Fdm Share Discussion Threads

[davidosh] 22/9/2009 11:01

The 'family' shareholders are 'ex family' by divorce and no longer involved in the business. Maybe that also tells you something but not about company prospects !!

It is a shame all this detracts from a good company that was a core holding in my long term small cap folio.

[red square] 22/9/2009 10:51

Paul, I support your view that the company is worth more than 135p. However I am concerned that the "family" shareholders are prepared to sell at 135p.

What does that tell about the company prospects?

[paulypilot] 22/9/2009 10:18

Hi,

The idea that without a bid these shares would go back to sub-100p is ridiculous! Everything has changed - we have gone from a savage bear market in everything (up to March 2009), to a roaring bull market since, especially in small caps.
My small cap portfolio is up 100%'s already this year to date. We have seen re-ratings across the board.

My view is that without the MBO, the share price of FDM would have probably risen higher than the current 125p. Instead the MBO proposals have been a total distraction for management and the market, as it effectively puts everything on hold, as well as putting a cap on the share price - hence FDM shares have not re-rated in line with the market.

My view is that if/when the MBO proposals fail, then the share price might well initially dip say 10%, then buyers will come in & hoover up stock (I will be one of them!). Over time the share price should then re-rate to around 200p, which is easily justified on fundamentals (why do you think mgt want to buy it at 135p?!! Because they know that price is a gift!)

Anyway, I'm going to fight these MBO proposals all the way, as they represent a cynical attempt to steal the company at an undervaluation from its existing owners. This is not acceptable, period.

It is a shame that some shareholders take such a short term view, and are not prepared to support this fantastic company for the long-term. I'm a long term shareholder here, and I think we have a stake in a fantastic company with good operational management, and I would very much like to remain a shareholder please, so that we can share in the company's long term success. And nobody is going to steal MY shares!

The long-term value of the company will drive the share price eventually, it's just that sometimes anomalies arise. Instead of getting frustrated at the share price, management should just get on with running the business.

Regards,
Paul.

[davidosh] 22/9/2009 10:02

page3girl...LOL. You are comparing apples and oranges.

If a seller is marketing a house it is because they OWN it and wish to sell.

The directors do not own the whole company here. Furthermore the clear majority of owners were not minded to sell so no agent was required. BIG difference !

[page3girl] 22/9/2009 09:11

Paul

The point you miss is that my house, were I to sell it, would be marketed by an estate agent and I would take the highest price from a willing buyer.

In FDM's case, there don't seem to be any other buyers - the non execs would have had a duty to market test, so for me the management bid IS the "market price". Who knows whether the shares oould be worth 200p in a few years time? May be they will, maybe they won't - it's about the time value of money/risk/alternative investments on recycling capital.

So for me the choice is clear - 135p certain now vs sub 100p with no bid and who knows what in the future. Very different to my house, which I would choose not to sell in the current market - that said I live in my house - I can't live in a FDM share.

[davidosh] 21/9/2009 22:23

page3girl...I am not doubting that there have been recent talks with insitutional holders even I received a call after the initial suggested price. My complaint is that the whole saga started without there having been any obvious discussion with the large holders. AXA were buyers above £1.20 if you remember.

[paulypilot] 21/9/2009 22:03

Hi,

I've been a professional investor for 7 years, and involved in loads of bid situations, so I do actually understand how these things work.

The amazing thing with FDM is that they did NOT consult and/or agree things with the larger shareholders before announcing the MBO proposals. I know this because I have spoken to holders of around 40% of the shares.
Why else do you think they increased the approach from 120p to 135p? Because the large shareholders said no to 120p!!

The family seem to have since gone wobbly, and have been persuaded to accept that the MBO is a fait accompli at 135p, which is nonsense. But my understanding is that the Institutions are not at all happy with 135p, and this deal is far from being in the bag. It was reckless & irresponsible of the Directors to underwrite the costs of the bidding VC, when the deal had absolutely NOT been agreed by shareholders.

page3girl - you've explained your stance on this share, but I have to say that I find your stance astonishing - you don't seem to care that the price being offered is way below the true value. Do you take a similarly cavalier approach to all your assets??
If so, since you take that approach towards your FDM shares, maybe I could offer to buy your house off you?? Since you seem to be happy with selling your assets for less than their true value, I would like to buy your house for half the market price please - I'm assuming you will be happy with that deal too, yes??

Regards,
Paul.

[page3girl] 21/9/2009 21:42

Does anyone honestly think that conversations haven't been held with "the blocking institutions" by the potential buyer to figure out that maybe they weren't blockers at all - do you think the non execs would have given the management team exclusivity and a cost underwrite to finish their due diligence to table an offer if the "blocking shareholders" hadn't been spoken to and said ok?

There are some people on this thread who don't understand how the City works - big shareholders get spoken to in bid situations - see how many of the "blockers" have not traded shares over the last few month, from which you can figure which were "insiders" and therefore unable to and draw your own conclusions

[paddyfool] 21/9/2009 20:26

ok name the blocking institutions and their holding.

[rbcrbc] 21/9/2009 17:32

I also think it is very naughty how todays RNS was issued only in the name of Astra 5.0 Ltd and no RNS was issued either in confirmation or response officially by FDMG, Therefore many FDMG shareholders may be totally unaware of this news.

It would also be interesting to determine what In addition, Astra reserves its position in relation to the terms of any such offer (if announced), including without limitation the mode of implementation. actually means, they are obviously planning something a little different.

[davidosh] 21/9/2009 16:29

RBCRBC....You only need 10% to call an EGM and make changes. The main shareholders should really have done something to tighten things by now and if non exec directors were not strong enough they should have spotted the weakness but instos rarely do.

[paulypilot] 21/9/2009 16:26

Hi,

Red Square - OK thanks for correcting that, I wasn't sure of the exact rules, but that sounds right.

75% is going to be a tall order. I know 3 Instis have effectively a blocking stake, so we'll just have to see what happens.

Shareholders should unite to block this opportunistic & under-priced MBO proposal.

Regards, Paul.

[rbcrbc] 21/9/2009 16:13

and at 50% nominee accounts tend to want to sell out if an/the offer goes unconditional.

So they are actually quite close.

I think the only reaslistic opportunity to stop the deal is to appoint a new independant Non-Exec and fairly quickly, so are there 20% of shareholders who would support such a nomination ?

[red square] 21/9/2009 15:06

Paulypilot, AIM regulations require 75% acceptance for de-listing, 90% is the hurdle for compulsory purchase of your shares.

[gengulphus] 21/9/2009 14:55

No - to exit at 135p, you need either the formal offer to succeed or for the market to believe that a better offer is a realistic enough prospect to take the share price above 135p. If the latter happens, you'll be able to get rid of your shares - just phone the house broker and put in an order good for the day when the price is rising, let them sell as many as they can, and repeat as necessary.

You've no good reason to want to prevent the latter from happening.

As for the possibility that what paulypilot does will disrupt the deal, firstly that's unlikely unless he really does get a substantial number of shareholders agreeing with him. Secondly, it's surely clear by now that he would prefer to disrupt the deal and keep his shares than to dispose of them at 135p? If you expect other market participants to put what you see as being in your best interests ahead of what they see as being in their best interests, you're going to be very disappointed!

Gengulphus

[paulypilot] 21/9/2009 14:51

Hi,

If management are not incentivised to run the business, then they should resign now. Whilst they are important to the business, a CEO on a salary/bonus package of almost £400k and with a meaningful shareholding, should be fully incentivised, surely?

Shareholders have every right to fight for our rights. It's just a shame that this management team are only interested in their own interests.

The whole point of a takeover approach is that you have to offer a premium price to persuade shareholders to sell. That hasn't been done here, so we face a long period of limbo for this company, unless & until management either back off, or come up with a fair price (200p+). They have been very, very badly advised. I'm going to fight this all the way, until we either get a fair price, or the offer fails.

Regards,
Paul.

[gengulphus] 21/9/2009 14:24

page3girl,

As I wrote before:

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...

Or in other words, if you really own shares and want to get rid of them at 135p or above, the last thing you should be doing is trying to discourage attempts to get a competing offer!

Gengulphus

[page3girl] 21/9/2009 14:09

Pauly

Why don't we just move on........... the big institutions will fall in line. I'd be amazed if they hadn't all been lined up and spoken to. Your share, whatever it is, means diddly squat - just like mine.

Game over as far as I'm concerned. Just let it be, let me get my 135p and find the next undervalued business to invest in.

[paulypilot] 21/9/2009 13:41

Hi,

Am very surprised that the family shareholders have caved in, more fool them!
This doesn't change anything from my point of view - I'll still be rejecting any buyout at 135p, because it woefully undervalues the company.

Takeover bids usually require 90% acceptance in order to permit the company to deList the shares, and they won't get anything approaching that unless & until they offer a realistic amount (i.e. 200p+).

Expect more strong-arm tactics from this self-serving management team, I expect a long & drawn out battle where they will probably secure around 40-60% of the shares, but that ain't enough for this deal to succeed, so eventually it will just lapse.

Shareholders are under no obligation whatsoever to accept this proposal, and I strongly urge people to reject it, as the offer is totally inadequate.

Regards,
Paul.

[paddyfool] 21/9/2009 12:02

well thats 40% in the bag cant see this not happening now without a counter offer.

[red square] 16/9/2009 11:52

Any further news or snippets about the proposed MBO ?
Much appreciated

[paulypilot] 13/9/2009 14:06

Hi,

I definitely think there's a strong case here to clear out the Chairman & other Non-Exec, as they clearly have failed in their role - the Chairman has a key role to act as a link between shareholders & management, and that has simply not happened here.

There's been a total breakdown in contact between management and shareholders, such that management have been pushing ahead with an MBO proposal which was doomed to failure because the shareholders don't want to sell.

So I'd certainly like to see the Chairman & Non-Exec ditched, and higher calibre Non-Execs people brought in to properly build mutual rapport & understanding between management and shareholders.

Regards,
Paul.

[gengulphus] 13/9/2009 11:53

Is that an Inverse head and shoulders I see begining to form on the charts ?

I can see a rather long-term and somewhat deformed inverse head & shoulders in the 2-year chart - head just above 60p in January, shoulders at about 106p in late 2007 and a month or two back, neckline at about the current level. Not certain I would put much faith in it even if I went into TA to a great extent, as I believe its timescale is a bit too long and also things are probably being distorted by the bid, but FWIW I believe such patterns are supposed to suggest further rises.

Which doesn't seem to match what you've said at all... Are you seeing something different to me? There could be a short-term double top forming over the last few months, for example, with the tops at the current price level and the dip between them at about 106p. But it could easily be another pattern starting to form - for example, an ascending triangle - so I wouldn't decide anything about it until the pattern is complete, whichever way it goes. (This effects means that trying to spot incomplete TA patterns is IMHO better at judging your own mental state about a share than anything else - basically, it's similar to psychiatric ink-blot tests in that there are lots of things that could be seen...)

I agree though that the market is sceptical about the bid happening, but that's simply on the basis that the current share price is significantly below 135p. No TA needed for that!

Gengulphus