Telent Share Discussion Threads

[charlie] 23/5/2007 20:16

And does the market understand that if we get rising real interest rates - bad news for almost every business - this will hugely help Telent.

The fund is 80% hedged, with net exposure of the funding position said to be £1.1m/ basis point.

So a 1% rise in real interest rates adds say 110m, that's 195p per share.

That's only approximate, because of convexity - but does the market understand at all that rising real rates = huge benefit to Telent.

[charlie] 23/5/2007 19:33

What doesn't the market understand about this?

I think the bit the market doesn't understand is that the pensions position at Telent is BETTER than many FTSE350 companies.

Many FTSE350 companies have IAS19 deficits. Following Pensions Act 2004, these are "hard" liabilities, the company can't wriggle out. The shareholders will eventually have to pay.

But at Telent, we're IAS19 neutral now, PLUS there's £0.5bn (822p per share) in escrow that may well eventually all come back to the shareholders.

It is IMO quite wrong to think (as the market currently appears to think) of Telent as having a unique "pensions problem" which other companies don't have. Telent's pensions position is much better than many companies.

[charlie] 23/5/2007 19:27

Market cap £318m

Earnings valuation:

Basic eps 91.8p

Adjusted eps based on operating profit from trading activities 38.7p

33.6p of the difference is a tax credit, probably not a long-term item. The other 19.5p is earnings on the escrow less accruing pension cost. The escrow belongs to the shareholders, unless the pension fund needs it. The pension fund is neutral on IAS19. It is quite reasonable to regard the escrow earnings as shareholder earnings.

So sustainable eps say 91.8-33.6 = 58.2p

Multiple 15x gives 873p.

Asset valuation:

Total £749m cash, of which £235m in Telent and £514m in pension escrow. The latter belongs to the shareholders, unless the pension fund needs it.

£749m is 1199p per share.

OK, guidance from the results presentation for outgo on legacy liabilities is £100m over next 5 years, plus some longer dated. Suppose (pessimistically) the £235m is all used up. Still leaves £514m, that's 822p per share.

OK, the IAS19 mortality of experience + 3% of liabilities, but trustees pessimistically use experience + 14% of liabilities. Difference is 11% of liabilities, that's £300m.

Still leaves £214m SURPLUS CASH, that's 342p per share.

All asset figures completely ignore assets of the operating business.

[jarbie] 11/5/2007 11:50

We are badly in need of some news - does anybody look at this company ?

There must be some life and some future but who knows ? - jarbie

[blank frank] 16/9/2006 21:18

Please note the following new thread which may be of interest:
"Telecom Shares You Should Buy: The Tips League Table"

[prallum] 03/8/2006 10:15

I do not want to sell out to anyone. I expect the directors to run the company make a profit and distribute the profit to me as dividends.

[charlie] 21/7/2006 11:41

Panning out as charlie expected.

"Therefore, the Court Meeting and EGM were adjourned to enable shareholders who had not yet voted an opportunity to vote. In addition, the Board urges all investors who have entered into arrangements to lend their telent shares to third parties but retained the economic interest to re-call these shares in order for them to be able to vote their shares at the rescheduled Court Meeting and EGM."

Ho ho ho! This could be about to get interesting.

[charlie] 18/7/2006 08:11

Todays' Telegraph: charlie may have been on the right track all along.



Spurned fund may derail Telent sale
By Ben Harrington

(Filed: 18/07/2006)

Secretive US hedge fund Polygon is threatening to derail the £346m sale of Telent after rival fund Fortress rebuffed Polygon's approach to launch a joint bid for the company, formerly known as Marconi.

It is understood that Polygon, which was originally offered the opportunity to make a bid for Telent when the auction of the business started, recently approached Fortress to join its bid.

Polygon has built up a stake in Telent of nearly 24pc through a mixture of contract for differences and shares.

Fortress is understood to have rebuffed Polygon because under the Takeover Code rules if it had let the hedge fund join its bid it would have had to allow all Telent shareholders a chance to join it as well.

It is thought Polygon is now either planning to vote down Fortress's 529.5p a share offer for Telent at the emergency general meeting this Friday or plans to make an offer for the company itself. Telent's bid has been structured as a scheme of arrangement and needs 75pc of shareholders to accept the offer. Polygon could block the deal if it decides to vote against Fortress's offer.

Most of Marconi was sold to Swedish telecoms company Ericsson in October last year for £1.2bn. The rump, renamed Telent, now focuses on network maintenance for large telecoms customers. It also has a £2.7bn pension fund with around 70,000 members.

The pension fund regulator only agreed to the deal if Telent put around £185m of the proceeds into the pension fund and a further £490m into the escrow account.

Some believe Polygon is targeting Telent because it believes there is potential to release extra cash to shareholders from the escrow fund after a sale.

Polygon, Telent and Fortress all declined to comment.

[humbagash] 11/7/2006 18:47

Just recieved a letter stating that I am to get a golden handshake of 2p for each warrant.
Well, at the least it puts a closure to what has been a very unsavoury interlude with Marconi/Talent.
Hopefully the snouts in the trough will get their just deserts.
A costly lesson learnt.

[charlie] 11/7/2006 12:35

Re my post 46:

"Or are Polygon trying to keep control of more voting rights? Not sure if what they're doing actually achieves this, they can probably direct the voting of the hedge of the 24% long, but the hedge on the 7% short has to be delivered and so can presumably be voted by the counterparty.

Looks like it since on Friday Polygon converted their entire long CFD 23.95% into shares. They have declared 23.95% under the Companies Acts. According to section 2 of their 10 July Rule 8.3 they are also short 11.65%. (Section 3(b) of same appears inconsistent, looks as if only the first 90,000 short transaction should be there.)

[charlie] 30/6/2006 20:12

Pages 68 and 72 of the Scheme document

The chief executive is allowed to exercise his 1.5m options at £1.00

and he gets a termination payment of £822k

That's £7.26m CASH in total

Which might have something to do with why this Scheme has been engineered?...

I find it difficult to see any other reasons why the business shouldn't stay quoted. The document doesn't give any.

[veg man] 29/6/2006 08:35

Thanks for the info JakNife, much appreciated.
It is actually a gentleman of 84 who is very confussed with the matter and asked me if I had any idea of the subject.
I think that in his younger years it would have been of no concern,but he as become a little absent minded in past months and things like this have started to worry him.
Thanks again.

[veg man] 28/6/2006 22:44

What would happen to a shareholder who does not return their proxy form or attend and vote for the warrent resolution.
Is money going to be lost on this share.for give me for sounding a bit thick and vague about this,but I do not understand the workings of warrents and the affect it could have on the share price and the company.
I am asking about this for a friend who holds shares in this company.
Thanks in advance.

[charlie] 24/6/2006 21:53

Any views on what Polygon are playing at? Had built up a 24% long but now added 7% short @ 520p.

It appears they were acquiring at around 510p shortly after the 25 May announcement. So if 529.5p is the final outcome, I suppose 10p of the spread has closed within a month whilst the remaining 10p will take maybe 2-3 months more. So if you've got something better to move on to you might as well move on.

Or are Polygon trying to keep control of more voting rights? Not sure if what they're doing actually achieves this, they can probably direct the voting of the hedge of the 24% long, but the hedge on the 7% short has to be delivered and so can presumably be voted by the counterparty.

Whatever their game it certainly muddies the waters (at least for simple souls like me).

[charlie] 20/6/2006 16:42

On second thoughts Polygon's holding is through CFDs so they can't give an irrevocable, maybe they've given some other indication they agree with it. (But no mention of letters of intent or similar?)

[charlie] 20/6/2006 16:39

I find it slightly odd that Telent paid Fortress £1m up front, back in February, in consideration of Fortress doing some due diligence. A break fee if Telent decides to accept some other offer is of course standard (and in this case it will be £2.4m), but paying someone just to have a look?

[charlie] 20/6/2006 16:37

Scheme of arrangement giving 529.5p announced this morning.

Of note they seem to have failed to get any irrevocables (which they said on 25 May they would be seeking), even from Amvescap (21% holder) whom one might have expected to be docile.

Polygon (19% holder) doesn't have a record of being docile.

Long list of other hedgie chancers joined the register.

I think 529.5p might not get a 75% vote, but I also think it's worth more.

[charlie] 25/5/2006 20:30

Another reason why Telent may have been artificially depressed in the past couple of weeks is that it was one of only two UK stocks booted out of the MSCI index at the annual review at the start of May. (It was booted out because of its reduced capitalisation after the special div.)

[charlie] 25/5/2006 20:05

The announcement of the offer says

"The Possible Offer price of 529.5 pence per telent Share would represent a premium of....approximately 23 per cent. over the average closing price of 430.5 pence per telent Share since telent announced the disposal of its equipment and international services businesses to Ericsson on 25 October 2005. "

This is misleading.

After the 275p dividend, xd Friday 24 March, the shares were consolidated 2-for-7.

Price on 24 March = 408.5p
Fair price on 27 March = (408.5 - 275) x 7/2 = 467p, that's 48.5p higher/

25 Oct 2005 - 24 March 2006 = 5 months
25 March 2006 - 25 May 2006 = 2 months

Therfore adjusted average price since 25 Oct 2005 = 430 + 48.5 x 5/7 = 465p.

And adjusted offer premium = 529.5/465 = 14%, not 23% as quoted.

[charlie] 25/5/2006 19:58

So the pension plan has been derisked, presumably via interest rate swaps. I think this was probably a bad idea. Nevertheless there is still £1.1m / basis point exposure to real interest rates.

So if real interest rates normalise upwards say 150bps, that's worth £165m which is 266p/share.

Meanwhile we have a single proposal(no competing bids) from a private equity buyer. Today's announcement gives no compelling reasons why the business needs to be sold.

I can't really see why shareholders should agree to this deal.

[graham99114] 25/5/2006 09:37

the deal looks to be finalised so why hasnt the share price shot to 529.5 ?
What happens to the warrants ?

[weatherman] 25/5/2006 08:24

Bid situation at 529.5p