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|neverabanker: 60-75p would value the company between 70-88m. If current profitabilty is about 5m then would suggest a PE of 14-17 might justify this. The full year results 2010, and the Q1 for 2011 should be out within 2 weeks or so(in 2010 they were issued on 15/4) and this will no doubt give a better idea of likely profit and have an impact on the share price.
The circular for shareholders (page 59) on the reorganisation gave a net asset value (post restructure) for the company irrespective of anything else of 103M on 30/6/2010 which might mean just on that basis alone 85-90p per share was justified on April 1st (this does not take into account the -favourable- trading conditions in the 2nd half of 2010).
With such a huge portion of the shares however it is what Newco does that really matters and if you read the circular there are some interesting paragraphs which do not seem to have been brought up here or even in the press in any way. These might exercise some people's thoughts. I have cut and pasted them below.
The sections from the circular are quite long but basically Newco is simply a short term vehicle to achieve realisation of the value of the shares (and effectively the company- or at least 90+% of it -without putting the company itself out of business) for the trustees/PPF.
Newco will become immediately insolvent, be put into administration and the administrator will decide how best to realise the assets for the major creditor which will be the Pension protection fund (PPF). It seems that this will be undertaken in a short/medium term time frame. The obvious answer ( see risk factor 3 below) will be to effectively engineer a takeover by selling them to a single purchaser who could then exercise the right to compulsorily acquire the rest of the shares.
Another option is that they might start to put them on to the market where they may be picked up by institutional buyers who still own the majority of the 9.2% (and who would undoubtedly prefer that the company was not all in the hands of a controlling interest) - equally the remaining II's might just want to get rid of what they have left as soon as trading opens which would hit the share price in the short term - my guess though is they will keep them in case there is a takeover in the offing. So there is still much to be played out here.
My final though is that given that even the IAS valuation of the pension deficit in the circular was 132m -and this would probably not be any where near enough to satisfy the PPF given buy out value of deficit was 400m+. But even if it was, then if the trustees/PPF are looking to get 130m+ or more from a takeover then the administrator may have expect that a realistic offer for the shares might be upwards of 120p or more. So... On balance, other than in the very short term, I don't see the price going down much as it is not in the interest of the administrator to dump the shares on the market and overall it seems reasonable to expect the price to drift up especially if the results are good for Q1 or the newco administrator actively seeks a buyer for the company - also - the directors of uniq have also been incentivised generously to immediately maximise the value of the company. I Would be interested in thoughts of others on this.
This is from section 4 of the chairman's letter in the circular
As part of the Restructuring, Newco will be placed into administration. The administrator that is appointed will seek to effect a transaction pursuant to which Newco will realise all or part of its shareholding in theCompany for cash to satisfy Newco's debts, in particular its Section 75 debt owed to the Trustee. In the event that Newco's entire shareholding in the Company is sold to a single purchaser (such a sale being governed by the provisions of the City Code), the third party purchaser could utilise its rights under the Companies Act to compulsorily acquire the remaining 9.8 per cent. of the Uniq Shares held by Shareholders other than Newco.
this from Section 3 RISKS from the restructuring also in the circular
Risks related to Newco being a significant shareholder following the Restructuring
Following the Restructuring, Newco will own a 90.2 per cent. shareholding in the Company. This significant concentration of share ownership may affect the market value of the Uniq Shares because investors may believe that there are disadvantages in owning shares in companies with a controlling shareholder.
As a result of its 90.2 per cent. shareholding in the Company following the Restructuring, Newco and Newco's major creditor, the Trustee (or the PPF exercising the Trustee's creditor rights during the PPF assessment period), will have the ability to determine the outcome of matters requiring shareholder approval.
However, certain undertakings have been provided in the IRA in relation to the exercise of shareholder rights to ensure that these shareholder rights are exercised in furtherance of the Restructuring. The IRA also provides that Newco and the Trustee shall accept that the day to day management of the Group shall be the sole responsibility of the Board, and neither the Company nor the Trustee shall instruct Newco to enter into transactions with a member of the Group except on an arm's length and on a normal commercial basis in the
context of the Restructuring.
As the parties' intention under the IRA is for Newco to effect a transaction pursuant to which Newco will realise all or part of its shareholding in the Company, it is likely that Newco's entire shareholding in the Company will either be sold to a single third party purchaser or will be placed in the market in the short to medium term. The Company cannot predict the timing, the volume or the manner of the sale of Newco's shareholding at the present time. A sale in the market of a substantial number of the Uniq Shares, or the perception that such a sale could occur, could adversely affect the market value of the Uniq Shares.
In the event that Newco's entire shareholding in the Company is sold to a single purchaser (such a sale being governed by the provisions of the City Code), there is a risk that the third party purchaser would utilise its rights under the Companies Act to compulsorily acquire the remaining 9.8 per cent. of the Uniq Shares held by Shareholders other than Newco at the price agreed between Newco and the third party purchaser.
In order to achieve the maximum value of the Uniq Shares for all Shareholders in such a sale, the Remuneration Committee recommended to the Board that a short term value maximisation plan be established for the Group's senior executives that is linked to the achievement of pre-defined equity value
|peawacks: From Cliff D'Arcy on Motley Fool
Published in Company Comment on 11 February 2011
Here's how a £6m firm tackled its £473m pension deficit.
How can a company valued at £6 million sort out a £473 million pension deficit? By giving more than 90% of its shares to its pension scheme and then moving to AIM, of course!
How Uniq was crushed
At least, this is what's on the cards at convenience-foods maker Uniq (LSE: UNIQ), which I last wrote about in July 2010.
Uniq's crisis has its roots in the Nineties, when dairy group Unigate sold its dairy and cheese divisions to Dairy Crest (LSE: DCG), reinventing itself as Uniq in 2000. In May 2001, Uniq demerged its logistics business Wincanton (LSE: WIN) to focus on its pan-European food operations.
The bad news for its shareholders is that Uniq remained on the hook for roughly half of the combined pension liabilities of its former businesses. Hence the massive mismatch between Uniq's market capitalisation and the shortfall in its occupational pension scheme (£473 million as at 31 July 2010).
Back in its heyday during the Nineties market boom, Uniq/Unigate was riding high, with its share price peaking at 468p in April 1999. In the intervening years, the chilled-food manufacturer's shares have been utterly crushed. As I write, they trade at 5.2p, down 99% from their all-time high. This 12-year nose-dive has transformed Uniq from a £500 million mid-cap into a micro-cap tiddler today.
Throwing shares at a black hole
Let's take a look at Uniq's proposed deficit-for-equity restructuring in more detail.
For more than 18 months, Uniq and its shareholders have been negotiating with its lenders, the Pensions Regulator and the Pension Protection Fund (PPF). The firm's aim was simple: to save itself by agreeing a process to rid the firm of its toxic pension burden.
Yesterday, Uniq revealed that its latest proposals have won approval from the Pensions Regulator. These involve:
* surrendering 90.2% of its equity to its pension scheme, leaving shareholders with under a tenth (9.8%) of the post-restructure business;
* injecting £14 million of cash into the pension scheme;
* a new bank facility of £25 million (from which the £14 million top-up will come); and
* moving the company's listing from the main market to the Alternative Investment Market (AIM), as the proportion of shares in public hands will be below the 25% free-float requirement for LSE-listed companies.
Everyone's a loser
As part of the deal, most of Uniq's 21,000 pensioners -- largely former milkmen -- will no longer receive inflation-linked increases in their pension payments.
Uniq's shareholders face their own headache, as its proposed move to junior market AIM will mean that Uniq shares can no longer be held inside tax-free ISAs. Thus, Uniq shares inside ISAs will have to be sold and, possibly, repurchased outside of these tax shelters.
Of course, this deal is subject to approval from Uniq's long-suffering shareholders, as well as the High Court. In addition, the Pension Protection Fund will waive the deal through if it is completed by 31 March.
Hardly a Uniq lesson
The glaring lesson from the devastation of Uniq is simple: directors and investors alike must take full account of all company liabilities when making judgement calls on future performance. More often than not, company failures (when investors suffer a 100% loss) happen because of problems with liabilities and/or cash flow, rather than strategic decisions.
Thus, when analysing a company's suitability for your portfolio, take its pension legacies and liabilities into account as much as its bank loans and other debt. Otherwise, the company's risk/reward ratio will be falsely lowered, putting you and your money at greater risk of loss.
Similarly, watch out for major changes to company pension schemes, as these have great potential to benefit or harm shareholders. As Uniq shows, what may appear to be a humble salad-and-sandwich supplier can turn out to be a pension pit with an operating company tagged on.
From Cliff D'arcy on Motley Fool
Next steps for Uniq
Assuming all goes well, Uniq will continue to stock the chiller cabinets and sandwich shelves of Marks & Spencer (LSE: MKS) and the like. However, there are four hurdles to be cleared for its reorganisation to be successful:
1. Shareholder and Court meetings: 25 February
2. Shares suspended from trading: 17 March
3. Capital reorganisation takes effect: 18 March
4. Listing on AIM: 1 April
Lastly, good luck to Uniq's hard-pressed shareholders and pensioners. Let's hope their next ten years prove easier than the past decade!|
|the juggler: I have just seen this over on Rainmaker's VAL thread and I am sure he won't me reposting it here
Honest crust - 20 Mar'10 - 19:24 - 1825 of 1826
You sold out of uniq??
Rainmaker - 21 Mar'10 - 14:00 - 1826 of 1826
Nope,HC, I'm holding for at least another 9 months.I'm optimistic for the Uniq share price near term(and medium term for that matter)because of high forward earnings estimates that are underpinned by huge cost savings.We also have to remember that those estimates are historically low in comparison to the recent performance of the UK business. Furthermore the Uniq share price historically performs well from the end of March-I believe we've had a rise in eight of the last 9 years even when the prevailing trend has been down.There's a Poster called Spec on ADVFN who said that Investors thought Uniq was the stock market equivalent of a overnight winning lottery ticket and think there are quite a few Investors who think that way.
|rainmaker: To Mova and co,haven't been posting much recently just following the news, however haven't changed my mind or sold any shares. Still very positive about the Uniq share price outlook. When I originally recommended this share in December 2008 at 4.4p, as far as I was concerned there was a two fold margin of safety, in the value of their market leading branded foreign businesses vastly exceeding the then market cap and secondly, the future earnings of Uniq underpinned by massive cost savings.The first factor has come to fruition and now the second comes into play.Sorry to repeat myself but at current forecasts of £7mln for this year we are only scratching the surface of Uniq's earnings power. The remaining UK business can make in the order of 19p a share or over £20mln pa. At this stage of the economic cycle we should be trading on a relatively high p/e yet we are trading at just 4 times prospective earnings.
|brando69: If the UNIQ share price stares at that photo long enough it might react with a verticle surge. Certainly worked for me.|
|rainmaker: Just a point worth making, I feel. Frequently exceptionally large volume preempts/predicts a large increase in a share price. So called "explosive volume" as Chartists call it, is obviously subjective but suffice to say we are talking about abnormally large volume. However,if we reasonably assume that average trading volume in Uniq is 150k a day then I have used a figure ten times that amount-1.5mln. Todays volume was 1.6mln and I note that on the 9 occasions since 19/12/08 when we have exceeded a daily volume of 1.5mln, the Uniq share price has subsequently risen on average by 11p within one month. Frequently the rise has occurred in a matter of a few weeks if not days.
|davius: > this is just sentiment as well as the markets having a rough time too
I can't see how anyone can blame the fall in the UNIQ share price on the markets 'having a rough time'. The FTSE 100 is less than 3% off it's 12 month high, yet UNIQ is 46% off. True many small and mid caps have taken a battering, but this is all about individual stocks and not the market in general.
Just because we're undervalued at 25p doesn't mean we can't go lower either. The only positive that I can see is that when we finally turn there may be some decent trading to be had on the way back up. But for those holding purely long term this has just given short term traders the opportunity to load up at lower prices than the rest of us.
I'll be glad to see a hint of the bottom and open up a couple of T20s...|
|rainmaker: I agree with Spawny- thin volume is allowing the share price to be manipulated. Ben Graham's famous quote springs to mind once again"In the short term the stock market is a voting machine but in the long run it is a weiging machine. It's ironic the Uniq share price went down today yet the the rise in the FTSE 100 meant the Uniq Pension deficit dropped by £6.8mln-I believe it's now around £20mln. Another interesting figure to ponder upon is that at current levels Uniq has a market capitilisation of £32.6mln yet within the last month has agreed to sell three businesses for £43.5mln giving it net cash of £41mln when the funds are received in March and lastly Uniq is trading profitably.Is this not a bargain, I see before me? Another Ben Graham quote "Investors should let a Companys underlying fundamentals as dictated by earnings, assets etc be there guide and not the share price. Shorting Uniq at current levels is a very dangerous game.
|davius: Opened lower yet again. The markets have risen so strongly yet the UNIQ share price continues to decline. The harsh reality is that a number of posters called it very wrong when talking about how much money would be received for the NE businesses and how this would affect the share price
Back to breakeven for me. Disappointed not to have taken profits, but unfortunately I was one of those believing the hype. Still, I feel this is a decent enough long term hold in my ISA.|
|rainmaker: TH-Unfortunately there's little more I can add- I would say the "market" is currently discounting Investec's old £42mln forecast for the sale of the three European businesses but no more but since that forecast was made the businesses overall have become profitable and the economic environment in Europe has improved.Poland is making £2mln more than it was last year and is currently on offer at close to £40mln which is a fair price. Really the question I would ask Investors on the thread is, "Does anyone still believe the Northern European businesses will only fetch £42mln?
For reasons I've already discussed previously-market leading positions, brands etc I confidently expect £60mln to £90mln which I believe would send the Uniq share price to between 60p to 90p-I think the fact that Uniq is now trading profitably with just £2.5mln of debt warrants a small premium to net cash
Uniq Plc share price data is direct from the London Stock Exchange