M.p. Evans Share Discussion Threads

[ed 123] 13/12/2016 11:44

The volume is very low today but the share price has risen. I guess the two sides are still talking.

If the assets are really worth about £10.50 per share, an agreement at £9.00 might be fair?

I see that Winterflood head the other market makers on both the buy and the sell sides. Others are sitting safely clear of any action. Not sure what that means.

I'm still in here and hoping for a recommendation. Almost any price will do for me.

[rfcg1] 12/12/2016 18:34

Interesting: the last para of the Shareholder Information sent to shareholders with the notice of the general meeting on Dec 23 indicates that total dividends, including special dividends, are expected to be at least 45p in respect of 2016 and 2017. The board are putting up a good defence, methinks.

[prettygreen] 11/12/2016 21:15

Coolen - many thanks for the clarification

[coolen] 11/12/2016 20:51

Prettygreen, interesting questions there:

1. No, acceptors of the Offer cannot force KLK to buy. They will simply get their stock returned to them. Worse still, until the shares are returned, they cannot sell in the market because the shares are committed to KLK.

2. KLK could indeed buy in the market at prices all the way up to their Offer Price. However, if they force the price up, supporters of M P Evans will be even less keen to accept the Offer.

3. KLK cannot "win" until they achieve 51%. If they can keep the market price low, KLK has slightly more chance of success.

3. Unlikely that the present Offer will succeed. Under the rules, they now cannot raise the Offer again without a recommendation from the M P Evans directors. Reasonable chance that will happen though.

[prettygreen] 11/12/2016 20:04

Presumably the extension gives breathing space to try for an agreement at a price nearer to MPE's valuation as I find it hard to believe that KLK will get over 50% in the next 10 days? Can anyone clarify whether the 12.9% who accepted will get the opportunity to sell to KLK at the offer price (and if so why would KLK do this when they can buy in the market for @ £6.50) Any guidance appreciated ....

[coolen] 09/12/2016 20:59

I believe the 12.9% has to be returned unlesss KLK go "unconditional" which they cannot do until they reach 50%.
An agreed bid at well over 740p is a fair prospect.

[ed 123] 09/12/2016 20:27

You may be right, rfcg1.

To me, there's not much point in this extension. I guess it's a tactic to stay in the game for now? Are KLK thinking they may yet get a recommendation (though at a price above 740p)?

What if there's still no recommendation? From memory, KLK can choose but are not obligated to buy the 12.9%. Maybe that's their Plan B? - buy as much as possible at 740p? Then KLK would have acquired an interest for 3/4 of its market value. Also, the 12.9% could be a base from which to add next year?

There's a bit more left to this story, methinks.

[rfcg1] 09/12/2016 18:17

It's dead in the water at 740p. Hard to see it succeeding at less than £9.

[ed 123] 09/12/2016 17:50

12.9% acceptances for KLK's 740p offer. Offer period extended to 21st December.

There's to be vote on the Board's proposed sale of MPE's part of PT Agro Muko on 23rd December.

I guess the two sides will talk again now that the vote has been counted.

[ed 123] 06/12/2016 21:12

After hours rns - Board proposes sale of Evans' share of PT Agro Muko for $100 million. Says the conditional agreement confirms the valuations in their defence document.

What I don't understand is why the Board were happy to sit back (and one of their number sold shares) at about 400p. Complacent? Disinterested in their shareholders?

Fwiw, I'd still take the 740p cash offer.

[ed 123] 06/12/2016 09:51

Voting deadline is 1:00pm this Friday. Those holding through nominees will have to pass on their instructions earlier. Brokers will set their own dates.

I like the intrigue of takeover situations.

MPE's share price has fallen back a bit recently, as some holders bank what's on offer in the market. Volume has been low, though.

Although a lower price can be thought to indicate a lower expectation of the bid succeeding, it can work against itself. Meaning, the lower the market price goes, the more attractive the offer of 740p can seem.

Will the 40% who said a conditional 'no' to the 740p exercise their freedom to accept? FWIW, I can't see those institutions supporting a possible drop to 500(?)p. Would they really prefer the prospect of incremental rises in the share price for several years, hoping eventually to get back to 740p? They've supported an attempt to get the bid raised but now it's 'make your mind up time'.

So, despite the share price having dropped now to 654p, I still expect the bid to succeed.

[ed 123] 01/12/2016 22:16

Ta, Tonysss13.

A bit more doubt in the market, if the share price is a fair indicator. Maybe the market sees both sides as being now entrenched, so less chance of an agreement?

FWIW, I thought KLK's justification read well.

Decision time for all holders next week.

My guess, about two thirds for the KLK offer.

[tonysss13] 01/12/2016 11:12

just out

FOR IMMEDIATE RELEASE



1 December 2016



INCREASED CASH OFFER



for



M.P. EVANS GROUP PLC ("MP EVANS" or the "COMPANY") by

KUALA LUMPUR KEPONG BERHAD ("KLK")



through its wholly-owned subsidiary, KL-KEPONG INTERNATIONAL LTD ("KLKI")



Accept the Increased Offer

1. Introduction


On 15 November 2016, the Board of KLK, through its wholly-owned subsidiary, KLKI, announced the terms of a revised cash offer at 740 pence per share for MP Evans by KLKI to acquire the entire issued and to be issued share capital of MP Evans (the "Increased Offer"). The offer document in respect of the Increased Offer (the "Offer Document") was published on 18 November 2016.



MP Evans published a response (the "Response Document") on 25 November 2016 in which the Board of MP Evans recommended MP Evans Shareholders not to accept the Increased Offer on the basis of an attributed value per MP Evans Share (the "MP Evans Valuation") which is in excess of the Increased Offer price of 740 pence per MP Evans Share (the "Increased Offer Consideration").



In setting out KLK's reply to MPE's Response Document and the reasons why KLK believes MP Evans Shareholders should accept the Increased Offer, KLK wishes to ensure that all relevant facts and data are made available to MP Evans Shareholders so that they may make an informed decision in respect of the Increased Offer.



2. KLK's compelling offer remains highly attractive


KLK urges MP Evans Shareholders to accept the Increased Offer as soon as reasonably practicable in respect of their MP Evans Shares in order to take advantage of the certainty of receiving very substantially more in cash than the price that MP Evans Shares have ever closed at before the commencement of the Offer Period.



The Increased Offer represents a premium of 81 per cent. to the Undisturbed Price. In addition, the Increased Offer represents a premium of 34 per cent. to the highest ever Closing Price of 553.8 pence per MP Evans Share before the commencement of the Offer Period.



The Increased Offer represents an unprecedented opportunity for MP Evans Shareholders to exit their entire stake in full and in cash, in light of the low trading volume in the MP Evans Shares.



3. The MP Evans Valuation is unsubstantiated by relevant market data and current operating conditions


KLK continues to support its highly attractive Increased Offer (implying a value of MP Evans' total planted area per hectare of c. $14,100) and disputes the implied lower value attributed to the Increased Offer by MP Evans in its Response Document.



KLK notes that, in relation to the Indonesian plantation interests of MP Evans (which constitute the majority of the value attributable to the Company), MP Evans did not use precedent sales of Indonesian plantations as comparables in arriving at the MP Evans Valuation but, instead, elected to use precedent sales of Malaysian and Papua New Guinean plantations, which are of an inherently higher value due to the differing operating environments/circumstances in those countries compared to Indonesia.



Precedent sales of majority stakes in Indonesian plantation estates indicate an average enterprise value ("EV") / planted hectare ("Ha") of c. $10,285. The Increased Offer implies a value of MP Evans' total planted area per hectare of c. $14,100, a c. 37 per cent. premium to the selected precedent transactions referred to below:



Announcement Date
Target
Plantation Estate Location in Indonesia
Acquirer
EV/planted Ha ($/Ha)

27-Jun-16
PT Agro Abadi Cemerlag
West Kalimantan
Genting Plantations
11,630

11-May-16
PT Golden Plantation Tbk
South Kalimantan, Central Kalimantan, West Kalimantan, South Sumatra, Riau and Jambi
PT JOM Prawarsa Indonesia
5,288

10-Feb-16
PT Nusa Persada Indonesia, PT Surya Panen Subur, PT Tempirai Palm Resources, PT Rambang Agro Jaya
South Kalimantan, South Sumatra and Aceh
PT Wisesa Inspirasi Nusantara (subsidiary of Kulim)
8,046

15-Dec-15
PT Lifere Agro Kapuas
Central Kalimantan
United Malacca Berhad
15,293

22-Jul-15
Pacific Agri Resources Pte Ltd
West Kalimantan
First Resources
11,930

02-Mar-15
PT Surya Agro Persada
South Sumatra
Oriental Holdings
9,521



Average
10,285




MP Evans Shareholders are therefore urged to note the substantial premium implied by the Increased Offer on an EV per Ha basis to selected precedent transactions.


KLK also notes that the land attributable to the Indonesian smallholder co-operative schemes belongs to the co-operatives and not to MP Evans. In general, once the loans advanced to co-operatives have been repaid, they may sell their produce to any company and may choose to be managed by any plantation operator.



KLK also notes that the value of $81 million attributed to MP Evans' Malaysian properties in the Response Document is almost double the market value which MP Evans attributed to them in its latest audited annual report and accounts for the financial year ended 31 December 2015 (the "2015 Annual Report"):



• "The land is estimated, based on independent advice, to have a value of approximately US$16 million."



• "The Group's 40% investment in Bertam Properties is currently estimated to be worth in excess of US$30 million."



The reported book value of MP Evans' 40 per cent. interest in Bertam Properties in the 2015 Annual Report was approximately $15.1 million. This is set against a weak Malaysian property market, with the total volume of transactions for all sectors in the State of Penang (the location of MP Evans' Malaysian properties) in 2015 registering a fall of 15.6 per cent. against 2014 and the value of transactions registering a fall of 15 per cent. Residential transactions, which made up 70.9 per cent. of the total volume of property transactions in 2015 (2014: 72 per cent.), recorded a drop of 16.9 per cent. and 18.5 per cent. in terms of volume and value, respectively, when compared to 2014. However, the outlook for the Penang property market is expected to worsen in the short term (Source: Knight Frank LLP "Malaysia Real Estate Highlights 1H2016" report).



In addition, it is MP Evans' long-term intention to dispose of its small Bertam Estate and its 40 per cent. interest in Bertam Properties to reinvest in Indonesian palm oil. However, to date, MP Evans' management has failed to achieve this, again highlighting the weakness in the Malaysian property market.



Even if MP Evans' Malaysian properties were to be valued at the market value of $46 million set out in the 2015 Annual Report and the net cash of $73 million (as per the Response Document, which disregards the $19 million that has already been depleted through dividends or off-set by disclosed tax charges, with a further $9 million committed to payment of the increased dividend) were to be used in calculating the implied value of MP Evans' total planted area per hectare represented by the Increased Offer, that implied value would be c. $12,500, still a substantial 22 per cent. premium to the average EV / planted Ha value for the selected precedent transactions referred to above.



4. The market has never recognised the MP Evans Valuation


KLK notes that the Closing Price per MP Evans Share on 25 November 2016, the date on which the Response Document was published, remained unchanged at 681 pence per MP Evans Share compared to the prior Business Day.



Furthermore, KLK notes that the price per MP Evans Shares since publication of the Response Document has remained well below the Increased Offer Consideration.



The MP Evans Valuation is therefore illusory as it is not supported by the market's reaction following the publication of the Response Document.



5. Promises to bolster shareholder value - Too little too late


Since KLK published its Increased Offer, MP Evans has stated an intention to increase its dividend in a belated attempt to improve financial returns for MP Evans Shareholders. Even based on the intended aggregate 15.0 pence dividend for 2016, the implied dividend yield based on the MP Evans Valuation is still only 1.4 per cent.



KLK would also draw MP Evans Shareholders' attention to the fact that the MP Evans Valuation represents a high price-to-earnings ratio of 79.2x. Notwithstanding improved performance based on crop increases and higher commodity prices, this P/E ratio would still be high.



6. The actions and omissions of the MP Evans Board do not support its belief in the MP Evans Valuation


In assessing the weight to be given to the MP Evans Valuation, KLK urges MP Evans Shareholders to consider that:



• MP Evans has not sought to repurchase MP Evans Shares at a time when the claimed MP Evans Valuation was far in excess of the market price of MP Evans Shares, with the perceived potential to create substantial value for MP Evans Shareholders, as a whole; and



• only since the Increased Offer was made has the Board of MP Evans written to MP Evans Shareholders to explain its implied value for MP Evans Shares at more than two and a half times the Undisturbed Price.





7. MP Evans Shareholders are urged to accept the Increased Offer


The Board of KLK believes that achieving any value per MP Evans Share in excess of the Increased Offer Consideration is subject to a high degree of uncertainty and would be unprecedented based on historic trading volumes in MP Evans Shares. By contrast, the Increased Offer represents an attractive value proposition at a substantial premium with a high degree of certainty.



MP Evans Shareholders are therefore urged to accept the Increased Offer in respect of their MP Evans Shares.


MP Evans Shareholders should note that the Increased Offer is conditional only on valid acceptances being received by the First Closing Date in respect of more than 50 per cent. of the MP Evans Shares, as more fully described in the Offer Document.



The First Closing Date of the Increased Offer is 9 December 2016 and there can be no certainty that this will be extended*.


The Increased Offer is final and is not capable of being increased, save that KLKI reserves the right to increase the price per MP Evans Share payable pursuant to the terms of the Increased Offer in the event of: (i) a public announcement of the existence of a new offeror or potential offeror, whether publicly identified or not; or (ii) the recommendation of such an increased offer by KLK or KLKI by the Board of MP Evans.



* If the Increased Offer becomes, or is declared, unconditional as to acceptances, it must remain open for not less than a further 14 days.



8. Acceptance of the Increased Offer


To accept the Increased Offer in respect of MP Evans Shares held in certificated form (that is, not in CREST), you should complete, sign and return the Form of Acceptance that was sent to MP Evans Shareholders with the Offer Document so as to be received by the Receiving Agent, Capita Asset Services, by no later than 1.00 p.m. (London time) on 9 December 2016 in accordance with the procedures set out in the Offer Document.



Acceptances in respect of MP Evans Shares held in uncertificated form should be made electronically through CREST. You should ensure that an Electronic Acceptance is made by you or on your behalf and that settlement occurs by no later than 1.00 p.m. (London time) on 9 December 2016 in accordance with the procedures set out in the Offer Document. CREST sponsored members should refer to their CREST sponsor as only CREST sponsors will be able to send the necessary TTE instruction to Euroclear.

[ed 123] 25/11/2016 18:46

12th Year, wow, that's good!

Ah yes, reversing losing trades promptly while not getting bounced out by 'noise', I know the theory.

Safer for me to stick with my knitting.


Good luck. :-)

[tonysss13] 25/11/2016 16:22

this is my 12th year full time, largeish amounts for smaller more predictable moves is the key, oh and admitting you're wrong quickly. Not as easy as it sounds but I must be doing some right.



wouldn't be surprised to see a recomendation

[ed 123] 25/11/2016 13:16

Hi Tonysss13.

You must be good to operate as day trader. :-) I've been buying and selling for about 30 years but I wouldn't be able to work profitably as a day trader. My aim is to keep moving to (what I judge to be) better places, usually several months timescale, sometimes years. It goes wrong occasionally but mostly I'm ok. MP Evans has been a good one for me - quick and a good percentage uplift.

Another 2 weeks to go till the vote here. Still time for a recommendation.

[tonysss13] 25/11/2016 12:56

Ed

I don't hold any as i'm a day trader

There are many examples of companies that have rejected offers due to undervaluation of the share price, that have never regained that level again. MCHL being a good example of a board not acting in the best interest of shareholders.

I think it's quite telling there has been no increase in the shareholders not supporting the offer (albeit unbinding). I expect it will succeed here as you say, or maybe even a recommended offer with a bumb, although if it's a small one the board will look pretty daft given the valuation they have just put on it.

[ed 123] 25/11/2016 11:34

Ta, Tonysss13.

Had a quick look.

Basically, the Board are saying the assets are worth 1082p but the KLK offer is only 740p per share.

These figures are more or less to my expectations, so nothing changes for me.

The shares were around 420p before the first bid. Holders now have a chance to exit for 740p and KLK could gain up to 342p per share in asset value (assuming valuations are accurate and excluding KLK's costs of acquisition).

It seems fair enough to me. I am grateful to KLK for bringing out more value in the shares I hold. The Board didn't do this. Indeed, one member of the Board was selling for around 400p.

I intend to accept the offer.

[tonysss13] 25/11/2016 10:55

here

hxxp://www.mpevans.co.uk/mpevans/dlibrary/documents/rejection-document.pdf

[ed 123] 24/11/2016 12:47

Yes, it is due soon and its non-appearance to date suggests that the two sides are still talking. That's good.

If an updated defence is produced I'd guess it will take the share price down a bit further. Ironically, a belligerent defence document may push more holders to take the 740p?

For me, the future gains from rejecting the bid are far off and inevitably carry some risk. Why gamble?

[rfcg1] 24/11/2016 12:36

Let's wait and see what the directors say in their more detailed defence document which must be due shortly.

[ed 123] 24/11/2016 10:21

I intend to accept the 740p. To me, from where the shares were a short while ago, it's a generous offer.

I don't know how the directors can take this stance. One of their number sold 5,000 shares for 410p in June and 15,000 shares in July this year for 400p per share. How can he now say that 740p "... very substantially undervalues the Company ..." Also, at say 420p, the directors must then have thought the shares were absolutely ridiculously undervalued by the market .... but how many of them were buying these crazily cheap shares? Answer? .......... None!!!

Important to note, those institutions that joined the rejection statement do not bind themselves to decline the 740p. If there's no more offered, they could easily flip to the "accept" camp.

Fwiw, if it goes to the vote at 740p, I'd expect KLK to win. I can't imagine the directors keeping their jobs if that should happen.

[nocton] 24/11/2016 10:00

I find this situation curious. The directors of MP Evans sold off the Australian cattle interests which surely they must have know made them more likely to be taken over by a Malaysian or Indonesian plantation group? Now the expected bid has valued MPE at a much greater value than ever before achieved in the market and they are playing hard to get. And the share price remains substantially below the offer price, so many must think the bid will not go through otherwise it is easy money for the taking. Last night I was rung by KLK's bank/brokers asking how I was going to vote my shares. This suggests that the voting is close and that the private share holders may tip the balance. In the note from Edison MPE are said to have 41% of shareholders, well below what they had for the lower offer. I have not yet decided what to do but am tempted to accept.