Fayrewood Share Discussion Threads

[etarip] 12/12/2008 10:59

Full details to be posted on the web-site on Monday. Hopefully with more detail.

[old boy returns] 11/12/2008 09:53

StewJames - the various deadline dates for warrantee claims seem to be spread between Dec 2009 and July 2011 but hopefully they can negotiate out of them earlier. The intention to do so is set out pretty clearly in this bit:

"Letchworth intends to realise the maximum cash return to Letchworth Ordinary Shareholders as soon as practicable. In order to achieve this, the Group intends, where appropriate, to vigorously defend any claims made against it
under the SPAs or otherwise and to the extent possible reduce the duration of the warranty and indemnity liabilities in order that the Non-distributable Assets can be released earlier than is currently required under the SPAs. Whilst Letchworth is optimistic that the Group under the control of Letchworth will be able to minimise any liabilities arising under the SPAs or any other potential liabilities that the Group may suffer in relation to any other
matters, they also consider that it will be able to defend such claims more effectively as a private company."

[etarip] 11/12/2008 08:42

scurbs and OBR:

We cannot reconcile the figures because we do not have up-to-date ones nor do we know all the assumptions they are making. That is why I started from the 99p. It would have been nice to have had them in the RNS. I wonder why they were not there.

bhoddhisattva: I have been told by my Pensioner Trustee that I can hold the new shares in my SSAS. A SIPP I imagine would be the same but do your own checking.

[bhoddhisattva] 10/12/2008 19:51

Anyone know if NEWCO shares can be held in a SIPP?

[stewjames] 10/12/2008 18:02

What do you think on timescale, Old Boy Returns? I've latched on to 3 years for the lions share simply because I saw 2011/2012 appearing a lot. Is it a possibility they could pass on the potential liabilities for a cost and wrap things up much faster?

[scburbs] 10/12/2008 17:48

etarip,

Did you manage to reconcile the 99p?

I calculated that the company was to withhold £9.13m plus an additional £1.3m to cover insurance and running costs, so a total of £10.43m.

There are 8,717,494 of shares voted for the partial share alternative and this is the number that KBC Peel Hunt say they have used. This gives a NAV of £1.05 to £1.20 depending on which of the above you use (£10.43m is not correct as it includes costs in it, but it may also have some bunce in it if things get agreed sooner than expected).

I can get to 99p if I take the £9.13m and then deduct the existing £0.5m provision in the accounts. As the provision may not be required then this would not be an appropriate way to calculate the theoretical maximum.

After the £10.43m is withheld this leaves it £26.17m to buy shares for a maximum of £29.3m or £26.86m when the votes already cast are taken into account. I must be missing something here because given the valuation has assumed everyone else takes the cash then FWY won't have enough!!!

[stewjames] 10/12/2008 17:40

To add to the above post, it looks like of the 51% irrevocably agreeing to vote in favour only 37.5% will be taking the part share offer.

Here's a formula for the theoretical maximum:

(152.6-126*p)/(1-p)-98

where p is the proportion (as a decimal) who take the all cash offer. p=0.135 (the value if all shareholders take part share other than those mentioned above) gives a theoretical maximum of 58.75.

This theoretical maximum is *not* the theoretical maximum, though, because it completely ignores interest earnings (and also running costs, but interest should comfortably cover that)

That "best value" number of just 28p looks mighty suspicious. That said, I suspect this is a pretty well pitched offer. It looks like the timescale for remaining distribution is going to be 3 years or so and there are surely going to be *some* claims. Not sure whether to take it myself or not. I'm leaning toward the cash offer...I feel in this market I can do more with the money.

[etarip] 10/12/2008 16:57

From the RNS:

"The theoretical maximum value of a Letchworth Ordinary Share is approximately 99 pence, calculated by reference to the Remaining Assets divided by the number of Letchworth Ordinary Shares that would be issued based on the Take Up Assumption"

"The assumption made for the purposes of the Estimate of Value that Fayrewood Shareholders will elect for the Part Share Alternative in respect of such number of Fayrewood Shares as shall equal 37.48 per cent. of the total issued share capital of Fayrewood"

If 37.48% of shareholders get the 98p + 99p and 62.59% get 126p the average is 152.61p (197 x .3748 +126 x .62.52). That is the implied minimum net asset value. (If the 126p was higher or lower the 99p would have varied inversely.)

If we all take up Letchworth shares then the theoretical maximum value of a Letchworth Ordinary Share becomes 152.61p – 98p = 54.61p and we all get a maximum of 98p plus 54.61p = 152.61p compared with 126p if we do not.

The 'non' theoretical maximum value of a Letchworth Ordinary Share obviously depends on the claims made on the company. Assuming they total (152.61 – 126)/2p = 13.31p then by taking shares you would get 139.3p (152.61-13.31)

I know the above is a simplification as it ignores timing differences and what can be earned on the cash between now and distribution but feel it is more or less correct.

It would seem that if most go for Letchworth shares it best to take the 126p now and if most do not then it is best to go for the shares.

Any comments?

[old boy returns] 10/12/2008 12:58

etarip - answer is probably tax and company law reasons. Also keeping FWY listed on the AIM for 'as long as possible' would also be an expensive exercise due to the costs and requirements of being a listed company.

[etarip] 10/12/2008 12:15

Can someone explain why the company could not return cash of around 98p direct without having to introduce the new company. This in my opinion would have left the company with a share price of around 28p. Those wishing to sell would have received about 126p as under the proposed scheme. This would have saved all the expense of a new company and left shareholders in a quoted AIM company as long as possible.

I have glanced at the RNS and could not see if there was any guarantee that the new company would not start trading. Have I missed something?

[pingi] 10/12/2008 11:43

Newco will be owned solely by those electing for the cash+share option.
The fewer who elect for the new shares (unlisted) the bigger the potential reward per share (if potential liabilities don't crystallise).

Will be a ~3yr wait.

[old boy returns] 10/12/2008 11:37

prewar - I have only had time for a skim read of the whole announcement but as I recall it the directors of Newco will only hold shares in as much as the take-up that the option to do so in respect of their existing FWY shareholdings. I think all the non-resigning directors have said they will opt for the cash / newco share alternative in respect of their full FWY holdings which I think gives a hint as to how thye see this one playing out as well as giving them an incentive not to mess up ! Further they will not receive any renumeration from Newco. All looks very fair and well thought out to me (which is very unusual for an AIM stock) and I am impressed.

[prewar] 10/12/2008 11:06

Will Newco be owned solely by Fwy shareholders or will their holding be diluted by the new directors of Newco? I would hope the former as this could be a stitch-up to those who see more than £1.26 per share in cash within FWY

[old boy returns] 10/12/2008 10:12

What fun ! In case anyone has not realised this is not an external offer but rather an offer by a company being set up specifically to buy FWY which will be owned by the FWY shareholders who opt for the cash and share option rather than the all cash option. I think the plan is that post acquisition FWY will pay dividends to the New Company which will then pay dividends to its shareholders. Lots of interesting permutations depending on the number of FWY shareholders who opt for the all cash exit. If most do that then those who do go for the cash /Newco share option could get a decent premium for their patience. It follows that if you expect most to go for the all cash option then buying FWY shares now and then taking the cash and share option on them presents a very attractive risk / reward combination.

[badtime] 10/12/2008 08:23

Hmm...not as much as expected it would seem...and share price still trading at a discount

[cliffyburger] 10/12/2008 07:11

Cash offer at 126p per share:

[badtime] 05/12/2008 10:15

ta smicker

[smicker] 04/12/2008 23:33

motley fool web site, user log lorry contacted the company

[smicker] 04/12/2008 22:17

see tmf for some info re cash return

[mjcrockett] 25/11/2008 10:12

Old Boy Returns, You can access the Aimzine article at - you have to register but it is free. The piece on Fayrewood is in the November lead article on 'Money Going Cheap'.

Michael Crockett
Editor

[stewjames] 24/11/2008 13:27

Could just be someone accumulating a personal holding, could it not? It's a bit of a no-brainer in this market.

[old boy returns] 24/11/2008 10:56

Nonno - no I have not. Do you have a link?