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Great research, analysis and 'skilled
observations'.
----- Original Message -----
Sent: Wednesday, April 07, 2004 10:41
AM
Subject: [sharechat] WRI $1.50
offer
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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