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Holders of certificates are getting the forms sent directly to them. I'm aware of nominee holders being told by brokers that the details on how to participate will be communicated shortly. The AGM has to approve the tender process but all offers have to be in before the AGM
Debating what to do, would welcome someone checking my maths. Going on all of the figures which GNC has provided, I think the tender offer price is low and doesn't account for the real enterprise value which is being tendered for.
Stating that the tender offer is a 17.5 % premium to the SP on 19th Dec is the language of a ruthless pawn broker. GNC has stated that "transaction" EV is a multiple of adjusted EBITDA.
I was trying to work out what adjusted EDITDA was for FY18 if I included the US performance in FY18 but the results treat the US business as discontinued. However, taking the FY18 adjusted EBITDA for non US business, i.e. £140mln, and assuming that there will be roughly 444mln shares left after the tender, a SP of £1.95 implies a forward multiple of 6.2 !! and this doesn't factor in future EBITDA growth which the company is projecting. If you take a forward multiple of 10, then implied SP is £3.15, and the share has traded at this level only 3 years ago with lower revenue/profits. The BOD has sold part of the business for a multiple > 13.
Anyhow, decision time for all whatever your circumstances, who knows where market SP will settle after this, I'm still predicting the independent board will recommend a MBO offer at a decent multiple, but I am expecting that 2019 will be eventful, not only for GNC !
EGM was sort of sad, chairman put a brave face on it, the tax issue is a side show notwithstanding the dividend is a financial calamity for me, the main issue is that GNC is now 100% in the BCG cash cow quadrant and I'm not sure it will ever get out of it. So, where does that leave us ? Ignore day to day SP movements, unless you are a day trader. I've said it before many times, brokers haven't a clue - which of them flagged this ???? The market is also rigged as we have seen for months. The BOD has now clearly stated what the minimum acceptable value is i.e.a multiple of around 14. If a bid at 14+ multiple appears, the company will be sold, the board of a cash cow has no other choice. Who will buy ? A public company doesn't really want a cash cow, so I believe it will be a combination of a private equity/MBO funded transaction. The timing could possibly be like this - we will see a strong set of FY18 results in Dec, followed quickly by this deal close I believe we will see a further announcement in Q1'19. Brexit not an issue - if it was they wouldn't have sold US business. You heard it here first folks and anyone who gets in now could bag the special dividend and still see another 50%+ gain. The most compelling reason for this is that I'm not aware a single broker is talking about the possibility.
Should be interesting tomorrow, I'll have a front row seat, the deal will be approved but not sure which way the vote will go regarding the manner of the distribution. Unfortunately while we can blame the BOD and executive team for strategic and operational screw ups, we can't blame them for tax policy. In reality, the biggest insight tomorrow will be how the BOD announces how to price the current shares for the purpose of share consolidation, currently they are indicating a value of £2 leading to a 36% reduction in share holding. The deal multiple suggests a value in excess of £3, I hope enough of the big II's demand the final consolidation reflects this.
Well I thought I would not have to re-appear until Dec update, actually been spending serious amount of time in US and I need a bit of time to reflect on this announcement. Personally I think this could be a Decca and Beatles moment, the US opportunity is enormous, they must just feel that it's beyond their commercial and operational capability to make a success. The main positive is that a floor has been placed under the valuation of a part of the company, the key issue now is the extent to which the resulting SP post deal will reflect the true valuation of the remainder of the compan, which should be 13-14 times non US earnings - can someone do the sums ? My prediction now is that the GNC id on the FTSE 250 will not make it to the end of 2019.
I'm going to sign off this BB for the rest of the summer and beyond because I don't really see much happening until FY18 full results or a bid or a big strategic announcement. Final thought until next time - GNC is a three ring circus, clowns in the broker analyst's ring, cowboys in the market ring and smart money in the reality ring. Like the recent lunar eclipse, on the rare occasions when they all align, it will be worth waiting for.Enjoy the summer everyone !
The analysts were a little spooked when CEO had to explain the margin mix in UK sales - he's in a tight spot because he can't be seen to hide bad news - and it is most definitely not bad news - but as the old expression goes, once you are explaining ... The analysts were concerned that there is a structural shift in the margin mix in the UK. And he was tight lipped on specific forward guidance for US growth - as he should be, but anyone with a brain cell in their head cannot but believe that they are very confident about the future, he even said a number of times that July numbers for UK are confirming this. My take about today's SP is that some of those who got in at 130p range in March are taking profits because the SP will not likely move to a new range until December, unless a bid emerges. It's really a case of building credibility up to the end of the FY and then the analyst sentiment may see the light. Just another typical day for a GNC shareholder
Listen to the call. The really big story today is that the growth of the US Peacock business is happening. UK revenue components are a bit of musical chairs, but only looking at a 12 week window and nothing to be concerned about. The full FY18 figures will be the ones to watch for UK trends. The analysts are mostly kids and the questions are mostly technical - completely missing the message. The CEO is too earnest on these calls, should say less to an investor audience that is too lazy to understand the company. The SP will trade in this range until FY18 results in December. In my view, a big winner today could be a bidder, I don't get any sense that either the company or the analysts enjoy this shareholder dance they both have to do. If it's taken private, a new owner will reap the financial benefits and won't have to explain themselves to anyone.
Melqart got in with 5% of company using CFD's just before the last big drop in March, I have to assume they were taking a long position with long dated CFD's because if not, they had a multi million loss bill to pay. They upped it to 7.17% in late March after the big drop, so they are probably back above water now and are closing some of the CFD's to reduce risk, so not a reflection on where SP will likely go tomorrow in my view. Of more importance is the first RNS.
My advice is not to sell and stay in for the long haul, I haven't sold a single GNC share in 15 years for one simple reason - rights issues. This is how all long term holders get really rewarded, my weighted average purchase SP is well below current SP, my effective dividend yield is over 10%. Obviously the most recent rights issue has not yet gone to plan in terms of SP performance and that's why current c-suite has to step up or move on because of poor strategy execution. If they take my advice and start selling direct in the US and need funds to establish this, I'll be first in the queue.
Shorts now under 9% and dropping aggressivley, if you are a day trader or an investor who trades on technical signals, all the signs are pointing to only one outcome on July 31st. I broke my own rules and took a punt at 180 just before the March announcement. I'm still convinced of what will happen after July update but I'm quite happy with what I have and I'm looking forward to at least a modest increase in net worth.
Coming to end of 2 week US trip, east coast and west coast. Recalibrating my expectations of GNC leadership as follows - great success in the current CPG sector is now a given in my view - with a very clear trajectory towards this becoming evident in the current FY, anything less and a leadership change must happen, there are simply no players putting their stamp on this segment and this is core competency for GNC, I'm not exaggerating when I say that there is a window for GNC to be the Amazon of food to go in US. But ... this isn't the only prize, the big prize is to have the courage and ambition to integrate forward and develop a channel to sell direct to targeted US urban centres, the point of sale margins are insane over here. Develop a pilot concept, tap the shareholders if necessary to fund the new channel. That's what I'm really looking to hear now - how GNC leadership plans to build on initial US success and completely redefine it's business model in US. I see the shorts are less than 10% for the first time since March update. July update eagerly awaited, if general market sentiment isn't being dominated by tariffs and Brexit, I know which way the SP will go and I now also better understand the sheer scale of the US opportunity, it's up the leadership to show that they will avoid snatching defeat from the jaws of victory
In UN HQ today, all the food to go is supplied by Culinart, poor quality and over priced, CEO should lobby his brother to get the contract as part of the Irish bid to get UN security council seat. And while he’s at it, figure a way to get all Cullinart’s food to go business in US, trust me it’s not a high bar.
My prediction is that the July update will be stellar, this weather will be a big boost to UK sales, the thick analysts will be falling over themselves with recommendations and the SP bounce will be overdone, but at least the roasting the shorts will get will make the current heatwave feel artic.
Anyone here also following Aryzta, SP been getting hammered for over 2 years now, fell 8% today and now I'm getting tempted, it's at all time lows, wont say there are comparable similarities with GNC, but my sense is that the bottom for this one is close by
Another value investor upping their stake, Polaris now at 7%. The smart money moves don't tend to be wrong. Two big events in the short term, one possible - a bid, one definite - the end of July trading update. Either way, SP will be above 220 after either imho.
To paraphrase Kevin Keegan, "I'd just luv it" if a bid was to appear right now, it would likely be rejected just as the Smurfit board have done, but it would sure torch the shorts. GNC is a Kensington mansion with a Brixton mid terrace price tag. Outside of a bid, it will trade in this 180-190 range until end of July market update. I'm heading to West Coast shortly and I will be checking every convenience store I can find to gauge US demand, if it's anything like what I've seen recently in UK and US East Coast, July update will be worth waiting for.
Shorts continuing to reduce. As mentioned before, GNC SP usually responds significantly only after news, doesn�t tend to price in future positive expectations � which is the key for anyone interested in this stock looking for an opportunity and who trusts management�s outlook. So what�s the next big move trigger ? Two possible events. The first is a bid, which I have to think is a possibility given the current SP level. The second is the Q3 statement at end of July. If, as I expect, it affirms the positive progress, the SP will have a step increase to 220 at least. CEO credibility is centre stage right now, it�s all about strategy execution for the next 6 months. In the recent update, saying all the right things about growing the top line. I�d be a bit sceptical about his plan to improve bottom line with the new GPS initiative. This is a hybrid of the Toyota Production System TPS effort and has high cost consultancy fingerprints all over it and I hope he doesn�t have a blind spot for his old pals like he had with the recent ERP disaster. TPS is primarily about developing people to solve complex customer problems in a systematic way, in my view GNC only needs the hard core industrial engineering skills to make basic products more efficiently to feed hungry folks on the go and that�s what GPS needs to deliver. GNC has no finished goods inventory to worry about � eat it quickly or dump it. However it�s the top line I�m most interested in for the moment