Greenko Share Discussion Threads

[bones30] 25/3/2013 13:06

Is it the same John Rennocks from the JPMorgan Overseas Investment Trust plc?



I reckon yes, and I reckon he knows exactly what he's doing.

[ntbb] 25/3/2013 13:03

very nice indeed, his buying before being appointed, now you dont see these things very often

"As announced on 28th February 2013, Mr Rennocks' appointment as a non-executive director of the Company takes effect from 1st April 2013"

[cestnous] 25/3/2013 12:31

And there you go. non exec director nice buy!

[staffiex] 25/3/2013 10:14

king suarez - snap!

[cestnous] 25/3/2013 09:58

Some director buying would clinch it for me., but staying in atm.

[smudgeroo] 25/3/2013 09:52

Yes, thanks to you both King Suarez and bones30. Excellent posts form you both.

[king suarez] 22/3/2013 15:07

bones,

Thanks for the kind words, I must confess I jumped in here on RNS day as a punt, with short term money, just hoping to make a swift profit.

On reading and understanding this circular document I have sold out at more or less breakeven.

I know almost nothing about this business, and would need to research more to determine whether I want to be in for a potential longer term hold or not. I just had to understand this deal properly to check why the market had not reacted as anticipated.

I like the idea of what they are doing and they certainly have impressive backing, but until I see the results of recent investments in the financial statements I cannot really make a judgement on market value at present.

I am trying to be a bit more ruthless about my share dealing these days after suffering greatly in the AIM market over the last couple of years! So I am taking a back seat for the moment.

All the best.

KS

[bones30] 22/3/2013 14:41

KS (excellent posts by the way), is it just turning prefs into ordinary shares (the new 29.1m ?)

I think you've got more of a clue about what's happening here than I do.

I'm actually pretty relaxed about this one, as it strikes me if this is a bad deal, they wouldn't want it!

My guess is GIC think the shares will do very well, and therefore think 260p is a great price. They are just protecting themselves should things go wrong with the adjustment clauses etc.

Incidentally I am no expert either, but thanks for trying to help me work through this.

One thing is for certain, the shares are not automatically suddenly worth 260p as implied by some on here!

I think the GIC will be taking a very strategic view on everything. There may be synergies here with other of their investments.

[king suarez] 22/3/2013 14:37

bones,

I posted before your message. Still a bit confused here!

There are going to be another 29.1m ordinary shares issued, as per resolution 3? (in relation to an equity deal from 2009 that I do not fully understand either!)

If so, the max CIPL could exchange currently would be 60m shares? (150.6m in issue + 29.1m to be issued x 30%) so 167p a share for the £100m, I think.

I guess you have to take this 30% max holding in combination with the adjustment agreement. As things stand today, if we skipped forward to 2017 with the share price still at 137p and 180m shares in issue, then CIPL would be exchanging 60m of their 74.4m GM shares for GKO shares at an equivalent price of 167p. The additional 14.4m shares they would return to GKO for £1 total.

On the flip side, we could end up having to issue CIPL the full 74.4m shares, say if there are 248m or more shares in issue by 2017 and the share price is below 260p (see post above re: £193.4m adjustment calc). Any additional shares above the 74.4m would be issued at an aggregate price of £1, thus quite dilutive vs today's share price

KS

[bones30] 22/3/2013 14:19

I see, yes, that's a good way of looking at it. I think you're right.

[king suarez] 22/3/2013 14:11

bones,

I have read this through a few times now, and If I'm right then you could argue that rather than a discounted placing at what was then the share price of 115p (or lower) the BOD have somewhat gambled on the share price being much higher in future, and thus they believe this share adjustment agreement will work in their favour.

At any time between 1 July 2015 and 30 June 2017 CIPL have to exercise their rights to exchange GM shares for GKO shares (they can exercise in 2 separate tranches if desired) and the longer they leave this, the more GKO shares they will be able to exchange in the deal.

Say they wait until June 2017, that is 4 years from the date of the adjustment agreement (today?) thus:

£100m x (1+18%)^4 = £193.4m

Now divide that £193.4m by "the Agreed Price" at a 'best case scenario' of £2.60 (if share price is at or above that level in 2017) then that is 74.4m shares (coincidentally equal to the total no. of GM shares CIPL have subscribed for!?).

So in this instance it would be equivalent to CIPL taking up £100m at 134p a share today (£100m / 74.4m shares).

If the share price does not appreciate significantly between now and the exchange period then this is a potentially quite dilutive deal.

Please correct me if you think I am wrong here. I am no legal expert for sure, but this is my interpretation.

KS

[bones30] 22/3/2013 13:48

(b) in the event that GM Shareholders are entitled to more than 45,000,000 Ordinary Shares upon the exercise of the Exchange Rights, such number of further Ordinary Shares as shall, when aggregated with the number of Ordinary Shares allotted and issued pursuant to paragraph (a), not exceed 29.99 per cent. of the Enlarged Share Capital,

Assuming there isn't dilution, worst case scenario is they get 33% more shares than the 19.5% minimum, which I make means theyd have paid 170p.

Am I right?

[bones30] 22/3/2013 13:04

KS, sorry to hear that.

> CIPL can exercise their transfer of shares early to ensure they do not miss out.

That is only fair surely, although isn't it there, also, as I suggested in previous posts to protect them against GKO diluting?

> I did think it sounded a bit too good to be true

So did I which is why I was trying to understand the negatives. All things considered though I suspect its a good deal. They could have done a deeply discounted placing. This doesn't feel like one! Directors interests are aligned, I imagine, with ours looking at the significant shareholders.

We'll see, but on balance I think the deal should create value rather than destroy it.

Another positive is that it isn't usual for GIC to invest in small cap AIM companies! Unusual often in stock market terms I have found often means 'good'.

I imagine a fair bit of hot money arrived the other day, thus the retrace. Can't be too long now before that's left the building.

[king suarez] 22/3/2013 13:00

bones,

Coincidentally I am also off work today with a virus/headache! and that has made it doubly tough to try and understand this document...so I can empathise.

It looks like the adjustment agreement is in place so that if a bid for the company (or a bid for a controlling stake in) comes along, prior to June 2015 then CIPL can exercise their transfer of shares early to ensure they do not miss out.

But the terms of this share adjustment also suggest to me that the maximum CIPL are going to be paying is the equivalent of 260p per share, but in actuality it will depend on whatever the share price is when they exercise? (the "agreed price" note). It could even be lower than today's price, if things don't go as planned?

I did think it sounded a bit too good to be true £100m at 260p, such a premium, and it seems like the original RNS was a bit missleading?

I'm guessing this is why the Sp has not risen to 200p +

[bones30] 22/3/2013 12:31

KS, have a headache today and have been trying to understand this document. I thought I understood what was happening here.

Can only assume that if it was a bad deal, the larger shareholders and board would not be voting it through.

Raising £100m in these market conditions, however, I believe is not easy at all. This doesn't feel like a bad deal, but I agree it's complex (and more complicated than I previously thought).

Why have they made it so tricky to understand !?

[king suarez] 22/3/2013 11:52

ntbb, I would urge you to go through the circular document in detal as I have. I do not believe it to be as straightforward as intially thought...

[ntbb] 22/3/2013 11:36

as i understand it cipl will have shares in gko at 260p for the £100 million and can buy shares upto 29% of the company if they choose to, but will dig into this in the weekend, remember directors have about 11% of the company or more, so for them to agree to and recommend must be good for us all

[king suarez] 22/3/2013 11:23

This agreement is really confusing (to me!):

1) The initial RNS stated "The GM Shares will in the ordinary course convert one for one into ordinary shares in Greenko at a price of 260p per share subject to final adjustment between 1 July 2015 and 30 June 2017." and this is meant to represent 19.5% of the companies fully diulted shares, right?

2) The circular says CIPL has agreed to subscribe for 74,074,074 GM Shares in exhchange for £100m.

3) Then there is an adjustment agreement, which determines how many of these 74m GM shares are to actually be converted into GKO shares. This has 3 possible outcomes. The first 2 happen if there is a material breach of the shareholder agreement with CIPL, or basically an offer comes in for GKO between now and the beginning of the exchange agreement.

4) The 3rd adjustment outcome (most likely?) occurs after 1 July 15. Here it states that, essentially, the amount of shares to be 'adjusted' will be a minimum value of £118m (£100 million multiplied by (1 + 18%)x) divided by a price that is "the lower of (i) the five day volume weighted average price of an Ordinary Share immediately prior to the date of the adjustment; and (ii) £2.60.

So we could be seeing £118m divided by whatever the prevailing share price is during the exchange period, not necessarily £2.60p?

This deal does not appear to be as good as I initially thought?!

The adjustment agreement further states that "The minimum number of GM Shares held by CIPL (and/or any permitted transferee) will be c.44.86 million"

Thus that is the lowest amount of GM shares that will be converted into GKO shares for the £100m and appears to relate to the warranties offered by GKO to CIPL of £116,640,000 (£116,640,000 / £2.60p = £44.86m)

Am I being thick/misunderstanding this?

Say the share price happened to be 137p still when CIPL come to excersise their exchange rights, we could see 86 odd million GKO shares issued for the £100m?

Please correct me if I am wrong here, I hope I am..

KS

[ntbb] 22/3/2013 10:05

havnt got time to go through it but had a glance and its looking very good for the company, plenty of news next month, board sees significant return to share holders value so do i

[bones30] 21/3/2013 15:04

ntbb, quite, I am v. confident here.

Shaking a few out.

[ntbb] 21/3/2013 14:54

if only i had some spare cash i would add few more, we have a business in profit and supply cannot meet demand for over a billon people

[manrobert] 21/3/2013 14:01

this doesnt look good.hope simon thompson has got his facts right.

[bones30] 21/3/2013 13:33

Most of the 5k share trades are buys. The smaller trades seem to be the ones knocking it down.