Forum Archive Index - April 2004

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

Hi Barrel S,
 
>
>yep, nice trot..but not worth anything until you sell   :-)
>

I disagree.   No need to turn a share into cash to determine its value.     
The value of the business is the value of the business.    Whether an 
individual shareholder is buying or selling or sitting on their hands 
makes no difference at all.

> 
> Norgate holds approx 13%, then he wants 37 and a bit % of holders to
> sell to him or "If Rural Portfolio Investments was not successful in
> reaching this target it would review its existing shareholding in
> Wrightson with a view to exiting."
>

Noragte wants 37% more of the total shares.    Given he already has 
13%, he wants 37 of the the remaining 87%.     If RDI (Fronterra) own 
20% of the total shares and are not interested in selling, that means 
Norgate needs 37/67 which is 55% of the free floating shares out 
there.    That's a tall order.

> 
> I appreciate that a lot (prob most) holders have a lot to gain from
> this offer, but , there is always the possibility RPI won't meet their
> target... again.. Does anyone think this might happen and what would
> be the effect of a selldown ? 
>

I heard today that 19.6% shareholder Fronterra aren't selling.    That is 
going to make things more difficult for Norgate.   I wouldn't blame 
anyone for selling to Norgate at $1.50.     At that price everyone makes 
a nice little capital gain and the dividends have been good over the 
last few years too.

*BUT*
For the income investor, sell WRI and you are still looking at giving up 
a gross yield of 9%, even at $1.50.   I'll give the offer due consideration 
when it comes out, but my initial reaction is that I don't want to give 
that 9% yield up.

>
>The option of shares in RPI would have
> to be attractive allowing for an indirect holding in Wri - or maybe
> keep a hand in both pies ?
> 
> By the way could someone define a 
>" redeemable preference share" ?
>

It is not as good as it sounds.   No voting rights.  Generally you don't 
get the capital gain if the company does well but are still exposed to 
the downside if things go wrong.  A redeemable preference share is a 
debt security that can be repaid to you at any time, entirely at the 
discretion of the company issuing it.    The secondary market for debt 
securities is not as liquid as for ordinary shares.

Having said that, in this instance it seems Norgate *is* incorporating 
some bonus payout based on the future capital gain of WRI shares.
I have never heard of this being done before with a RPF, so I will need 
to study the Norgate offer closely before I finally accept or reject it.

SNOOPY



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