Forum Archive Index - September 1999

["Mark Hubbard" <mhubbard@es.co.nz>]

Firstly, a quick apology for sending so many posts to this forum recently.
Up until now I've done all my investing through managed funds, however, for
various reasons, I have become disullusioned with managed funds - note this
is as much an administrative issue as one of returns generated by these
funds (the lousy tax treatment of active funds also is influential). Anyway,
I'm now looking to do a lot more investing in my own right, hence my posts
to this forum - ie, I am a bit green.

My question for this post is simply, what am I missing in the following
assumption. Today, the directors of Shortland Properties have recommended
that shareholders accept capital properties takeover offer of .76 cents a
share. Currently, Shortland shares are trading at only .67 cents a share.
The terms of the offer are .42 cents would be paid for via fully paid
Capital Properties shares (at which they are currently trading), the balance
would be in cash.

If you consider that at .42 cents Capital Property shares are very good
value (they have over a 15% gross dividend yield!) as a long term
investment, then does it not make a lot of sense to purchase heaps of
shortland shares at .67 cents, then onsell these directly to Capital
Properties for the .76 cents (an instant 13% gain, less brokerage). You
would then be left with cash in the bank, plus good value Capital Property
shares.

Well, what am I missing?


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