Patsystems Share Discussion Threads

[eacn] 06/6/2008 09:28

dm1066, I think it is 6 months but it may be 3. I would like to think that this will lead to an offer, but then again it may not. I note that there has been block buying in the market today.

It was always a risk that PTS would not make the numbers in the current climate and unfortunately that has proved to be the case. However, with 80% of earnings being annuity based, the lack of new sales is not terminal, but deservedly places the stock on an ex-growth rating for the time being.

[bg23] 06/6/2008 09:24

given the announcement today, i suppose the least we could hope for would be some director buying if they are going to maintain any sort of credibility?

especially if they were to try to rebuff any type of speculative approach.

i would love to be a fly on the wall at ION HQ. are they rubbing their hands with glee or pondering this weeks purchase as a missed opportunity to save some cash?

[tell it as it is] 06/6/2008 09:07

Does Katie Potts/Herald still own this share ? It can't exactly be the best one in her portfolio !

[bg23] 06/6/2008 08:47

dm, i think you are correct.

it would appear that the management have delivered the company to ION on ION'S terms - if there are any.

that said, with an outlook flat on last years profit, the eps of 1.9 (or 2p) whatever it was, puts the shares on a 13-14 times at 28p, whih i think was the highest ion informed the market they paid.

if ION do want it, its probably going to be easier and quicker to strike whilst the IrON's hot !!

[dm1066] 06/6/2008 08:24

Indeed. Although I think that the MMs have over-reacted a bit by marking this down over 25% at the open! At the end of the day, if ION do make an offer, my understanding is that they cannot offer less than the highest price paid during the previous 6 months (note : this is off the top of my head, please correct me if this is wrong).

[groin] 06/6/2008 07:52

Today's news is just probably the best thing that could have happened as far as ION are concerned.
Any bid will now be well below 30p, so at a stroke PTS's management have saved ION millions!
It is telling that FFA recently announced that they appear to be going in the opposite direction.

[eacn] 05/6/2008 11:02

From the PTS web site data none of the big holders appear to have been sellers since 28.02.2008.

There was, however, a 2M share trade on 30.05.2008 at 27p which may yet to be reflected in the PTS web site list of major holdings.

This sale could be from Rathbone who previously sold down a 2M share block. Given the change in reporting requirements following the introduction of Mifid they may not be required to report this sale.

ION do appear to be in a position to win control at the right price. ION and the other significant holders now account for around 63% to 65% of the shares in the company (depending upon the source of the 2M acquired on 30.05.08) and the majority of these holders other than ION appear to be open to selling shares.

Since ION came onto the scene Sedaf have sold 5M shares, Credit Agricole have been a net seller of 0.9M and Rathbone have sold at least 2M. Resolution is a recent entrant with 8.9M shares and can be assumed to be purchasing on the basis of a possible bid. Herald are a long term holder and will back the board, but past experience shows that they will sell if a big enough offer is on the table. Brewin Dolphin represent PIs and possible employee shareholders but have bought 2.4M shares in the last 6 months (having previously been a seller of 1.2M shares) suggesting that a reasonable proportion of their stake is susceptible to a bid.

On the basis of the above ION should be able to command at least 50% support for a bid at say 36p unless the management can provide strong evidence to support a materially higher valuation.

Indeed with the support of the former Tamesis holders (who appear to have already sold a sigificant number of shares to ION) and founder shareholders I would expect ION to be able to reach 60%+ acceptances following the announcement of an offer, which would then allow them to extend the offer timetable. Once PI's see such strong support I would be very suprised if ION could not reach the 75% threshold within the extension period.

So what could delay ION? Lack of finance is clearly not the problem: TA are continuing to fund ION's accumulation and are said to be flush with cash. Lack of support from the board is the most obvious deterent, but with a few extra pence (say 4p to make an offer of 40p) that can surely be overcome.

A June offer would not be ideal, particluarly is ION expect there to be a need for an extension, since PI's are away in July and August and they will want to maximise the acceptances. It may therefore have to wait for September.

[dm1066] 05/6/2008 10:35

bg23 - my comment about "finally entering the end game" was slightly tongue in cheek given the patient nature of their stakebuilding to date. It does at least take us one step closer to a takeover/rto (as eacn says, any further sizeable purchases will take them over the threshold for an obligatory offer).

Interesting discussion re possible reasons for an RTO. We will have to wait (for as long as it takes) and see what transpires.

[maddox] 05/6/2008 10:29

Hi bg23,

The reverse takeover to gain a AIM quote I have speculated upon would depend on there being a good aftermarket for the shares. But with AIM floats down and lots of rights issues the environment is not ideal.

Regards, David

[bg23] 05/6/2008 10:19

eacn, i assume the last sentence was your own comment !!

dm1066, ION haven't rushed into this, they have taken a long long time to build their holding, i'm not sure we should expect them to rush the final 100 metres.

they won't have any problem gaining finance, sub $100m deals are going through fine in the capital markets and TA are both a good name and holding cash.

But its the board that are going to have to come round to the sweet talk for a quick deal and they have not indicated a willingness to move in that direction despite the seeming 'relaxed' stance they have assumed whilst ION did their thing.

the other alternative that Maddox mentioned eon's ago ( pun intended) was that ION might be looking to reverse into Pats and therefore monetise their stock for further aquisitions in the space. there is a certain sense in this idea, ION, from what i can find on various websites/news releases have only ever acquired privately held/run entities, so presumably there are a lot of equity holders within ION looking to crystalise equity buyout holdings as well.

anyway, think that Pats will be part of a larger company and renamed, privately held or otherwise by the end of the year. watch this space

[dm1066] 05/6/2008 09:41

Looks like they need to update the website - se today's RNS - ION now up to over 29%. Are we finally entering the end game?

[eacn] 05/6/2008 09:40

At long last another ION statement.

"Patsystems was advised on 4th June 2008 that ION Trading Ireland Limited purchased 4,125,000 ordinary shares of 1p each in Patsystems.

Following these purchases, ION Trading's total interest in Patsystems now amounts to 52,101,191 ordinary shares representing approximately 29.06% of the total voting rights in issue of 179,287,301."

That 4M has taken many weeks to acummulate and puts ION on the threshold of a mandatory bid.

[bg23] 04/6/2008 09:14

new shareholding %'s listed on the website, based on 179080396 shares in issue

ION Trading UK, Ltd. 49,801,191 27.81%
Brandes Investment Partners, LP 13,687,500 7.64%
Brewin Dolphin Securities Ltd. 11,047,434 6.17%
Sedaf Holdings SA 10,389,600 5.81%
Resolution Asset Management 8,937,200 4.99%
Herald Investment Management Ltd. 6,400,000 3.58%
Credit Agricole Indosuez (Suisse) SA 6,237,117 3.48%
Rathbone Investment Management Ltd. 6,000,000 3.35%

[bbd2] 29/5/2008 17:12

Source: Corero, 19 May 2008
Corero names Richard Last non executive director
Corero, the specialist provider of software solutions to the banking & securities and education markets, announces changes to its board.

Richard Last, aged 50, will join the board of Corero as a non-executive director with effect from 22 May 2008. He is chairman of Lynx Group Limited, chairman of Xpertise Group plc and chairman of Patsystems plc.


He is also a non-executive director of two VCT funds, British Smaller Companies VCT plc and British Smaller Technology Companies VCT 2 plc and a number of other companies. Richard brings a wealth of relevant knowledge to the Corero board due to his strong background in the software industry, experience of the financial services sector and successful board and management experience. He will sit on the Company's audit committee and become chairman of the remunerations committee. Further details of Mr Last's directorships are set out below.


Richard will replace Bernard Fairman who will resign as a non-executive director on 22 May 2008, having served as a non-executive for seven years. The directors of Corero thank Bernard for his immense contribution to the Company during this period and wish him continuing success in his many other business ventures.


Mr Last has a beneficial interest in 220,000 Corero ordinary shares, equivalent to 0.48 per cent. of the issued voting share capital of the Company and he has confirmed that there is no further information required to be disclosed under paragraph 17 of the AIM rules.

[bg23] 22/5/2008 16:19

200,000,000 shares @ 28p.

freudian slip or maybe someone has a big finger

:-)

[maddox] 15/5/2008 11:21

eacn,

Its an interesting investment strategy that ION have to say the least. If they sell, in fact if they sell any, then they will take away any takeover premium in the shareprice. They will then most likely either realise a loss or be sitting on an unrealised loss. The only means that they have of exiting PTS in the short term at a profit will be to find another trade buyer with a takeover in mind.

As an investment ION must be looking at PTS as a long term investment.

Regards, Maddox

[dm1066] 15/5/2008 10:23

eacn - thanks - I'd forgotten that comment in the Bloomberg interview.

Interestingly, in an interview with thomson financial in Feb of this year (see link in post 796), the tune seemed to have changed slightly again when asked about ION's stakebuilding.... "Webber said: 'It's not as if we're looking to be taken over. However, the option is there."

On balance, I think we all agree that it seems highly unlikely that ION would build such a large stake purely as an investment.

I also agree with you regarding the eventual takeover price. Even in the absence of another bidder, given the strong prospects for growth of Patsystems, surely the majority of shareholders would prefer to see the company remain independent rather than seel out cheaply.

rgds

dm

[eacn] 15/5/2008 09:34

Doomsday_Man,

I would like to think that you are right about the timing, but we shall see.

As to price, however, I would be very suprised if ION get away with anything less than 35p. The major holders, the NOMAD and the board have no reason to capitulate and will therefore not accept anything less.

[doomsday_man] 15/5/2008 00:38

eacn, PTS has been going through one of those lull phases as it often does. I actually wished I sold a year ago at 31p, but at least it's been considerably better than a savings account since when I first bought in.

I topped up with a further 50k recently because I believe sentiment is changing again. I think ION will bid sooner than later. However, I'm realistic and think it'll be closer to 30p than 35p+ and much of the bid is probably priced in already.

Having said that, PTS is a strong Co, continues to performs well, and the current share price is justified on its growth and on its own merit in any case.

[eacn] 14/5/2008 23:48

Holders will have noted that at the AGM all resolutions were passed.

Special Resolution 7 permits the directors to allot 26,813,298 shares, being 15% of the ordinary shares currently in issue.

Special Resolution 8 requires that all but 8,937,766 of these shares (i.e. 5% of the shares currently in issue) are to be alloted as part of a rights issue or other offer in which pre-emption rights are preserved.

These provisions will expire in five years.

So the directors remain without a poison pill defence, since they can only issue a further 5% without making a general offer to shareholders which respects our pre-emption rights.

[eacn] 14/5/2008 23:33

Re: "ION's interest only being as an investment"

Webber gave an interview on 02.11.2007 to Bloomberg TV (see posts 633, 637 and 639) in which he said that the board had met with ION "in the summer" and had been reassured that ION were only interested in PTS as an investment.

Webber's statement appeared to contradict the comments he made in an interview syndicated in the Independent on 25.08.2007:

"But a possible predator is circling. Since February ION Trading, an Irish software group, has aggressively built a 14 per cent shareholding. Patsystems is mystified. The two parties have not met. "We have offered but there has been no response", said Mr Webber. ION appears to have private equity backing and could presumably afford a strike for full control."

I remain of the opinion that it was wrong of the board to fail to formally report the summer meeting with ION.


For the record my comments in post 860 echoed the closing remarks I made in post 683 on 21.11.2007. Where I have misread the situation is in respect of timing: while it was no means certain that ION would bid before the finals were announced, I had thought they would do so within weeks of the AGM (see posts 700 and 738 for remarks on timing).

[maddox] 14/5/2008 17:01

Bg23,

I completely agree with you. We may be concentrating too much on PTS circumstances as dictating the timescales and not enough on ION's. If they are looking at a reverse takeover for a listing they will have other things to consider, such as market conditions. They will want to come to market at a good price and get away well with good take up.

Regards, Maddox

[bg23] 14/5/2008 15:16

no, i hadn't heard that either, but i think the pats ceo was trying to suggest that this was the case at the last results.

the action of the last couple of days would seem to imply there is buying interest. if the m makers have got wind of a buyer, they're unlikely to make it easy for them. they also know that ION paid up to 28p to acquire shares last year, so the market makers are going to see if they can squeeze a higher price regardless. it'd be unlike them to make things easy - unless you are broking the order that is.

for what its worth, i find it hard to see the reason for a private equity backed unlisted corporate entity to buy and hold an investment equivalent to over a 1/4 of the equity of a company in a related space. i am in no doubt that ION have plans to complete a takeover, either a reversal in order to attain a listing or purely to expand their business and gain operating synergy. they have bought a seat at the table and have made the likelihood of a competitor offer that much less likely by the size of their holding.

but as i said earlier this week, we know from the way they have built their shareholding that they are patient, so we may not see anything for some time yet.

[maddox] 14/5/2008 14:09

eacn,

Likewise, I am not aware of any statement that ION have made regarding PTS. Where is the reference to this?

Regards, Maddox