Rpc Share Discussion Threads

[jeffian] 13/2/2019 14:51

billy,

You were the one that once took me to task for not qualifying statements with "IMO" and you've been making stuff up ever since! Whatever your "own view" might be, the answers are all there in the documents and Code if only you would care to look. This from the original Offer -

"The Bidder reserves the right to elect (with the consent of the Panel and subject to the terms of the Co-operation Agreement) to implement the acquisition of the RPC Shares by way of a Takeover Offer as an alternative to the Scheme. In such an event, the Takeover Offer will be implemented on the same terms so far as applicable, as those which would apply to the Scheme..."

[bouleversee] 13/2/2019 14:50

Billywhizz

Grandma may not be au fait with all the technical terms (still on a learning curve) but it's comforting to know that although my memory is in serious decline, maybe I haven't quite lost all my marbles just yet. Anytime soon, alas!

[billywhizz1] 13/2/2019 14:38

bouleversee.
At last.......They didn't bung that clause for nowt!

[billywhizz1] 13/2/2019 14:31

Jeffian, my own view is that their final offer statement is ring fenced to be in compliance with the specified conditions of the Court Sanctioned Scheme only! If the T/O panel sanction the T/O route, previously and clearly stated in Apollo's offer, then this final offer commitment would no longer apply and the normal 'open bid market' would apply.
What d'ya think ?

[bouleversee] 13/2/2019 14:16

This is the wording: "It is intended that the Acquisition will be effected by means of a Court-sanctioned scheme of arrangement of RPC pursuant to Part 26 of the Companies Act 2006, further details of which are contained in the full text of this Announcement and which will be set out in the Scheme Document. However, the Bidder reserves the right (in accordance with the terms of the Co-operation Agreement) to implement the Acquisition by way of a Takeover Offer (with the consent of the Panel"

It does sound like a let-out clause which would enable them to convert a Scheme of Arrangement where they have declared their offer is final into a takeover offer where the sky is the limit so long as the Panel consents. And why would the Panel not consent if another bidder made a higher offer? Surely the interests of shareholders should be paramount.

[redartbmud] 13/2/2019 14:15

It is all academic, until Berry bids.

[jeffian] 13/2/2019 14:13

billy,
I didn't answer it because it isn't particularly relevant. Changing from a Court-sanctioned Scheme of Arrangement to a Takeover Offer does not change anything I have already said. The terms, including the "final and will not be increased" bit, remain the same and are still subject to the Code. All changing from a Scheme of Arrangement to a TO would do is lower the bar for Apollo and give them options. If they go down the Scheme route and fail to get a bare majority, that's the end of it, they lose. If they switch to a TO, they can decide whether to press on and declare the offer unconditional at any stage. It's a technicality and it doesn't get round the problem that they have committed themselves absolutely not to increase their offer.

[billywhizz1] 13/2/2019 14:03

By the way, the t/o code is a 'Code of Practice' which means that it is a guide which is subject to adjudication by the T/O panel under the umbrella of a court's jurisdiction.
Remember a lot of leeway exists in the interim
period between the offer date and the time expiry date.

[redartbmud] 13/2/2019 13:55

It is all academic, until Berry bids.

[billywhizz1] 13/2/2019 13:40

Of course the take-over code is important.However I have twice posted extracts directly from Apollo's offer terms which clearly set out Apollo's RESERVED RIGHTS. Please read Apollo's Offer terms and my two related posts, it might help you know!

[dr_smith] 13/2/2019 08:49

Jeffian. Yes, that is my experience, and now you mention it, I do feel bold on it, it is a repeated experience over many years. I state my reasons/sources, so leave it for others to take own balance. "The code" is not the be all and end all.
Rules and codes are broken all the time.
I won't go on, I'll shut up and go away, annoying folks was not my intention.

[phillis] 13/2/2019 08:34

Always read the small print!

[jeffian] 13/2/2019 08:20

Dave, you don't need to read "all the small print", just the relatively short extract I have already posted, highlighting the relevant parts for you! If someone else wants to trawl through the whole Takeover Code and find something which contrasts with my understanding, I will happily defer to them.

However, not reading or understanding the Code doesn't seem to stop you making some pretty bold statements, which may result in you misleading yourself and others. You say "IME, in most areas of law, agreements can be varied if consented to by all interested parties (well that's questionable),, so if apollo want offer more, BOD and s/h say yes, who is going to stop them.....". Answer: The Takeover Panel. That's what it's there for!

[dr_smith] 13/2/2019 08:01

Jeffian. Not reading all small print - Guilty..and by selling I thought it would be save my eyesight in having to weave through the smoke! ;-)
Listen to you. Yes. Most definitely yes.
Awareness of what should and does happen - especially when money talks - the world is your oyster.
Cynism dominates unfortunately. ;-)

[jeffian] 12/2/2019 23:19

Oh dear. I find myself getting repetitive but clearly nobody here can be bothered to read the Takeover Code or take in what I have been saying. The Apollo offer was absolute and unconditional - "The Bidder's offer is final and the Consideration will not be increased."

The "final" bid for Lavendon contained the all-important condition at the outset that it reserved the right to increase if a competitor came along -
"TVH confirms that the Offer is final and the Cash Consideration will not be increased, except that TVH reserves the right to increase the amount of the Cash Consideration if there is an announcement on or after the date hereof of an offer or a possible offer for Lavendon by a third party offeror or potential offeror."

As some have said, yes, it is possible that the Takeover Panel could be approached and asked for a waiver in this case but the rules, which I have already posted twice, say that the TP would only do so "in wholly exceptional circumstances". I'm not sure making a low-ball offer and then finding yourself pipped at the post fits that description, but we shall have to see what evolves.

[boy john] 12/2/2019 21:12

Well done Dave, that was exactly the one I was thinking about but could not recall. Was in Lavendon, they had a Final Offer of 205p, another bidder entered the fray and it finished going for 270p. So over 30% increase from first bid. Now that we nice here!

[dr_smith] 12/2/2019 20:52

Eureka - looked for this before and couldn't find it.
Subject of "are final bids" final.



Read the attached link. It is Loxam and TVH bidding for Lavendon.
Note in particular:
"This battle is now quickly moving towards a climax. TVH stated at the beginning that its offer of £2.05 a share was final, now it faces the difficult decision of whether to go to £2.60 or more or drop out of the bidding.

While TVH has a total aversion to paying over the odds for anything, it probably hates to lose even more - so anything is possible. At this stage it is probably looking at a profit of around £9 million on the shares it has already acquired - although it will also be facing some substantial adviser fees. "

Also the rns for Apollo and RPC had:
"The Scheme will be governed by English law and will be subject to the jurisdiction of the courts of England. The Scheme will be subject to the applicable requirements of the Takeover Code, the Panel, the Listing Rules, the London Stock Exchange and the UKLA."

IME, in most areas of law, agreements can be varied if consented to by all interested parties, so if apollo want offer more, BOD and s/h say yes, who is going to stop them, there is nothing illegal or bad about it, just contrary to what they said earlier - so...make your own mind up - and where people stand to make money, it is the proverbial oil to make wheels turn.

I have sold already, so sharing above in community spirit. Didn't share earlier because I couldn't find it, but did air my thoughts at the time. :-)

Dave

[spot1034] 12/2/2019 20:35

It'll be three weeks tomorrow since Apollo announced their bid, so presumably their offer document has to be published by next Tuesday at the latest.

Just looking at the original statement again, I have to say I thought it was a bit of a cheek to include the dividend in their calculation of how much of an increase for shareholders the offer represented. It was irrelevant - the dividend was not brought forward or enhanced beyond the small increment which would have been expected anyway, and it was payable regardless of whether the deal went through. It was nothing to do with the offer!

[budgiekevin] 12/2/2019 20:28

Re Sogoesit article from IC if the Apollo price is 10.7 times forecast earnings and Berry are trading on approx 13 times they can go quite a bit higher and it would still be earnings accretive. Private Equity use EBITDA but listed companies use price earnings

[redartbmud] 12/2/2019 20:12

jeff

Agreed.
It was a very bold and explicit statement.
They do appear to have decided on a figure that they are happy with, and no more.
Appollo are obviously hard nosed Private Equity operators, whose aim is to acquire assets for a song and turn a significant profit as a result. If it doesn't there are many other opportunities to address.

After due diligence, at least they thought that RPC was worth a go.
If Berry believe that the information is anything near accurate, they have to decide:
1. They too will bid.
2. The price they can afford to offer.

The clock is ticking, and there is little point in speculating on the outcome.

[boy john] 12/2/2019 20:11

Re Apollos FINAL OFFER I believe there is a way they can come back with a revised offer if there was an alternative offer, but they would have to ask The Takeover Panel for permission to do this. I have seen it happen before but cannot remember Who/Where. If shareholders rejected Apollos bid they could not come back with a revised offer, but if there was an alternative higher offer it is likely they would get permission to increase theirs as it would be in shareholders best interests.
I am however not a lawyer or an expert on The Takeover Code, just a worn out humble builder with 40 years experience of the stock market.

[sogoesit] 12/2/2019 20:05

From BearBull in the IC:
Title: Ignoring Apollo.
“When a master of the universe speaks, you listen. It’s not just that the New York-based private-equity firm Apollo Global (US:APO) names itself after Greek mythology’s most important god; it’s more that the $250bn (£192bn) fund manager was founded by a real ‘master of the universe’ – Leon Black, a legendary figure in the US finance industry, although certainly not a mythical one, who was the right hand of Michael Milken, the 1980s junk-bond king. While Mr Milken ended up in prison, Mr Black founded Apollo and became even more fabulously wealthy than his one-time mentor.

Thus Apollo spake unto the directors of the UK’s second-biggest packaging group, RPC (RPC), who were keen to sell their company. Apollo said it would make a distinctly low-ball offer – 782p a share in cash; but they had better take it or leave it because it was the only one the firm would make.

RPC’s directors gave a breathless “oh yes, please” and recommended Apollo’s offer. This has hacked off some of RPC’s institutional shareholders because the offer does look pretty unexciting. However, there is now a second suitor talking to the maker of stuff such as bottles for Heinz tomato ketchup and tins for Dulux paints – Berry Global (US:BERY), a packaging group floated by Apollo in 2012 and in which it still has a stake.

The background is the directors’ conviction that RPC must grow by acquisition. And the clear inference in their unconvincing recommendation of Apollo’s offer is that they feel that listed status shackles the group. Or, as they put it, “differing investor views on the appropriate level of leverage have been a constraint on RPC’s opportunities and growth”.

Without a counterfactual, we can never know, yet that statement does not readily tally with the facts. These past five years RPC has binged on acquisitions. It’s hard to imagine that its bosses could have done more without biting off more than they could chew.

Spending on acquisitions has dwarfed any other category of capital allocation, especially its internal equivalent, growth by capital spending. In the five years to 2013-18, capex totalled a bit more than depreciation – £680m against £574m – but that compares with almost £2.1bn cash spent on acquisitions. Meanwhile, almost all the funds for this growth were sourced externally. Cumulatively, RPC generated free cash of just £327m in that period while it raised just over £2bn in almost equal amounts of debt and equity.

Clearly, this leveraging has had the desired effect on performance. RPC has become a more productive beast – in 2017-18, gross profits per employee were 13 per cent higher than five years earlier even though employee numbers had more than tripled. In the same period, revenues rose by the same proportion while pre-tax profits quintupled to £317m and basic earnings quadrupled to 62p. Even the dividend, whose movements should be comparatively staid yet reliable, doubled to 28p.

True, free cash – arguably the best long-term measure of profitability – is lagging. It came in at 35p per share in 2017-18, barely more than half the accounting earnings figure. It is feasible to ascribe that to RPC’s acquisition-driven growth, sucking working capital, interest and cash taxes out of the group. Yet even free cash has been moving strongly in the right direction. In increments of approaching £50m a year, it went from nothing to £145m in the three years to 2017-18.

Besides, there is nothing wrong with RPC’s basic aim of growing by acquisition. On the contrary, in a low-growth industry such as packaging, where fixed costs are high and economies of scale especially powerful, it seems the one to pursue.

So why do RPC’s bosses seem so miffed? Quite likely because the share price has responded indifferently to their efforts. At its current 793p, it is 26 per cent lower than its peak two years ago. That said, it is still 50 per cent higher than it was five years ago, which compares with a gain of just 11 per cent from the FTSE All-Share index.

Not surprisingly, they see the solution in the arms of private equity where they can run RPC “without the costs, constraints and distractions associated with being a listed company”, as they say in the offer document. And there is the point – which somehow doesn’t get mentioned in the document – that they may well have the prospect of making even more moolah with RPC being private-equity owned than as a listed company.

Yet this brings little benefit to the people who currently employ them – RPC’s shareholders. All that Apollo’s bid offers them is a miserly 14 per cent uplift on the share price immediately before the directors announced they were in bid talks last September and an exit earnings multiple way below the average of RPC’s global peer group – 10.7 times forecast earnings against 14 times. True, the arrival of Berry Global may improve the exit returns, but don’t expect a bidding war – as Apollo’s offer is final it can’t be raised without special permission from the Takeover Panel.

In which case, RPC’s shareholders may have to make the best of a bad job. That would mean persuading New-York-listed Berry Global to include an equity component in any offer it makes, which would allow them to share in the future gains accruing from RPC’s acquisition strategy. Failing that, they should tell RPC’s bosses to stop whingeing, get on with the good work and don’t listen to masters of the universe.“

[billywhizz1] 12/2/2019 19:44

Re: My post 1 Feb '19 - 19:03 - 2995

RNS Number : 8573N
RPC Group PLC
23 January 2019

I’d be interested to hear what others make of this, was my interpretation
in my post 2995 accurate ? or just wishful thinking on my part.

EXTRACT FROM APOLLO’S CASH OFFER TERMS
It is intended that the Acquisition will be effected by means of a Court-sanctioned scheme of arrangement of RPC pursuant to Part 26 of the Companies Act 2006, further details of which are contained in the full text of this Announcement and which will be set out in the Scheme Document. However, the Bidder reserves the right (in accordance with the terms of the Co-operation Agreement) to implement the Acquisition by way of a Takeover Offer (with the consent of the Panel).

[jeffian] 12/2/2019 19:41

"I always believed that it was possible to re-enter the process, if a third party came in with a counter offer."

red, they would have been able to if they'd either specifically made it a condition of their bid that they could increase if a counter-bidder appeared, or hadn't made their offer so absolute ("The Bidder's offer is final and the Consideration will not be increased."). That's pretty unequivocal and they can't go back on it now.

[redartbmud] 12/2/2019 19:01

I stand corrected. So the Apollo bid was it's last go.
I confess that I have not read the code for years, but I always believed that it was possible to re-enter the process, if a third party came in with a counter offer.
I always believed that the when the Institutions ignored the offer, or even declined, it was going to be difficult to find a white knight who would pay up.
Will Berry have the resources to meet the demands of the institutions?
It will be interesting.