailed question is best answered by the Equiniti Shareholder Helpline +44 (0) 333 207 605. However, the answer is almost certainly yes. As you have a certified holdings (ie share certificates rather than shares held electronically) you probably have (just) about time to send in any acceptance for the main vote as your deadline is 30 April and it is suggested that you allow four days to post. But the risk of late delivery is on you.

It probably does not matter much if you accept now or in the extension period. People should be aware that if DK does not get to 75% then acceptances fall away and you are left with the shares as before. In this scenario the share price will, in the short term, likely drop. If you accept you will not be able to sell the shares until the result of the takeover is known as by accepting you have, subject to the takeover being successful, sold your shares to DK. In other words accept and 75% is reached your shares will be owned by DK, if 75% is not reached you get the shares back to do with as you want (hold or sell) once the result of the vote is known.

@Bluecruise

You can accept at a later date (in the minimum 14 day extension period) but that period will only happen if 75% is reached and the takeover is successful.

The large holders will almost only vote at the end. No upside to vote early. They also have CREST accounts which means they can vote much later (30 April).

I suspect there will be a bit of an increase (not that much) of acceptances after the 25 April deadline for smaller shareholders with nominee accounts has expired. After that it is the institutions.

I am sure if you post your query someone will try to help.

I would suggest, that if people are against the DK takeover, it is not particularly advisable to vote no at this stage. Doing nothing has the same impact on DK’s bid ie he needs people to vote in favour and it is irrelevant to him between a no vote or not voting.

If you vote no I don’t think you can subsequently change your mind if the takeover is approved and you are potentially in the 75% - 90% trap. If you want to get out you can, however, sell in the trading period that exists after/if DK’s offer goes unconditional.

In other words if you are opposed doing nothing gives you the additional option of accepting in the extra acceptance period post the offer going unconditional (if it does).

2/2

If DK gets to 75% (and the offer goes unconditional) the share price will close further in on 368p - say 367p or so as effectively the share has been converted into a cash deposit for those that have accepted or do accept and there is no equity downside or upside. If he does not get to 75% (ie the takeover fails) the danger is that the share price may drop quite a bit. It is difficult to say how much but a share drop is typical in failed takeovers and market and economic conditions are rather rocky at the moment. So this will impact all shareholders (whether they have accepted, voted against or done nothing) except those that have sold. Acceptances fall away if DK does not get to 75%.

So in many ways the choice now (given that a better offer is a very remote possibility) is whether to sell now getting only slightly less than the 368p (but incurring dealing costs) or accept and get 368p somewhat later.

1/2

@Newdealz

Firstly, the Unconditional Date. The Unconditional Date (if DK is successful) is going to be when the vote has been counted - so 30 April or just possibly a day or so later in the very unlikely event there are any technical glitches with the vote count. Until the final timetable has been known the nominee share services seemed to have decided to have put in a notional “placer” Unconditional Date of end of Quarter 1 and then end of Quarter 2 (less the three days needed to process and aggregate the votes of small shareholders and send the result onto the Receiving Agent, Equiniti, which is in charge of the overall vote count). This has been based on the fact that the takeover was guided firstly to complete in Q1 and then Q2. So the June date has been superseded. I don’t think the notional dates were particularly helpful and rather confusing to many people.

As mentioned before there has been no merit in accepting early (the institutions have not done so) and the choice has been to hold or sell. As might be expected the share price has gradually worked its way to 368p.

However, now a decision has to be made:

(1). Initially vote no or do nothing. In effect this more or less amounts to the same thing. The danger here is that if DK is successful (gets to 75%) but gets to less than 90% (at which point he can compulsorily buy out the remaining 10%) the shareholder is stuck with an untradeable share. However, the shares can still be sold in the market post the Unconditional Date until the announced date of last trading.

(2). Initially accept. Provided DK gets to 75% 368p is assured. Although I have not checked the Offer Document payment is normally 14 days after the Unconditional Date. The shares cannot be sold in the market because they have gone to DK.

By “initially” I mean voting in the coming week by the deadline specified. There is then, as you say, a second chance to accept (if a shareholder has not done so) in a 14 day period after the Unconditional Date. Note this only happens if DK’s offer goes unconditional. The purpose here is to try and sweep out the shareholder holdouts and in particular try to get to 90% (if not already there). Whatever level he gets to above 75% there will be that 14 day window (and conceivably it could be extended). I am not sure how quickly you get paid out if you accept in this period. I would imagine it would be 14 days after the end of the 14 day period but I have not checked.

If in the 14 day window a shareholder (who has not already accepted) does not accept and DK cannot get to 90% then the shareholder will be left with an untradeable share.

DK/EP Group are allowed to buy in but they have to declare it. There is no way that a major institution such as MS will be buying in on their behalf without declaring it.

It is very difficult to know what organisations like MS are up to. Not least because the disclosure they make on form 8.3 aggregates their position across their entire organisation. They will be managing different funds with, quite possibly, different mandates and so conceivably conflicting objectives.

It could be that, given existing holdings, MS are looking to further ensure the takeover goes through (albeit the extra shares bought are not very material). More likely is that that they think the takeover is very certain to go through and are seeking to capture a few pence gain. This may not seem very much but getting somewhere approaching 1% in a month is about 12% return in a year and so rather attractive. But that has some considerable risk if the takeover fails and the market price falls and so you need good market intelligence which is really only available to institutions.

I notice that eg Syquant (spelt correctly?) - see last RNS yesterday - and Samson Rock are buying in. These are “events driven” hedge funds. One of their strategies is to buy in to near certain takeovers where there is a small (few pence) but very certain gain to be made. They can magnify this gain by using derivatives which uses leverage. Not for the faint hearted. When I last looked it did not seem MS were particularly using derivatives - more conventional buying of shares.

Guesswork really as to what is going on - but some context.

@Wirralboy. I had more in mind the (I think) newer investors that tend to come in at the end of the takeover process. They seem to have long CfD and total return swap positions which are, of course, leveraged. However, I did not look very closely and as you say many investors eg the trackers will have long positions anyway so it does not, per se, mean they will vote in favour.

The form 8.3s on the RNS feed are hopeless. No clear or consistent titling so you have to go into every one to see what it is about and there must be lots of junior analysts in different organisations across the City tasked with summarising and tracking them. The Panel should require the company to run a summary on the company’s website.

@mike1974

No, I had not overlooked the possibility of DK’s offer not being accepted and him coming back with a higher offer. I just don’t see it as very likely as:

(1). It has to be remembered that DK’s offer is recommended by the Board. The Board will only have done this after significant engagement with shareholders as to what price they will accept. Of course that dialogue is not binding on the shareholders - there is after all the vote - but normally the Board recommendation is the end of it and it would be seen as bad faith for the shareholders to change their mind. The slight difference here is that, because of regulatory clearances, the takeover timetable is very extended and conditions have changed since the recommendation. If the stock market was shooting up and the economy doing very well then I could see shareholders demanding more. However, the reverse is true - tariff war, prospects of recession, stock market volatility etc. I think the investors probably see DK’s offer as a very decent exit route in current circumstances. They are more short term than he is.

(2). DK (with 27%) can effectively block another bidder coming in and he could also take a more activist approach to managing IDS’s business. This does not leave shareholders with many cards to play.

(3). DK is stretching himself to finance this. He is using a good deal of expensive debt and there has been some concern that he might be overextending himself. Debt finance conditions at the moment, particularly in the high yield market, are tough. He probably does not have much scope to raise his offer and the major shareholders will know this.

However, there is, as you say, the theoretical possibility that he could be pushed up a bit.

He has no reason to increase his offer unless someone else comes in. It is a possibility but a rather remote one.

If you do not accept the offer - either vote against or do nothing - then:

(1). If DK gets to 75% but not 90% then potentially you will be left with shares in a private company and unable to easily sell them. There is the likelihood that, once IDS is private, and in order to clean up the shareholder register DK will still try to buy you out at 368p using a “tracing” firm eg Equiniti. However, DK does not have to do this and as far as I am aware there are no particular rules around this. Once IDS goes private then the Takeover Panel/rules are no longer involved and only the general rules in the Companies Act about protecting minorities apply ie you do not have many rights. It is not a position you want to get into.

(2). If DK gets to 90% he can (and almost certainly will - but again does not have to) buy you out compulsorily.

There is no merit in voting early but equally, given above, you should make a decision and vote. If there is no better offer (and it seems a remote possibility) and on the assumption that any individual private shareholder vote is incredibly unlikely to swing the overall vote the most logical course of action, irrespective of whether you like the takeover, is to vote to accept.

If you want to wait longer then there is another opportunity to make a decision. If/once the takeover goes unconditional (ie gets to 75%) then voting remains open for (at least) another 14 days. It will be known whether DK has got to 75% by 30 April/1 May and just conceivably earlier if institutions vote before the final deadline (which I don’t think they will do).

There has been about a 1.5% increase in acceptances over the last week. This will have been by small shareholders. The institutions will only vote towards the end. From a brief glance at some of the form 8.3s they all have long positions and so will vote to accept. Not much can be read into the current acceptance level.

I take from the webcast that Indonesia is about to go ahead in a couple of weeks or so (unsurprisingly after all this time as the CPs, being the last barrier, are minor). Also, unsurprisingly, the Nexus launch is pushed back again to the summer. Although not specifically articulated that much was clear from the interims. Mr Tucker seeks to put a good gloss on this but it cannot go on too much longer without loss of credibility. The first tranche of sales (largely covered by pre sales) is 1,500 units. What might be the gross margin on these (seem to have a selling price of c£1,600)? 50%?

No real impact from tariff war (unsurprising) and maybe two new MDA contracts perhaps end this year or early next.

I doubt the institutions will cast their vote until towards the end of the timetable. They are under a fiduciary duty to act in the best interests of the investors and so have to wait to see if any better offer comes through (even if that is a remote possibility). The share price is edging ever closer to 368p and has held up in the current market turmoil. This indicates that the market is largely certain that the offer will go through - otherwise the IDS share price would have suffered the knee jerk downward reaction of other stocks. Also, from a brief glance at some of the form 8.3s there are, as is to be expected, some arbitrageurs taking derivative positions for enhanced gain. These positions are long positions.

DK won’t offer more unless another bidder comes in with a higher price and if he still wants IDS (no reason to think not). His offer is recommended by the IDS board and once there is a recommendation it is a done deal as between DK and the Board (The Direct Line Board held out a bit for a better price before recommendation and I think Rightmove never got to a recommendation). Except in very exceptional circumstances the Takeover Panel will not allow either side to back out before it goes to the shareholder vote. Of course, if a new bidder comes in everything opens up again.

A good number of the major shareholders are FTSE 250 tracker funds. Under their investment mandate they have to maintain the appropriate weighting (by market cap) in FTSE 250 stocks. So as the market cap of individual stocks move daily (and indeed stocks periodically go in and out of the FTSE 250) the tracker funds are daily adjusting their holdings in all the FTSE 250 individual stocks to keep the correct weighting. This is why there are all these form 8.3s (which show daily movement in holdings for any investor over 1% in IDS) every day in the RNS feed. The tracker funds have to do this readjustment for IDS as well as for all the other stocks.

The need to maintain an appropriate weighting in all constituent FTSE 250 stocks also means the tracker funds cannot sell up before the vote as other investors can. They have to hang in for the conclusion.

IG are incorrect. Please see yesterday’s RNS - which puts the acceptance deadline, for the moment, back to 30 June (but it may well be considerably before).. No one yet knows the final voting deadline - not DK or IDS or any broker or custodian bank. It is dependent on what Romania does - and they don’t know when they will give clearance, if indeed they do.

https://www.lse.co.uk/rns/IDS/update-to-crest-acceptance-deadline-j1g0t4t0tqnl6pl.html

Newdealz

Yes, the next event should be an RNS on Romanian clearance (provided it happens - which I think it will) COMBINED WITH the resumption of the timetable showing the final timings of events to complete. As said before they have 60 days to complete this type of takeover and had used 37 days of that last year before the timetable was suspended. The timetable was suspended because of the need for extra time for regulatory clearances. The timetable actually should go back a bit when it resumes - so it should start from “Day 32” leaving (a maximum) 28 days in which they must complete the bid.

I think, however, that things might move a good deal quicker than that. From everything I read (plus the performance of the share price) the institutions are reconciled to accepting the bid. As with some private shareholders they are likely to want it all over with and get their money out as soon as possible (quite a few cannot just sell because they are operating FTSE 250 tracker funds) in order to invest elsewhere. So DK may get his 75% early on in the remaining 28 days.

The likely direction of the share price is to jump a couple of pence or so when the Romanian clearance and new timetable comes through and progressively approach 368p as the date for the payout of the takeover approaches.

I am not sure where your date of 26 March comes from. I think it may simply have been a “placer” date your broker came up with in the absence of any information other than that the deal would complete in Q1. I cannot see anything in any RNS to suggest that date and as said before you will be given a minimum 14 days of final notice to vote.

I don’t think there is much point voting no if you want out. You either sell now, hold and sell around when Romanian clearance comes through (the share price should be not too far off 368p) or accept and get the full 368p which will take more time to receive.

All of this presumes the bid goes through on expected timings and no one can be absolutely sure of that. There could be a counterbid or the bid fails. Both unlikely but cannot be ruled out.

As always you have to take your own decision based on personal circumstances.

2/2



DK’s offer of 368p is putting a cap and a certain floor on the share price. There do not seem to be any competing offers. I would have thought they would have come through by now. The market certainly seems to think the game is up as the share price has not gone beyond 368p. Although I know some think that DK is getting IDS on the cheap I am not so sure it is as simple as that. Yes, it is almost certain that the USO will be reformed but it will take 18 months of reorganisation and agreement with the CWU to redesign working practices and walks - so a good deal of restructuring costs. At the same time letter volumes will keep falling and the UK may well be in recession. They are also facing more competition in parcels. Inpost are now launching a c-to-c PUDO proposition using their lockers and shop pick up points. Apparently it is priced at £1.99 for the smallest parcel with Royal Mail’s lowest equivalent price at £3.25.

It is going to be a long hard slog to get Royal Mail back into some sort of consistent profit with almost certainly a lot of cost to do so. DK is almost certainly relying on GLS and Royal Mail properties to backstop his bid.

As time goes on I would expect the share price to move gradually upwards to 368p. The reason, as I mentioned before, is that effectively in these situations the takeover target has become more like an investment in cash/a bond with a known yield or payoff (but there is still some equity risk if the bid fails for whatever reason. On this it is important to note that under Takeover Panel rules there are only extremely limited circumstances in which DK can arbitrarily back out by himself. Clearly the most likely cause of the bid to fail is not getting to 75%). The share price will probably have (relatively) quite a leap if/when Romanian clearance is obtained.

If/once the takeover goes Unconditional (at 75% acceptances) the last day of trading should be the announced. However, before the last day of trading there will be a further minimum extra 14 days from the Unconditional date in which to accept the offer. This is there to try and get to 90% acceptances and be able to compulsorily “squeeze out” the remaining 10%. If 90% is not quite achieved, but is close, the deadline for acceptances MAY be extended.

1/2

Newdealz

The timetable should recommence, as I briefly mentioned before, at “Day 32” of a 60 day timetable. So that is 28 days for the takeover to be completed. That is the maximum time to complete. It may complete earlier (I would have thought there is a strong chance it might as it seems to me that the institutions are largely reconciled to accepting the offer).

The trigger for the timetable starting up again is regulatory clearance from Romania. It is really a complete guess when that might be but my sense is that it might be not too far off - so completion of the takeover (ie going Unconditional) is earlier rather than later in Q2). Romania is a (relatively) recent EU member (as well as a net recipient of EU funds) and I can imagine that some pressure is going to be brought to bear from the EU and others to comply with “normal” EU standards, which themselves are at best largely sclerotic, to move things along faster. However, Romanian politics is very volatile and unpredictable (I once spent about a year working in the country) and so there are no certainties.

Once the timetable recommences the weekly notifications of acceptances will restart up and so it will be clearer how matters are progressing.

The half year figures have to be out by end March (3 month deadline). Full year accounts is a 6 month deadline. I would imagine they will get the interims out in a couple of weeks time.

Hopefully we will find out status of NEXUS (have they started shipping?), possibly a bit more info on Indonesia, the shape of cash, borrowings and debtors and also a better understanding of the p&l. I am quite interested to see how much of staffing in admin overheads gets moved into cost of sales once they have contracts underway (I think the way the work is that they carry a certain pool of permanent staffing to deal with various projects. If there is no revenue from projects then they remain overheads. If there is a project those staffing costs get soaked into gross margin).