Fdm Share Discussion Threads

[rbcrbc] 17/12/2009 18:00

from the latest RNS:

Accordingly, Astra has either received valid acceptances, received irrevocable undertakings which have yet to accept the Increased Offer or is otherwise interested in a total of 17,693,640 FDM Shares, representing approximately 76.20 per cent. of the existing issued share capital of FDM.

So as they now (effectively) have over 75% we shall see how determined they are to go for the 90% or if they will do the deal at 75% and delist and play games.

[paddyfool] 17/12/2009 09:31

job done by all accounts

[page3girl] 17/12/2009 09:10

re the 8.1 notice - I think that Rex is not an offeror, it's because with his conditional purchase taken into account, he would be over 20% ownership, which makes him an "associate" of FDM which gives rise to reporting trades under Rule 8.1 not 8.3.

The fact is that Rex's group control 14.5% (the conditional purchase doesn't look like it will kick in) - looks like Astra are pretty close to locking up the rest - so while 90% might not be achievable, 75% looks like a breeze which would give Astra plenty of ways to put the squeeze on Rex. Just saw another 1.2m shares bought going through the market - if Astra rather than Rex bought it looks like game over to me

Of course Rex could surprise us all and make a bid - but the company hasn't been approached by him (or anyone) - they said so in the offer document - so if he hasn't looked at the company's books (and ditto any potential fiancial backers he might have) it would seem a pretty serious longshot

[gengulphus] 17/12/2009 05:59

My guess is that if they are forced/able to take up the 2m family shares it will put them over the 20% threshold and they will be obliged to make an offer for the whole company.

What 20% threshold? I know of the 30% threshold for being obliged to make an offer, but not of a 20% one - and a quick search of the Takeover Code hasn't revealed one. And their latest RNS reveals that their stake if they get the 2m family shares will be at 23.36%, still comfortably below the 30% threshold.

As Rex&Co now have 12.5% (without the 2m) the 90% threshold is dead.
Do we have a bidding war ?
How high will Astra go ?
What will the management do if Rex takes control ?

Standby for the next exciting episode....

I did spot an RNS for Rex Harbour taking/upping a stake in another company the other day so I believe it/he is a rich individual active investor.

The recent RNSes do say "Rex Harbour is a director and the beneficial owner of City Securities Limited." right at their end, so yes, it looks like he is a private investor and probably quite rich - with a taste for acting privately in conjunction with his company.

From his actions so far, I'd judge him (including his concert party) to be quite an 'active' investor who would probably not be happy to be left with a large minority stake in an unlisted company, and it's noticeable that he's continued to accumulate the shares after reaching the 10% required to block Astra from being able to get 100%. So I very much doubt he's just trying to stop Astra from doing that.

It also doesn't seem likely that he's just trying to build his holding up to the 25% level required to block Astra from taking full control of the company and being able to delist the shares. If he is, he's probably shot himself in the foot, because I'm very doubtful that Astra would continue if they knew they couldn't at least get full control - and if he gets 25% and then Astra let their offer lapse, then the conditional purchase from the Divett family completes and he goes over 30% and has to make a full offer. He could just about conceivably be aiming for 21% (so that his holding doesn't quite go above 30% when the family holding is added), reckoning that there will be enough hold-outs among smaller investors for full control to effectively be blocked - but that's a risky game, both because there might well not be that many hold-outs and because he would have to rely on those hold-outs actually voting on important resolutions!

None of the above says that frustrating Astra so that he can hang on to his investment cannot be one of his motives - just that it's not his only motive and probably not his main motive.

I'm also doubtful that launching a full offer himself is his main motive, because he's failing to take a major step towards that goal. Specifically, he can release the Divett family from their irrevocable undertakings to accept the Astra offer by actually making an offer, causing the let-out about a competing offer to trigger. If he waits until they have accepted, though, they probably won't be able to withdraw their acceptance. So hanging back from making an offer of his own seems a bit counterproductive. Still, he could be hoping to get a bit more of the company comparatively cheaply before doing so, or being delayed by practical matters such as arranging finance - so I'm only doubtful about making an offer as his main motive, not certain it isn't.

All in all, therefore, I suspect short-term gain is his main motive - bid Astra up as much as he reasonably can, then accept their offer. If so, he's not doing badly so far - accepting their offer now would make him (still including his concert party) up about £21.0k on the 15/12/2009 purchase, £13.3k on the 14/12/2009 purchase, £122.4k on the 01/12/2009 purchase, £30.0k on the 10/11/2009 purchase, and has pushed the realisable value of earlier purchases up by around £140.0k. Not millions, but definitely not a bad profit!

The fact that he has declared himself an "offeror" by making rule 8.1 announcements rather than rule 8.3 announcements does however suggest that he doesn't want to rule out the possibility of making an offer. So overall, my best guess is that his main motive is short-term gain from bidding Astra up and then accepting their offer, with the possibility of making an offer himself held in reserve as a contingency plan if they refuse to be bid up enough for his liking.

If that guess is right (and I emphasise that it is at best an educated guess!), the big question is how much Astra need to raise their offer to dissuade him from using that contingency plan. I'd love to know the answer...

So would Astra! So I suspect he's keeping it very secret...

So now we have the formal revised offer at 150p, with Rex and Co holding 14.75% and the 90% condition still in place it is a waste of time if Rex & Co. have not agreed to it. But as Astra now has 68.07% (at least) and Rex&Co have 14.74% (total 82.81%) still not a foregone conclusion if Rex&Co have accepted.

Not technically a foregone conclusion, I agree, but in practice I think pretty close to one. Over 75% acceptances with no known large hold-outs almost always proceeds through delisting, further acceptances, and compulsory purchases to a completely successful takeover.

Just wondering if it is worth trying to buy in the market up to 160p in anticipation that this is not the end.......

Hmm... I can see the temptation, but I think I'll personally simply continue to await developments - without accepting the offer, until and unless it becomes reasonably apparent to me that the outcome has become practically inevitable. At present, there's too much chance of further improvements, and withdrawing an acceptance once it has been made is too unlikely to be permitted.

Still, if you want to bid the share price up to 160p, don't let me stop you - I wouldn't mind the opportunity to top-slice my holding again at that level! ;-)

Gengulphus

[rbcrbc] 16/12/2009 16:26

So now we have the formal revised offer at 150p, with Rex and Co holding 14.75% and the 90% condition still in place it is a waste of time if Rex & Co. have not agreed to it. But as Astra now has 68.07% (at least) and Rex&Co have 14.74% (total 82.81%) still not a foregone conclusion if Rex&Co have accepted.

Just wondering if it is worth trying to buy in the market up to 160p in anticipation that this is not the end.......

[rbcrbc] 16/12/2009 09:14

the most likely explanation of the use of the rule 8.1 announcement is that they are declaring themselves potential offerors.

My guess is that if they are forced/able to take up the 2m family shares it will put them over the 20% threshold and they will be obliged to make an offer for the whole company.

The last RNS by Rex&Co I can see was 2nd Dec when they had 19.82% incl the 2m family.

As Rex&Co now have 12.5% (without the 2m) the 90% threshold is dead.
Do we have a bidding war ?
How high will Astra go ?
What will the management do if Rex takes control ?

Standby for the next exciting episode....

I did spot an RNS for Rex Harbour taking/upping a stake in another company the other day so I believe it/he is a rich individual active investor.

p.s. Did any directors show up for the EGM ?

[gengulphus] 16/12/2009 01:10

The latest RNS indicates that the concert party consisting of City Securities Limited, Rex Harbour et al has been in action again, this time buying 300,000 shares on Monday at a bit over 145.5p. It is very interesting, for two reasons:

* It is a rule 8.1 announcement (i.e. one by an offeror or the offeree company or their associates) rather than a rule 8.3 announcement (i.e. one for holders of 1% or more of the shares) like their last announcement on December 2nd.

* It is at a price above the current offer price.

The Takeover Code says that the term "offeror" includes potential offerors, so I think the most likely explanation of the use of the rule 8.1 announcement is that they are declaring themselves potential offerors. (I don't think they can be the existing offerors or in concert with them, otherwise the existing offerors would have had to raise their offer to the level paid yesterday, and being FDMG or an associate of FDMG doesn't seem to me to make sense either.)

I did sell about a third of my holding yesterday at prices of 142.5p and 145p (it's partly in a SIPP and partly in an ordinary dealing account, so two separate sales were needed) and was glad I'd kept my options open by not accepting the current offer - basically, I wasn't certain whether the price rise above the level of the existing offer was due to some serious action on a competing offer or was just a temporary response to some unfounded rumour, and wanted to hedge my bets between the two. Today's RNS makes it look much more like serious action on a competing offer at a level above 145.5p, and so I'll be hanging on to all of my remaining holding and certainly not accepting the existing offer until things become clearer or the market price rises significantly further!

Gengulphus

[rbcrbc] 14/12/2009 11:39

150 on the offer now, I suspect they are unsure of the vote tomorrow and will raise the offer later today.

In the past for other companies I have often got a phone call to ensure I vote in a takeover situation, but I havent had one here - has anyone ?

(My certified holding here is smaller than in those previous situations so maybe that is the reason).

[davidosh] 14/12/2009 10:38

There seems to be a feeling that £1.41 is still not strong enough to win sufficient votes and a number have said in the past that £1.50 is the lowest they will consider.

[rbcrbc] 14/12/2009 10:35

142.5 to sell
144 to buy

I smell a counter bid.

150p anyone ?

[gengulphus] 12/12/2009 11:39

I understand that the bid is conditional on 90% acceptance so if they only get say 76% it will fail and they won't take up those who accepted.

Page 27 PART III, Section A, 1.Acceptances

Not quite, because if you read that section carefully, you'll find it has the standard "(or, in either case, such lower percentage as Astra may decide)" let-out. If Astra only get 76% acceptances, they can decide to let the offer fail for the reason you suggest, but saying that it will fail goes a bit too far...

Such let-outs are very standard, and quite often used by acquirers, because they allow them to decide late whether to give an offer up as a bad job or to commit themselves fully to it. In particular, if Astra get 76% acceptances by the first closing date of the offer, I'm pretty certain they will at the very least extend the offer to see what further acceptances come in, either from people who forgot to respond at first or from people like me who decided to wait and see whether any other offer would be forthcoming.

And they're quite likely not just to extend the offer, but also say "OK, we're lowering the acceptance condition to 75%, declaring the offer unconditional, taking possession of all the shares we've had acceptances for, and starting the process of delisting the company", since that will let all the remaining shareholders know (a) that there is no longer any realistic possibility of a higher bid emerging; (b) that if they don't accept, they'll most likely be forced to anyway by compulsory acquisition, and failing that, be left as minority shareholders in an unlisted company. It's a fair bet that that will produce enough further acceptances to get to the compulsory acquisition threshold - it will certainly get mine if they do it!

And they may well get mine anyway even if they just extend the offer - it depends on my assessment of the acceptance level they have got... If e.g. they've got to 72% by the first closing date, my assessment will be that they're pretty certain to be able to complete the job and I will probably accept at that point; if on the other hand they've got to 56%, it will mean that they've had almost no further acceptances beyond the irrevocable commitments and I will continue to await developments, expecting the bid to fail.

Gengulphus

[rbcrbc] 11/12/2009 14:55

I cant see any RNS relating to the sale of the family stake to Astra.

So therefore either:

1 - The sale did NOT happen and there is a problem with the bid

2 - Someone isn't notifying the market as they should

3 - Other

any thoughts on 3 ??
Or have I missed something.

[rbcrbc] 11/12/2009 14:53

I understand that the bid is conditional on 90% acceptance so if they only get say 76% it will fail and they won't take up those who accepted.

Page 27 PART III, Section A, 1.Acceptances

[gengulphus] 11/12/2009 10:45

I'm fairly certain that if they don't reach the compulsory acquisition threshold and all the remaining shareholders stand firm, they can't actually force acceptance - after all, if they could, that would simply mean that the compulsory acquisition threshold is lower than it actually is! I don't know the full details of what they can do to squeeze the remaining shareholders out if they don't all stand firm, nor whether those details change when the company becomes private.

A majority shareholder can however make life quite difficult for minority shareholders, even if they only go over 50%, not 75%, and so cannot delist the company. That applies especially if the majority shareholder has more financial clout than the minority shareholders and so can afford to indulge in "this will hurt me, but it will hurt you more" tactics such as cancelling dividends and doing a rights issue. An example is the Tesco takeover of Dobbies Garden Centres a few years back - Tesco only got about 60-70% acceptances on their offer because of a blocking holding of nearly 30% held by another shareholder, but declared it unconditional anyway. A year or so later, they cancelled the dividend, declared a rights issue to expand the company that the minority shareholder would have to take up to keep their holding above 25%, and made another takeover offer at a lower price than the first one. And once the minority shareholder had established this couldn't be blocked by legal means, they caved in and accepted that second offer, which then duly went all the way through to compulsory acquisition. Basically, the writing was on the wall: even if the minority shareholder could make the further investment required to keep the blocking holding, there was nothing to stop Tesco coming up with further company expansion plans that required another rights issue in another year's time, and so on - and their financial resources were going to run out before Tesco's!

Obviously, Astra doesn't have the same sort of financial clout as Tesco, and so are unlikely to use exactly the same tactics. And you're talking about a holding that blocks compulsory acquisition, not the larger one required to block delisting. But I would be very careful about any plan to block Astra once they've got 75% control of the company - make certain you know what you're doing and what your contingency plans are, and definitely don't let those plans involve getting into a financially precarious position!

Gengulphus

[abc125] 11/12/2009 09:52

gengulphus

If the company decides to delist with 75%+ acceptances but a rump of 10% or more don't sell, can they force them to sell after the company has become a private concern?

[gengulphus] 06/12/2009 22:07

Take a bit of care with that interpretation - the EGM vote will count 'for's and 'against's, with those people who have sat on the fence not being counted at all in the percentages, while the acceptances will count 'accepts', with those who are against and those who are sitting on the fence both just being 'has not (yet) accepted's... So while people may be taking the same position on both, the percentages may come out very differently. E.g. if 54% are 'for', 6% 'against' and 40% sitting on the fence, the EGM vote will be 90% in favour and 10% against (54% and 6% out of the 60% who voted), but they'll only have 54% acceptances...

Gengulphus

[rbcrbc] 06/12/2009 16:39

I got the following email from my SIPP provider earlier today (I guess they work Sundays...):



RECOMMENDED TAKEOVER OFFER: HARGREAVES LANSDOWN CLIENT DEADLINE 17th DECEMBER 2009

As you may be aware, Astra 5.0 Ltd has recently made a Recommended Cash Offer for FDM Group Plc. Under the terms of the Offer FDM Group Plc Shareholders have been offered 141p in cash for each Share held.

A letter confirming your options in detail will be dispatched to you shortly by post. If you do not receive a copy please contact us and we will arrange for a duplicate to be forwarded to you.

To accept the takeover at this opportunity an acceptance must be received in our office by noon 17th December 2009.

Should you have any queries regarding this matter please do not hesitate to contact us on 0117 980 9803......


That is the day before the real deadline, which is fair enough they need some time to coordinate responses.

And it is 2 days after the EGM - I guess the EGM results will be a very good predictor of the offer acceptance, I cant think why anyone should vote for the EGM resoultion and then against the offer. Or against the EGM and accept the offer unless 90%+ vote in favour at the EGM and they see themselves doomed.

[gengulphus] 03/12/2009 04:19

I had a standard email message from one of my brokers (selftrade) today which said that because the FDM offer is recommended (by the amazingly independent paid stoogs of a non-Exec), then Selftrade by default accept the offer UNLESS they have specific instructions from the client not to accept.

I was surprised & a bit shocked by that. Surely the default position should be to await client instructions & do nothing? Apparently not.

I got the same message...

The default position on such things is whatever was agreed in the account's terms & conditions, and in this case section 8.5 of Selftrade's terms & conditions say that they will accept recommended offers... And while I agree entirely about the nature of this particular 'recommendation', it is nevertheless technically a recommended offer.

I've replied telling them not to accept the offer. I suspect I will end up accepting it later, but I want to give a decent chance for a competing offer to emerge. The stuff to do with Rex Harbour & co suggested that it's a reasonable possibility, and the existing deal could easily collapse if one did, as about half of the existing irrevocable commitments to accept cease to be binding if a competing offer is made at 135p or more. (Though I wouldn't expect them actually to be withdrawn from unless it was more than 141p!)

So I'll wait at least until the first closing date of the offer, and see what has happened by then. If it's gone unconditional, I'm certain to get at least another two weeks to accept (a requirement of the takeover code) and will do so - I most certainly don't want to be left as a minority shareholder in this company! If it's allowed to lapse, it was almost certainly doomed to failure with or without my acceptance. Otherwise (and this is what I think is most likely) the offer will be extended and I'll then assess the situation again, probably accepting if nothing significant has changed.

Gengulphus

[gengulphus] 29/11/2009 00:33

In a similar situation recently my SIPP provider sold my shares in the market without consulting me when the bid went unconditional. I'm not sure if there is some weird SIPP rule that makes them do that but suspect that someone thought unconditional meant certain - In which case why not wait for the payout - or maybe they didnt want me left holding untradable equities. But the value was small so I didnt say anything.

My guess is that it will have been something in their terms & conditions that says they can do that, so it might be worth checking through their small print.

More important, don't fail to say anything just because the value was small. Either what they did was allowed under their terms & conditions, in which case you want to find out why it was allowed and decide whether you're OK with it being allowed before a large sum of money is involved, or it wasn't, in which case you should want them to get their systems and/or people sorted out before a large sum of money is involved... Either way, it's best to get things sorted out now rather than waiting until there's a lot of money at stake!

Gengulphus

[rbcrbc] 27/11/2009 18:53

You're welcome RBCRBC. Well we managed to get the offer raised twice, from 120p to 135p, and again to 141p, but it's still a ridiculously low price. Ex-cash it's only about 6 times earnings for a great little business.

I waws thinking of buying you a drink as a thank-you but suspect my profits might get wiped out ;-)

There again, management are in my opinion both overpaid & untrustworthy - due to their total disregard (contempt even) for shareholders, and greed in wanting to effectively steal the business at a massive undervaluation from its current owners (i.e. us!).

Although I guess >50% of shareholders think it a fair price.

Rex Harbour was willing to buy shares for 140p recently, and I doubt that was in order to make 1p/share profit on them! Whether it was an attempt to spoil the Astra bid, an attempt to push the Astra bid up (that appears to have worked if so!), preparation for a counterbid, some combination of those or something else entirely, I don't know

I suspect that if he/they was thinking of a bid they would have made the counter offer for all of the familiy shares not just the ones he did. Maybe he just wanted to ensure Astra didn't make a lower offer. - But time will tell. I doubt this is a big enough company to interest any of the large IT or recruitment companies into making a hostile bid, so I tend to think this is the best offer we will see.

It's fairly certain that doing so and making the offer unconditional will gain another few percent of acceptances, as a fair number of shareholders take the approach of not even considering accepting a bid until it's gone unconditional

In a similar situation recently my SIPP provider sold my shares in the market without consulting me when the bid went unconditional. I'm not sure if there is some weird SIPP rule that makes them do that but suspect that someone thought unconditional meant certain - In which case why not wait for the payout - or maybe they didnt want me left holding untradable equities. But the value was small so I didnt say anything.

so £13m debt against £10m cash is not quite the materially above risk they are making out in their comments then

With 23m shares in issue and the board holding 10% I suspect the £13m loan is after using the comapnies own £10m to buy itself.

There is an addition short term facility of £35m from Investec bank, of which the £13m HSBC will be paid back reducing £35m to £25m, then the £10m cash in the company might be able to be used to reduce that to £15m (this is probably where they need the 90% acceptance).


My thoughts at the moment are to sell my SIPP holding when something else grabs my attention, and keep my certified shares so I can attend the EGM and through a few rotten eggs ;-)

[davidosh] 27/11/2009 15:56

Story from the FT...



Gareth Healy of Inflexion admitted it was using "debt finance at a level materially above that which would be normal for a quoted company". Inflexion will add £13m of debt provided by HSBC, which is also an FDM customer.


Then later down the story we read of course....

For the six months to June 30, revenue from continuing operations fell marginally to £25m and pre-tax profits eased to £2.2m. But the Mounties have continued to bring in the cash, which was nearly £10m at the end of the first half.


Mmmmmmmm so £13m debt against £10m cash is not quite the materially above risk they are making out in their comments then ??


I still think the offer is lowball but thankfully there are now other opportunities and if the big boys want out then who am I to stand in the way ?