Forum Archive Index - April 2004

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

So Norgate has made his move.    I have read the press release a
couple of times and came away wondering whether I was reading the 
same document that the media was reading and reporting on.

The first point I noticed is that it is *not* a full takeover.  
Norgate already has 13% of the company, so he only needs an 
additional 37% to control the company.  

So he will be offering $1.50 but only for
37/(37+50)= 43% of the shares that are left in the market.  He has to
make the same offer to all shareholders so my pick is that a letter
will arrive offering to purchase, say, *half* your shares for $1.50.  
 At the very least there will be a scaling back clause should Noragte
get too many acceptances.

So I say to Karyn W.   WRI will still be listed after the offer is
finished.   There will be no need to sell out if you think the offer
is too cheap!

WRI management have predicted the tough first half year (operating
profits down 21%) will continue into the second half.   The interim
dividend has been cut to 2.5cps and to be consistent that means we 
can expect the final dividend to be cut to 6.5c.     Based on the offer
price of $1.50, that means a gross dividend yield of 9%, which is
still good.   By co-incidence (or is it?) 9% is also he rate that
Norgate is offering on his 3 year redeemable preference shares, which
he is issuing to fund this purchase.  Norgate also says of the
preference shares:

"the effective rate of return is based on the intention to pay a fully
imputed dividend."

My guess is that this is how he is funding the partial takeover, from
the WRI dividend stream.

Shareholders who swap their WRI shares for 3 year convertible notes
will be getting the same income, but from 'Rural Portfolio
Investments', not WRI directly.   We know that WRI is a conservatively
geared company, but what about RPI?   We know nothing about that!   
I for one will be studying the financial strength of RPI closely when
the offer documents arrive.   On a superficial look, losing your
voting rights and getting the same income from a much riskier entity
does not strike me as a good deal.    The 10.5% 5 year notes look 
more attractive.    Then again if WRI are able to raise their dividend to
FY2002 levels again, it might not look as good.   From where I sit the
cash offer for $1.50 looks the most attractive of the three options.

The wildcard clause in all of this is

"The redeemable preference shares will also carry a redemption 
premium based on specified appreciation in the Wrightson share 
price."

That is intriguing, and something that I haven't seen before.   
Depending on what that 'premium' is, that could sway the preferred
takeover offer back in the direction of either of the three or five
year preference shares.

The other thing I noted in the Norgate press release is what I term
the 'big baby' statement.     This is where Norgate is threatening to
throw all the blocks he already has out of the play pen if he doesn't
get his way.  Frankly I wouldn't take this 'baby bullying'  too
seriously.    Norgate may end up abandoning his offer, but I can
guarantee that he will *not* be looking to exit his 13% stake at a
loss!    That means another corporate player will more than likely
come onto the scene, and then action will start again.

Whatever the outcome, it is certainly interesting times for WRI 
shareholders.    To Allan, Macdunk and Cris thanks for your 
congratulations.    I would like to add my congratulations for all
those other sharechatters who have stuck with WRI so far.   And to
those who think it was just 'windfall luck' I offer the following
observation.   The more homework I do, the 'luckier' I seem to get!

SNOOPY

discl: hold WRI

--
Message sent by Snoopy 
on Pegasus Mail version 4.02
----------------------------------
"Sometimes to see the wood from the trees, 
you have to cut down all the trees."




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