Forum Archive Index - April 2004

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

Hi Macdunk,

> 
>The norgate  consortium I would ask the question why?. Lets ask
>ourselves the  question for Instance why did they not do it earlier
>when the share price was more favourable for a move.
>

Good question.  Only Norgate can answer that for sure but I will make
an educated guess.  The original offer was for 20% of the company at
$1.45 per share.  There were 136,181,393 shares on issue so that 
means
a total purchase price of $39.5m.  Now Norgate may be rich, but he is
not *that* rich.    Perhaps the McConnons (Norgate's 50% business
partners) are that rich.   But considering they are only 50% partners
it is doubtful that they have put more equity into RPI than Norgate
himself.

That means RPI is likely to be heavily geared, and that means a large
interest bill to pay, much larger than Norgate can afford.     So
rather than pay the interest bill himself, I think Norgate planned to
use the strong dividend flow from WRI to pick up the interest tab.

Remember when you explained your investment strategy for Auckland
property last year Macdunk?     Put down a few dollars yourself, let
the tenant pay the bank loan and then sit back and rake in the capital
appreciation for yourself, using the bank's capital to do it?    Well
my pick is that Norgate read your post and realised he could do the
same thing, but on a scale that was fifty times bigger with WRI
shares.    Substitute 'WRI shares' for 'Auckland Property' and
'dividends' for 'rent' and Norgate is wearing your shoes.   

So take a bow yourself Macdunk.  You gave Norgate his investment
strategy!

>
>What do you reckon snoopy put yourself In norgates place you 
>would never have done It that way surely.
>

Norgate might have been able to buy the shares cheaper if he had 
moved
earlier, true.   But you are assuming he had the money to do it.   My
guess is that he didn't.   

By waiting Norgate was able to convince the banks that his prey was
able to pay high enough dividends to cover his leveraged buy in
strategy.    He wasn't able to do that when the share price was
cheaper, but the dividend payment record was patchier.

SNOOPY
--
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----------------------------------
"You can tell me I'm wrong twice, 
but that still only makes me wrong once."


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