Forum Archive Index - April 2003

["tennyson@caverock.net.nz" <tennyson@caverock.net.nz>]

The BIL International offer for Thistle Hotels plc is, I think, a 
disgraceful document.    For a bit of spice, I think everyone should 
have a 'punters' share and BIL International is mine.   However, the 
'circular' dated 20th March has me fuming.

The argument for the takeover in a nutshell is that BIL International will 
be able to improve their profitability by taking onto the books the 
'negative goodwill' of Thistle plc.    In other words the hotel assets are 
selling for below book value, so by bringing them onto the books BIL 
can book a 'profit' by gradually revaluing these hotels to book value 
over time.   Perhaps BIL management might like to reflect that the 
reason that Thistle is currently trading below 'book value' is that in 
todays market there is no-one willing to pay 'book value' for these 
assets.   The process of taking the Thistle assets private might be a 
catalyst for ferreting out another buyer (so far it hasn't).   But actually 
taking these assets private will do absolutely nothing for the value of 
these assets.

Boosting profits by revaluing 'negative goodwill' without finding a buyer 
for those assets is IMO deceit.  You can't revalue an asset just 
because you think someone ought to pay more for it.  You have to find 
someone who will actually pay the revalued amount to make the 
revaluation stick.

If Thistle Hotels is removed from the LSX, then this will remove the 
largest window of market discipline that is keeping BIL honest.

There is no guarantee that the cash flows from the enlarged BIL will 
improve significantly as operating profit from Thistle is expected to be 
down this year if indeed there is any.   Furthermore the investment 
activities of Thistle, (selling hotels), seems to be striking some 
problems and I predict negative cash flow from investing activities at 
Thistle this year.   Besides, selling hotels is something that can be 
done whether or not Thistle is consolidated within BIL anyway.

In summary, I don't believe that taking on more debt at a time when 
interest rates are set to rise is a good thing for the cash strapped BIL..
I intend to vote against this proposal.

SNOOPY

discl: hold BRY 

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