Colt Telecom Share Discussion Threads

[dickbush] 01/7/2015 22:43

From Light Reading

Colt Technology Services has revealed it will quit the IT services market as part of a restructuring aimed at focusing resources on its core network, voice and data center businesses.

Explaining the move in a detailed statement, the operator said it would need to make considerable short-term investments in its IT services business to deliver profitability and that it was not prepared to bear the risk.

The decision marks a radical break with the strategy Colt Technology Services Group Ltd (London: COLT) announced earlier this year, when CEO Rakesh Bhasin said that one of the operator's priorities in 2015 would be "delivering the turnaround in our IT services business."

[dickbush] 30/6/2015 18:39

I've been working on the back of an envelope again.

Based on the rumour that AT&T offered £2.50/share back at the end of 2007, that worked out at exactly an EV/EBITDA of 9 times trailing 12 months EBITDA through June 30th 2007 plus net debt at that time. The rumour, again, was that Fidelity wanted £3/share which equated to an EV/EBITDA of 10.8 times. And that was when debt cost a lot more than currently.

9 times the underlying EBITDA and net cash equates to circa £2.50 again now.

If you think that's a strange coincidence, how about this? The total cost of the acquisition in US Dollars is almost exactly the same. The decline in Sterling v the Dollar exactly compensates for the increase in the number of shares since.

[dickbush] 30/6/2015 14:04

robwt

My reading of the offer, if I remember, was that closing would be 109 days after the announcement. If I'm right, there's plenty of time for someone else to come forward and, at least, make Fidelity's offer look what it is, inadequate. Anyone with a substantial pan-European business would be able to bid substantially higher e.g. AT&T which, as we've seen from industry surveys, fits perfectly with Colt in Europe.

[robwt] 30/6/2015 13:53

DB..Fidelity have put no dates on the offer only said there would be no more money offered. However, that doesn't mean they wouldn't pay more at a future date.

Apart from Ruffer and Standard Life, we have heard nothing from other major holders. If there is to be a knockback or another deal out there from one of those who may see this as Fidelity stealing it, it is time they showed their hand.

[dickbush] 30/6/2015 12:00

There is absolutely nothing in this latest announcement that would make any of Colt's longer term investors want to sell. On the contrary.

[dickbush] 30/6/2015 10:05

I didn't miss anything negative.

Excluding the IT Services EBITDA loss and including KVH for a full year suggests underlying EBITDA of at least Eur340 mil, probably more, and growing.

As has been suggested here many times, Colt's senior management has been providing negative value added for years. This latest reorganisation is further confirmation. The conclusion is obvious.

It looks as though we are going to see the Half Year figures earlier than July 31st.

[dickbush] 30/6/2015 09:18

Today's announced reorganisation looks like good news for Colt shareholders. I have only read through quickly but the points that jumped out were:

Closing down the loss-making IT division over three years. IMO about time.

The Japanese acquisition is performing better than expected.

Free Cash Flow will be circa Eur100-120 mil in 2016.

I've probably missed something negative, but I would have thought that in a decent market (which we don't have currently) this announcement would have sent the shares heading towards 190p without any sniff of a bid. With that forecast for FCF in 2016, I don't see why any acquirer with synergies from Colt's acquisition would not pay more than 190p.

[palace andy] 24/6/2015 13:11

Looking at Bloomberg, Fidelity appears to own 62.45%, Southeastern Asset Management 4.72%, Ruffer 3.83%, L&G 3.02%. Aberforth Partners advised on 31st May that they had bought 6,211,800 shares which brings their holding to 0.79%. Rakesh Bhasin owns 0.21%, Norges Bank 1.17% and Dimensional Fund Advisors 0.88%. No other holders above 0.5%.

[robwt] 23/6/2015 17:02

If they go to 195-200p, those buyers are seriously doubting the Fidelity offer is a done deal. In the old days this share would have jumped to well over 200p on last week's news. There would have been a suitor buying up what they could and the likes of Rutter and Standard wouldn't have been so helpful to Fidelity.

Times have changed since those days, now there are not many with any balls. IMO many are looking at this knowing Colt is worth at least 30% more than this derisory offer, but where are the brave. To most the thought of taking any risk petrifies them.

[dealy] 23/6/2015 17:01

maybe they assume or believe the bid will be rejected, they will keep their shares and those shares will be worth a lot more when Fidelity sells in 2017. Not so long to wait if you believe in the story. Fidelity clearly believe in the story.

[palace andy] 23/6/2015 15:48

All these people buying in at 191.7p today, they must not believe Fidelity when they say they won't sell before the end of 2016?

[dickbush] 22/6/2015 13:55

My reading of today's statement is "There has been some comment that we could change our mind about selling before December 31st 2016 because our statement is not bound by the Takeover Rules. We are, therefore, committing ourselves to this AS IF WE WERE BOUND BY THESE RULES"

OK so all thoughts of Fidelity acting ethically have gone out of the window with this "bid" but they would open themselves up to a law suit if they now accepted a bid before then. By whom? By all those who have been selling from this morning onwards.

The only way for us to participate in a higher bid is for Fidelity to fail to get enough shares to get the quote eliminated. I've been in this since October 2008 and I don't mind waiting another couple of years to get properly paid. I've got plenty of patience. How much patience has the new bully-boy at Fidelity got? How much patience has his boss got with him?

[palace andy] 22/6/2015 13:50

Buys starting to come through at 191.5p. Rumour of a higher bid?

[robwt] 22/6/2015 13:22

There is a lot of selling at 190p. It looks like this is a done deal, I cant see a third party coming in with Fidelity saying they won't sell.

It is a stitch up, but is there any point in holding on just to save dealing costs.

[dealy] 22/6/2015 13:00

I think the Fidelity commitment not to sell before end 2016 does not apply in the case of the current offer failing (failing due to lack of support or failing due to another offer coming in). They are simply saying that they haven't got anything up their sleeves that they are not telling us about (which would leave us all mightily peeved if it transpired).

[palace andy] 22/6/2015 12:44

Good to see Alphavalue on the ball

[palace andy] 22/6/2015 11:34

Or a decent offer comes in and Fidelity change their minds. The statement is not covered by the UK takeover rules so there is an outside chance of this happening.

Reputation is very important to Fidelity, I'm hoping there are more twists to come. Doesn't look likely, but still hoping.

[robwt] 21/6/2015 22:11

hxxp://www.financemagnates.com/institutional-forex/technology/colt-rebuffs-fidelitys-undervalued-offer/

[dickbush] 21/6/2015 21:05

FT article suggests Southeastern Asset Management with 4.7% of Colt's shares may try to get improved terms.

[dickbush] 21/6/2015 14:51

BidCo has received irrevocable undertakings to accept or procure acceptance of the Offer and to vote in favour of the Shareholders Resolutions and against any Impeding Resolution from Ruffer LLP and Standard Life Investments in respect of 70,148,176 Colt Shares representing, in aggregate, approximately:

o 23.4 per cent. of Colt's issued share capital held by Independent Colt Shareholders; and

o 7.8 per cent. of Colt's issued share capital.

The irrevocable undertakings referred to above will cease to be binding if the Offer does not become or has not been declared wholly unconditional by the date falling 109 days after the date of this announcement (or, in the case of Standard Life Investments, such later date as determined by BidCo).

[dealy] 20/6/2015 09:33

Private companies get better valuations all the time versus UK listed companies. A private Colt can say to a buyer "7 times Ebitda please". A public company that has bad history and trades in a market that doesn't understand technology ends up getting a 30% premium to a discounted valuation.

Fidelity will get more in a sale from a non-listed position in 2 years time. Their desire to get rid of the minority shareholders is therefore understandable. The 190p is a shot across the bow. Surely they will be willing to stretch it to 220p to get the deal done (after all, they only have to buy one third of the company). If markets rise in the coming weeks once Greece is resolved it will be hard to justify the 190p buy out price.

Most logical outcome here is a trade buyer putting in an offer now for the whole company.