Total Systems Share Discussion Threads

[davidosh] 09/6/2010 16:17

This is an interesting read from last years AGM



Note the question about delisting then....

Fly in the ointment
Although Total Systems looks like a slam dunk for value investors, it is worth bearing in mind that no dividends have been paid in the last few years and, of even more importance, Terence Bourne owns approximately 50% of the shares. Another director owns approximately 20%.

Having been scarred for life by the recent fun and games at Touchstone (LSE: TSE) -- where the directors are planning to take the company private at what is perceived by many as a very low price -- it is always possible that the directors could decide to take Total Systems private at less than the value of its tangible assets. With 70% of the equity, the directors are in control.

When asked about the costs of remaining public the finance director, Granville Harris, said the cost was about £50,000 per annum.

The MD also said that potential acquisitions come across their desks approximately once a quarter, and very very general chats about whether he would consider selling the company happen on the same frequency.

Winding up this report, I liked the directors as they were happy to answer questions and not in a hurry to wind up the meeting. The offer of the site visit was appreciated. For what it is worth, I do think they are genuinely committed to answering shareholders questions.

The last few years have been reasonably dull for Total Systems' watchers. Given the directors don't appear to be thinking about retirement, the next couple of years could also be dull, and the latest trading update was downbeat.

Of course, there is always the possibility that the MD does receive an offer for Total Systems in the next month that he cannot refuse, but don't bet your town house in Islington on it.


Amazing how the supposed cost of having a listing doubled in a year when they wanted to use it as an excuse for running off the market with all the assets !!

[9degrees] 09/6/2010 15:49

no but good idea
will do it

[weatherman] 08/6/2010 21:14

Have you complained to the FSA or LSE ?

[9degrees] 08/6/2010 17:29

Well is that it then ? What else can we do ??

[rarther] 21/5/2010 10:51

I am really disappointed with Terry... we all knew this was his nest egg and there was a risk of delisting, but to shaft the shareholders after all this time of "understating" is just shocking.

A real dark horse if ever there was one.

[deswalker] 18/5/2010 10:46

Rainmaker,

Yes that is a subtle consequence of share buybacks and has been going on at LDSG for years.

Small shareholders tend to think that it is good news every time a buyback happens at a discount to NTAV because it enhances their own NTAV per share. Ofcourse this is true but it misses the more important point that it increases the grip that the largest shareholders have over a company. This point is certainly not lost on those shareholders doing the buying back.

I've made reasonable money out of VLE but sold out a couple of months ago because I no longer trusted that management were going to act fairly to all shareholders. Their holdings of Ordinary, A and B shares give a lot of control and now the buybacks will only act to increase this. Small shareholders on that thread get excited when a buyback happens but if I was holding I'd be seeing it the other way round.

Smell and trust is just as important as running the numbers with these type of shares IMO.

Des

[rainmaker] 17/5/2010 23:03

Des, it has to be remarked that every time the NAR CEO buys back shares for cancellation he is simultaneously increasing his stake.

regards

[deswalker] 17/5/2010 19:51

CLV remains the worst of these type of situations that I've seen and so far is the only one that has caught me out. As scburbs says it was apparent what they were doing a full year before the delisting and they finally structured the buyout using Loan Notes offering all sorts of possibilities. To my knowledge the Takeover Panel is continuing to watch the situation six months after the buyout. Shame they didn't have the teeth to stop it at the time, despite some serious representation against the MBO by shareholders.

I never liked the look of TTS as there was never an outside shareholder who might act as a barrier to a delisting and the 50% was held by one person.

NAR might well develop along similar lines with an ageing shareholder owning 60% of the equity and with tax issues to think about. But there is Herald Inv Trust with about 11% and a hotline to City lawyers standing in the way. NAR will be an interesting one to watch from the sidelines IMO.

Anyone who entertains stuff like MTT with a single foreign 80% shareholder is playing with fire IMO.

[weatherman] 16/5/2010 16:52

TTS is owned by a few shareholders and the required votes are 'in the bag' for them. The only option for us is to email or write to the LSE or FSA and complain about the significant undervaluation, even below net cash, for forced sellers. If enough people write it might raise the problem and perhaps lead to a reevaluation of the situation. Controlling shareholders should not be allowed to ram through a delisting at a price below net asset value; and the net assets should be re-valued annually by independent experts.

A breakup price for this might be as high as 100p taking into account property, cash and business.

A risky strategy might be to hold on and see if a break up is the intention of management.

[isis] 16/5/2010 09:54

I was one of the Bears and I'd stay away from that Basket Case VTS as well.

AIM can be very dangerous to your wealth, with many Blue Chips still relatively cheap from their highs I see no reason to buy the majority of AIM stocks - just too risky.
Shares like BT,LGEN and VOD offer good divs and outlook without the worry. imo

[essentialinvestor] 16/5/2010 09:43

scburbs

These points were made repeatedly on this thread over the last couple of
years by some Bears on TTS, luckily I took notice.

They were dismissed by many Bulls as ridiculous.
From memory egoi was in this camp and kept banging on about the value here.

Where is egoi now - Its a case of silence is golden.

[scburbs] 16/5/2010 09:35

Not a holder here, but follow a few of these in case there is any indication of value being outed. This is the first such sign of a plan to crystallise the undervaluation, however, it is also clear whose pockets it is destined for!

Davidosh,

Good to see the article flagging this practice. It is very difficult to regulate against through imposing exact valuation restraints, although perhaps there could be minimum valuation guidelines together with a panel to review. The danger of the valuation restraints is that it may just encourage companies to delist without a tender and then complete the job later.

What I think would make sense is a widening and strengthening of the takeover panel rules to ensure they apply to any company listed on the UK market and that when takeover panel limits are waived that there are severe restrictions on what the parties can then do. They also need to strengthen the rules on concert parties. If you ensure that the Director holdings are below 30% then you know that the delisting vote would be much fairer. You might also exclude Directors from voting on delisting plans.

An example of where I was caught out by this sharp practice was CLV. The two Directors increased their stakes from reasonable shareholdings to 52% between them. They then voted for a delisting without a tender offer (forcing me to exit in the markets) and then subsequently put in a low ball takeover offer which I imagine they have pushed through due to the size of their shareholder. This means that even if shareholders believe in a company and hold through the take private they are left holding shares in a company where the Directors have effectively indicated their intentions as to where the value is going! Given the public announcements are pretty blatent you can rest assured that people without morals will not hesitate to complete the job once they are a private company.

In the case of CLV it was clear that the two shareholders were taking over CLV and it was also clear that they represented a concert party. Once they hit 30% between them they should have been forced to make an offer for the company. This would have outed them sooner and made it much harder for them to be certain of being successful.

The other key question in this sorry affair is what has happened to Directors fiduciary duties to act in the best interests of all shareholders. Do they really think a bit of wording on cost cutting is job done!

The corporate finance/brokers, lawyers and other advisers carry a high degree of responsibility here. It wouldn't surprise me if they are actually hawking around these companies and trying to persuade them to go private. If this is happening then the lack of morals in these advisers who are lining their pockets at the expense of minority shareholders is shocking.

Something needs to be done, either stopping the Director shareholding getting to such a high level, excluding them from a delisting vote or having a valuation panel.

It is worth noting that the current problem is self fulfilling in terms of the valuation of these companies. It is next to impossible to hold shares in a company like Total Systems unless the company shows that it has shareholders interests in mind and is actually offering them a return (dividends, share buybacks etc) from the inherent value. This means that these companies will stay ridiculously undervalued and encourage those Directors who may not be constrained by morals to take steps to realise the undervaluation, just not for the benefit of all shareholders!

[davidosh] 15/5/2010 21:27

Surely there is a chance of blocking the delisting if they need 75% of the vote ? We should group together and try to block it. Or to cause embarrassment lets make a bid at 27p and see if they like it when we expose the pathetic situation we are forced into as a minority. I bet they will not accept 27p and allow us to run the company nor will they get a fair valuation on the property in which I own most of the windows. They could do a sale and leaseback at just 50% of the true value and afford to pay shareholders 40p !!

[liarspoker] 14/5/2010 20:59

If anyone wants to start a petition to send to the LSE or the company regarding matters such as this I would be more than happy to sign my name. I don't hold TTS, was nearly severly tempted a few months ago though, but I'd still like to offer my support for existing holders.

[weatherman] 14/5/2010 20:38

I agree - there should be rules to prevent people delisting at a price below net value.

Looking back this company has never really had the interests of other shareholders in mind.

[gingerplant] 14/5/2010 18:21

In practice, there'll be nothing to be done about this other than to accept the cr*p offer as the boss owns 50% and I'm sure has the other requisite 25% in the bag.

Yet this doesn't even cover the cost of the cash the Co. has in the bank, let alone the NTAV which is much higher in reality as the London freehold property HQ on which a lot of money has been spent is on the balance sheet at the 1986 purchase price less £200k depreciation.

If an independent arbiter / ombudsman type person was asked for a "fair" market price - the offer would be more like 50p, but let's be cynical and knock off 10p a share as that's life and all that - so 40p minimum.

As things stand, it beggars belief that this action is legal - but legal it is. The LSE should change its rules IMO.

[davidosh] 14/5/2010 14:25

There are some comments and the story highlighted here if anyone wishes to add anything....



Nothing has been posted in the Pub there yet

[sailing john] 14/5/2010 10:51

Pug - Yes I agree (I follow TTS but don't hold)
Same thing happened to me with Spectrum Interactive. I had little alternative other than to accept the offer and move on but felt like I had been mugged. Fortunately the offer was above my buy price so made a profit but many will have accepted at a loss.
GL with whatever you decide
John

[pugugly] 14/5/2010 08:44

Today's rns makes it look as though managment are going to make a killing at the buyback offer price of 26p - If I have read the documents correctly

Views.

[pugugly] 13/5/2010 20:06

Rainmaker:- Just come back to this - Very bottom drawer but I think your property valuations of December were about right. i might however mark the property down to say £4 million as a developer will need to make a magin but even at that level there is value there if only it can be unlocked.

[hugepants] 13/5/2010 19:56

This offer looks awful. I think the London property alone is worth 26p per share. It was purchased for £0.75M all of 23 years ago. And they've spent several hundred thousand recently improving it. It was a good move of Mr Bourne not to revalue it since Im sure the share price would be at least 10p higher.

When you include the recent Stockcube debacle who will buy shares in these tiny businesses now when there is a big shareholder who can take it private at any time for a song.

[essentialinvestor] 13/5/2010 18:11

All that cash on the Balance Sheet, which PI's thought they would share.

[davidosh] 13/5/2010 18:05

That seems rather mean although slightly more generous than the last place I got shafted in this way which was at Stockcube (SKC). I do not see why at least 35p could not be paid considering the overall assets including the property that are available and could be borrowed against to allow a reasonable exit. What would pressure them into paying more though ?

[essentialinvestor] 13/5/2010 17:57

Bears called this correctly, and this is what I saw happening.

Hope too many are not sitting on a sizeable loss on the 26 pence price.

[deswalker] 13/5/2010 17:33

Offer at 26p and cancellation of listing.