Fdm Share Discussion Threads

[rbcrbc] 13/9/2009 10:50

Talking about heads...

Is that an Inverse head and shoulders I see begining to form on the charts ?
If so I think that is short term bad news and means the share price is likely to fall, taking that back to FA from TA It would imply the bid not been made at 135p, which is great as long as they dont go back to the lower bid level.

It is also interesting to see that the share price hasn't climbed up close to the 135p and so 'the market' does not expect the bid to happen.

If it doesn't then maybe this is another candidate for a shareholder NED to make sure they dont try again at silly prices and dont keep the divi down when there is plenty of cash and plenty of profit......

[davidosh] 12/9/2009 18:29

Gengulphus.....You hit the nail on the head again !

[gengulphus] 12/9/2009 15:17

tis gone to the highest bidder

Really? Perhaps I haven't been paying attention and have missed:

* An actual bid being announced, rather than just talks about a possible bid.

* The emails from my brokers telling me about the bid and asking whether I accept.

* The announcement that the bid has gone unconditional.

Then again, perhaps you're spouting complete rubbish...

Gengulphus

[paddyfool] 12/9/2009 08:55

tis gone to the highest bidder

[greek islander] 08/9/2009 00:51

Talk about a quiet stock.

[gengulphus] 24/8/2009 20:02

As regards "inducement fees" in general, while I understand the desire of offerors to have their costs paid even if their offer fails, I completely fail to see any principle that says they should be able to expect it to happen.

Suppose I'm looking to buy a house, for example, and I decide that my due diligence requires me to get a full survey done on it by a surveyor who is contractually obliged to me to get it right. I would certainly desire the vendor to pay for it - but that's not going to happen, and IMHO quite rightly not. I have to take the risk of the money being wasted if I don't actually get the house, and I don't see that the situation with a potential offeror for a company is any different...

Basically, such inducement fees IMHO only really have a place if the owners of the assets being sold want to sell them - and want to do so badly enough to be willing to pay a fee to induce offers to be made. Personally, I would only permit them if shareholders had passed a resolution authorising the directors to pay an inducement fee to get offers above a certain level...

None of this is specific to FDMG, by the way - it's a general gripe I have with the Takeover Code permitting directors to induce people to buy the shareholders' company without first ascertaining whether the shareholders want it bought off them.

Gengulphus

[gengulphus] 24/8/2009 19:36

page3girl,

If you're happy with 135p, I'd suggest you put your shares on the market with a limit order to sell at say 136p (the extra penny to cover the selling commission) and stop trying to persuade people that paulypilot is wrong. If he does convince shareholders that they're worth considerably more than 135p, you'll reach your target more quickly than by waiting for the offer to come through; if he doesn't, you'll reach it just as quickly. A "heads you win, tails you draw" situation...

Also, there really is very little point in appealing to people who think the shares are worth well over 135p not to try to get more - you may be happy with 135p and want the deal to go ahead at that price, but they are clearly not happy with 135p and would rather keep the shares. Do you really expect them to put your contentment ahead of their own???

And since I am one of those people, I can assure you that I am most certainly not going to put your contentment about this offer ahead of my own! Which may well seem unfriendly, I know - but making friendly gestures of that type is completely incompatible with being successful on the stockmarket.

Gengulphus

[paulypilot] 24/8/2009 16:28

Hi,

FDM Directors are actually paid very generous salaries for the size of the business, although personally I don't have a particular problem with that, given that they have performed extremely well.

Share options packages can & will deliver further gains for Directors over the long term, although we've clearly been through a savage bear market for small caps in 2007-2008, when most small caps lost 80%+ of their value.
It's going to take time for markets to recover, but this year to date has been one of the best years I can remember in my investing career in small caps. the bottom line is that good, well-managed companies like FDM will secure appropriate share prices in the long-run, for all our benefit including management.

Fair value for FDM shares is currently: net cash + 12-15 times earnings.
That works out at roughly 42p cash + 12-15 times (say) 15p earnings,
so that gives a share price target of 222p-267p.

Given time, this share price will gradually rise to around 200p in my view, and the MBO is an unwanted distraction.
Obviously if you're just a short term speculator, like page3girl, then you want to skim off a quick profit at 135p & move on, as he/she's indicated above.
Fair enough, he/she is putting forward their point of view, but I strongly disagree because I like the long-term value in FDM.

Interestingly, the 120p initial MBO approach had absolutely NOT been cleared with large shareholders. I contacted many of them, and they were unanimously against such an opportunistic bid approach. So why should another measly 15p on the price make any difference??? (especially since markets have been rising strongly in the past 2 months).

Anyway, time will tell. Management will look very foolish indeed if they press ahead with this MBO, and then find that shareholders reject it - remember that nobody is obliged to accept a bid approach. If we collectively say "no", then the bid just fails.
I've spoken to a couple of large shareholders today, who have both said they will be rejecting the 135p bid. So it's my view that this bid is absolutely NOT in the bag!

If FDM ends up paying £313k in fees for this aborted MBO, then I think head(s) should roll on the Board. Usually such fee arrangements are just so that the original bidder (Inflexion) has covered their costs in the event of another bidder entering the fray at a higher price.
However, no fees should be triggered if shareholders just reject the bid. But FDM have not disclosed what the terms of the 1% fee actually are, so we don't know for sure.

Altogether a most unsatisfactory situation.

Regards,
Paul.

[rbcrbc] 24/8/2009 16:06

Rod Flavell £363k for 2008 is not working for charity !



Have you actually read the Annual report ?

[davidosh] 24/8/2009 16:06

page3girl.....I am well aware of the costs involved and why they would wish to have them paid for but this is not a third party making a bid it is the management. Why should the rest of us underwrite their costs ? The first offer suggestion showed how out of touch they were and now they want us to pay up if this does not work out.

With respect you are clearly a recent buyer and just wanting a quick deal. We are long term holders and wanting long term value and also happy with our dividend return and security of investment. We work hard to protect our assets you seem to trade and care not what is behind the investment so long as it goes up !

Sadly it says it all and we wonder why our economy is in the state it is in !!
Investment funding will disappear if left to robots and traders IMO.

[rbcrbc] 24/8/2009 16:01

Under the terms of the Agreements the Company, in
certain circumstances, would be obliged to pay to the Management Team and
Inflexion an inducement fee of up to 1 per cent. of the value of the Revised
Proposal.

I think you are mistaken page3girl

[page3girl] 24/8/2009 15:59

RBCRBC

As a general matter, I don't disagree that MBOs like this can always put the non execs in a tough place. Unfortunately you also have to accept that managements of smallcaps don't like to work for charity which is what they see happens when the share price is cr*p (and they have rubbish salaries and under water options)- and these business don't generate enough money to support a full independent board.

Bottom line is that companies under £100m are not investable/should never be proper listed plcs. Alternatively invest with open eyes and accept the corporate governance risks

This situation is over.........the non exec would not have agreed a deal if the major shareholders had not been consulted and said yes to a sale at 135p.

[page3girl] 24/8/2009 15:53

The directors don't benefit from one - if you knew anything about the working of bids, it would be Inflexion which benefit from the inducement fee, which in the event of the offer not being recommended by the independent directors is used to pay all the third parties (eg accountants, lawyers, banks doing the due diligence needed to enable a bid to take place - consider it a cost underwrite - the directors don't see a penny of it -and I suspect since it's capped at 1% it leaves Inflexion out of pocket - I'd estimate diligence fees to top £1m!) If Inflexion don't make a formal offer then they don't get anything paid to them - at least that's how I'd expect it to look

I want to accept the offer - I am happy with my return. While not a great exit price, it's not unreasonable and there are much more situations out there where shareholders should demand a voice than this one.

Good campaign, you've gained us 15p - let it be, I don't want the offer to get screwed up now..........

[rbcrbc] 24/8/2009 15:46

My view is hardening on this - I think we need to start seriously thinking about Requsitioning an EGM, with a view to perhaps unseating one or two Directors, and putting in a proper Non-Exec, as a demonstrative move to make it clear to management that shareholders will not tolerate these huge conflicts of interest, and derisory MBO approaches.

The people running the business MUST have all shareholders interests at heart. That is their legal duty. However, for several months now, we have had Directors at FDM with a clear & massive conflict of interest.

I agree that there is a very clear corporate governance issue here.
Having all directors bar one non-exec trying to ensure an MBO CANNOT be in the best interests of ALL shareholders.

In a situation like this the majority of the board MUST be independant of the buyout team.

I feel strongly that this situation is so obvious and clear that now is the time to make a stand on this point of principal, regardless of what the larger shareholders view or voting intentions are. This is a clear situation in which to make a change of rules happen for the benefit of the next insider MBO, even if this case is (or becomes) lost.

[davidosh] 24/8/2009 15:31

page3girl....Pauly has set up a website and publicised the poor original offer as being inadequate. He then liaised with tens of shareholders including me to ensure that the independent non exec director was well aware of our thoughts on the matter. The offer has been increased but the fight must go on. If we call an EGM then you will find out how many shares we hold. I have been equally active and actually threatened an EGM at three small caps last week with a non exec appointment very imminent at one. These are not the times for sitting back and doing nothing with your investments.

Now what have you done ?

For clarification....I do not expect Pauly to gain an inducement fee and why should the directors benefit from one ??

[page3girl] 24/8/2009 15:19

Beacause Pauly is not working on my behalf to represent me or my shareholding. Therefore it is a valid question to enquire whether he is a significant shareholder who needs to be listened to by major shareholders or not!

PS What hard work is he doing?

PPS Why should he get an inducement fee - he is not spening a lot of money on diligence to put a £35m cheque on the table to cash out shareholders (i.e. me!!!)

With respect davidosh your post is nonsensical!

[davidosh] 24/8/2009 14:47

page3girl.....Why on earth should that matter to you ? The important fact is that Paul is working very hard on behalf of ALL shareholders whether he has 10 shares or 10,000. Furthermore he does not get a 1% inducement fee AFAIAA !

[page3girl] 24/8/2009 14:35

Pauly

As a matter of interest how many shares do you own?

[paulypilot] 24/8/2009 14:33

Hi,

I'm very doubtful that the large shareholders are onside at 135p, since the ones I spoke to last time were horrified at 120p, and unanimously thought it seriously undervalued the company.
Am trying to get their up-to-date views, but usually in this type of situation people are "nobbled" by management - i.e. persuaded that it's a bad idea to speak to some pleb like me!!

Can't say anything specific about what large shareholders have said, nor indeed who I've spoken to, since it's confidential. But I can give a general impression of what larger shareholders views are, once I have updates.

Our views depend on what your investing timescale is. For long-termers like me, who see deep value here, then 135p is derisory, and I wouldn't care if the bid fell through & the share price fell back to say 100p - because I would then buy lots more!

But if you are a shorter term punter, then you probably want to grab 135p for a quick profit & move on.

My view is hardening on this - I think we need to start seriously thinking about Requsitioning an EGM, with a view to perhaps unseating one or two Directors, and putting in a proper Non-Exec, as a demonstrative move to make it clear to management that shareholders will not tolerate these huge conflicts of interest, and derisory MBO approaches.

The people running the business MUST have all shareholders interests at heart. That is their legal duty. However, for several months now, we have had Directors at FDM with a clear & massive conflict of interest.

This cannot go on.

Regadrs,
Paul.

[page3girl] 24/8/2009 14:14

Clearly there's no other bidder hence the agreement to move forward and I'm sure only done with the complicit agreement at the revised price with the major sharheolders, so I think we have a done deal.

Frankly the trading statements weren't that great, there's no liquidity in the stock and I bought in the low 100s, so a 35% return, over 3 months, annualised to 140% is a perfectly satisfactory exit to move my money post bid to the next situation.

No way is there going to be a higher bid from the MBO team after this much "negotiating time", so not much point hoping otherwise!

Thanks Pauly for your protests but can't see the point of continuing the crusade - lets take our cash and find the next opportunity!!

[greek islander] 24/8/2009 12:41

Guess if the downside is 135p I am very surprised that the sell price is not at that level or higher as there must be a very good chance of either an alernative suitor or an increased bid eventually.

[paddyfool] 24/8/2009 12:22

You have to recognise that the books are now being opened and that the high liklehood is that the majority of the large investors are now onside. The investment house would not be putting up its time and effort to do this unless they were pretty sure. Congrats to those who bought in at the lower prices available over recent months.