Wilmar buys into Goodman Fielder..a possible takeover?

Wilmar International, the world's largest palm oil trader/producder,  announced they have acquired a 10.1% stake in Goodman Fielder in Australia. Goodman Fielder is the largest bread maker in Australia and New Zealand.

Last year, Wilmar bought the sugar unit of CSR Ltd, Sucrogen, Australia's largest sugar company, for A$1.75 billion.  Wilmar also bought Prosperpine Sugar Miller Association for A$120 million plus working capital, making it the largest raw and refined sugar producer in Australia.

According to a statement release on SGX, where Wilmar is listed,

"This acquisition will make Wilmar the largest shareholder in Goodman Fielder. Wilmar is currently assessing whether to increase its shareholding in Goodman Fielder.

Wilmar’s Chairman and CEO, Mr Kuok Khoon Hong said: “We look forward to working with Goodman Fielder and its management team to improve Goodman Fielder’s performance over time”."


Possibly Wilmar might look into buying the rest of Goodman Fielder. Unsurprisingly, the share price of Goodman has rose to a high of $0.695 and closed at $0.66. Goodman was trading at $0.495 exactly 7 days ago.


For now I will be keeping Goodman on the watch list.

Ludowici takeover revisited

Much has happened in this deal, and it was positive news for all Merger Arb investors.

After FLSmidth put in an offer of $10.00. As expected, the Weir Group put in their $10.00 bid as well.

Subsequently FLSmidth increased their offer to $11.00

The takeoverpanels have come out with their ruling of the case submitted by Weir Group,
In essence, it is not prohibiting FLSmidth to proceed with an offer higher than $7.20 and FLSmidth has to advertise in major publications to seek out investors who sold their shares before the $10.00 was made and pay them compensation as assess by an arbitrater. The payment shall not exceed the difference of $9.87 ( the vwap price on the day the $10.00 offer was made) and $7.20.

Now i guess the billion dollar question is, will you take your money now and run or expect a bidding war?

In Weir's offer, it gives the rights to Weir to terminate the scheme of implementation if the Takeover panels does not prohibit FLSmidth to proceed with an higher offer than $7.20. The key word here is the "rights", not automatically terminate.

At the levels LDW is currently trading, $11.18, it seems to imply that Weir is going to come in with another bid.

I would not exit the trade now. The risk now is there is no bid coming in and you receive $11.00 or potentially another bid comes in at another +10%. I would wait and see. This is a case where you would want to let your profits run.

***Additions****
Seems like Weir group has put in an appeal to the Takeovers Panel on their ruling. I would think this is nothing other than to buy more time for them to plan and execute their next action. I would think it is highly unlikely the  Takeovers Panel will reverse their ruling. It will be really messy if they do so. The path of least resistance is to stand by the original ruling.

Billabong takeover revisited

Seems like the company has rejected TPG's initial proposal of $3.00. TPG subsequently increased their offer price to $3.30 to facilitate due diligence but was flatly rejected by the directors and major shareholders Gordon Merchant and Colette Paul and I quote from their lawyer's letter to TPG, "

2. do not support Billabong taking any steps to assist or facilitate a proposal by TPG Capital, including allowing TPG capital to commence due dilligence on Billabong, even if the price TPG capital offered was $4.00 per share (which our clients consider would still represent a discount on the true value of Billabong shares)

"
There are rumours as well that KKR and Blackstones are sniffing onto this deal as reported by The Financial Times.


Anyone has thoughts on this deal? I'll write more when I get some time to get more info.

Initial thoughts, on Feb 17 2012, Billabong annouced a major restructuring including closing 150 outlets and dismissing 400 full time workers. Seems like the company isnt holding up well. If you look at the share price, that is the case as well.

If you look at the shareholder structure, besides Mr Merchant that owns 14.8% of the shares(since he is founder), he might not want to sell, but the rest are institutional investors. Need to check on their buy in price to see at what levels they would be sellers.

Again to re-iterate, there isnt any binding deal here.

An example of a Mandatory General Offer. Khazanah Nasional Berhad divests stake in Proton Holdings to DRB HICOM Berhad

On 16th January 2012, Khazanah Nasional, the sovereign wealth fund for Malaysia, announced that it will divest its entire stake 42.74% in Proton Holdings Berhad to DRB HICOM for $5.50 a share. As the stake is more than 33%, DRB HICOM is required to make a mandatory general offer for the rest of Proton Holdings shares at the same price.

The current price for Proton Holdings is $5.47. This reflects that there is only 0.54% in the deal which I believe roughly equates to interest rates in Malaysia. Usually there will be traders who would do the carry trades on deals that are certain to happen. As an example, say the trader can borrow money at 0.5% and will be able to earn 1% after all transaction cost, this equates to a net profit of 0.5% for the trader. If the trader can use leverage and lever it up x 10, he can make 5% on this trade alone.

Sometimes in Mandatory General Offers, where the acquirer has no plans to delist the target and wishes to keep the target listed, the price of the target might even go above the offer price. I would usually try to get borrow and short these stocks. In reality, these cases happen very rarely but they do prove that market can sometimes be inefficient/irrational.