So TPG has came back again with the same offer for Billabong at $3 per share but this time it does not preclude the Nixon agreement Billabong has with Trilantic Capital Partners. Last week, Billabong announced that they are selling 48.5% of its stake in Nixon to the private equity group. Billabong will have a stake of 48.5% while the management will hold the remaining 3%
However investors should bear in mind that this is a non-binding, indicative proposal that is highly conditional. Another point to bear in mind is that the Acquirer is a Private Equity Group. Deals involving private equities are usually associated with higher risk. The deals when announced tend to be non-binding, indicative proposals that are highly conditional. So unless when a deal is announce and the private equity group has already have in place some skin in the game, I would usually be more cautious.
Now the deal is subjected to due dilligence risk, financing risk and other conditions yet to be announced but precludes the Nixon agreement with Trilantic.
I would say that this shows that TPG is abit more serious in trying to get Billabong. For them to continue making an offer even after Billabong agreed to sell Nikon, one of the stronger brands in the company, shows that they are perhaps a little desperate to get some money into action.
At this point in time, I would recommend no positions in this trade or if you feel the need to diversify, a small position due to the risk inherent in this deal.
At the current closing price of $2.83, there is a 6% premium to be earned if the deal goes through at $3.
Tuesday, February 21, 2012
Ludowici takeover
After a hiatus from the blog, I am back. It has been a tumultuous ride through 2010 and 2011 for me. I believe 2012 would be a better year.
So the deal we are looking at this time around would be Ludowici Ltd. Listed in ASX under the code LDW.AX
An offer was made by FLSmidth in late January 2012 at the price of AUD $7.20. Anyone who entered the trade around that level would have made a killing. Current price as of 21-Feb-2012 is AUD $9.74
In between the jump in price, we have seen another offer coming in from the Weir Group and how they have gone to the Takeover Panels to prevent FLSmidth to put in a better offer.
In their undertakings to the Takeover Panels, they seek that FLSmidth to be held accountable for their CEOs statement on Reuters "that the bid was last and final". Weir Group is seeking that the Takeover Panel rules the statement is legit and FLSmidth not resile from it.
Since then, FLSmidth has put in another offer of AUD $10.00 pending the results from the takeover panel.
In my view, the takeover panel would not block the AUD$10.00 deal as the stock was not halted and investors/speculators have continued to take on positions/sell position. By blocking the deal, it would mean that the Takeover Panel is consciously impeding a free auction market for an asset where there is a willing buyer and seller.
Now i understand that there are investors our there that sold their shares based on the statement given the the CEO in the Reuteres interview declared " The bid was last and final", they would probably seek damages from the FLSmidth if the takeover preceeds. Besides that, the most probably course of action the Takeover Panels might do is just serve a fine to the CEO, as there wasnt any release in any ASX official document. It was just an interview with Reuters which Reuters did eventually update and remove the statement from their website. As it goes with interviews, words might get misintepreted.
So what do we make of the deal at the moment?
With the current price of $9.74 and the deal should pay out date, barring any disaster, to be around early to mid June. Lets take 15-June as the payout date. The premium translates to 2.66% or on an annualised basis, 8.47%. Note that the current Australian Cash Rate is 4.25%
This means we essentially earn roughly 4.2% above cash rate.
Now however if you look at the downside of the share, it can go down a long way to $3.00. a whopping -66% lost. However it is deemed unlikely given that there are 2 suitors for this company. Once the Takeover Panels have given their ruling , I believe the Weir Group would come in with their serious offer. Also note, if the ruling is in favor of FLSmidth and there is a takeover war, this trade could still translate to another +20% ie the offer of $12.00 by one of the potential acquirers.
I would personally wait for abit on this trade. Potentially i would have a normal size position when it hits below $9.70
At $9.70, the premium is roughly 3.1% and the annualised rate is 9.8% unlevered.
I believe in low-interest rate countries, this is actually a good return. Even after hedging for currency risk. If one believes that the AUD will get stronger, then just leave the currency risk unhedged.
So the deal we are looking at this time around would be Ludowici Ltd. Listed in ASX under the code LDW.AX
An offer was made by FLSmidth in late January 2012 at the price of AUD $7.20. Anyone who entered the trade around that level would have made a killing. Current price as of 21-Feb-2012 is AUD $9.74
In between the jump in price, we have seen another offer coming in from the Weir Group and how they have gone to the Takeover Panels to prevent FLSmidth to put in a better offer.
In their undertakings to the Takeover Panels, they seek that FLSmidth to be held accountable for their CEOs statement on Reuters "that the bid was last and final". Weir Group is seeking that the Takeover Panel rules the statement is legit and FLSmidth not resile from it.
Since then, FLSmidth has put in another offer of AUD $10.00 pending the results from the takeover panel.
In my view, the takeover panel would not block the AUD$10.00 deal as the stock was not halted and investors/speculators have continued to take on positions/sell position. By blocking the deal, it would mean that the Takeover Panel is consciously impeding a free auction market for an asset where there is a willing buyer and seller.
Now i understand that there are investors our there that sold their shares based on the statement given the the CEO in the Reuteres interview declared " The bid was last and final", they would probably seek damages from the FLSmidth if the takeover preceeds. Besides that, the most probably course of action the Takeover Panels might do is just serve a fine to the CEO, as there wasnt any release in any ASX official document. It was just an interview with Reuters which Reuters did eventually update and remove the statement from their website. As it goes with interviews, words might get misintepreted.
So what do we make of the deal at the moment?
With the current price of $9.74 and the deal should pay out date, barring any disaster, to be around early to mid June. Lets take 15-June as the payout date. The premium translates to 2.66% or on an annualised basis, 8.47%. Note that the current Australian Cash Rate is 4.25%
This means we essentially earn roughly 4.2% above cash rate.
Now however if you look at the downside of the share, it can go down a long way to $3.00. a whopping -66% lost. However it is deemed unlikely given that there are 2 suitors for this company. Once the Takeover Panels have given their ruling , I believe the Weir Group would come in with their serious offer. Also note, if the ruling is in favor of FLSmidth and there is a takeover war, this trade could still translate to another +20% ie the offer of $12.00 by one of the potential acquirers.
I would personally wait for abit on this trade. Potentially i would have a normal size position when it hits below $9.70
At $9.70, the premium is roughly 3.1% and the annualised rate is 9.8% unlevered.
I believe in low-interest rate countries, this is actually a good return. Even after hedging for currency risk. If one believes that the AUD will get stronger, then just leave the currency risk unhedged.
Thursday, May 27, 2010
Current deals in Asia
Well there are noticably a few deals in Asia.. especially in the healthcare sector ..
Sigma Pharma.... Healthscope... Parkway... although the first two are non-binding conditional offers... i believe the healthscope offer is a real one and most probably Sigma will find a solution to its endless problems with a white knight strolling in to rescue it.
the most recently announced is Parkway Holdings..
Its a partial takeover by Khazanah the investment arm of the Government of Malaysia...now this will either be a bidding war between Khazanah and Fortis or Khazanah is just poking around to see if it can get away with it. My initial thoughts, Fortis will not be selling their stake to them nor do they want Khazanah to buy 51.5%.. Fortis themselves have been buying in the market the past couple of months.. well given that there might be a hope of a bidding war (chances around 33.33%) i would say i'll put some capital into this trade. (Ratings : low capital weigthing)
HSP AU.. healthscope... Given the rumoured private equities behind it are good names ie. TPG, carlyle, blackstone??... i would say the chances are they are going to get it probably @ another bid up...thus i would definitely put capital into this trade. Even if the deal doesnt happen, the downfall isnt that much and its a decent company.. (Ratings : Medium to High)
SIP AU.. this one is more complicated with the CEO and CFO resigning in a hurry and the chairman putting in his resignation as well.. but like i said, the company must be worth something. and most probably the South African buyers are desperate to invest somewhere
Till more updates
Current portfolio weigthings
SIP AU ( 3%)
HSP AU ( 10%)
PWAY SP (3%)
Sigma Pharma.... Healthscope... Parkway... although the first two are non-binding conditional offers... i believe the healthscope offer is a real one and most probably Sigma will find a solution to its endless problems with a white knight strolling in to rescue it.
the most recently announced is Parkway Holdings..
Its a partial takeover by Khazanah the investment arm of the Government of Malaysia...now this will either be a bidding war between Khazanah and Fortis or Khazanah is just poking around to see if it can get away with it. My initial thoughts, Fortis will not be selling their stake to them nor do they want Khazanah to buy 51.5%.. Fortis themselves have been buying in the market the past couple of months.. well given that there might be a hope of a bidding war (chances around 33.33%) i would say i'll put some capital into this trade. (Ratings : low capital weigthing)
HSP AU.. healthscope... Given the rumoured private equities behind it are good names ie. TPG, carlyle, blackstone??... i would say the chances are they are going to get it probably @ another bid up...thus i would definitely put capital into this trade. Even if the deal doesnt happen, the downfall isnt that much and its a decent company.. (Ratings : Medium to High)
SIP AU.. this one is more complicated with the CEO and CFO resigning in a hurry and the chairman putting in his resignation as well.. but like i said, the company must be worth something. and most probably the South African buyers are desperate to invest somewhere
Till more updates
Current portfolio weigthings
SIP AU ( 3%)
HSP AU ( 10%)
PWAY SP (3%)
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