They wont be meddling in the cafe scene, I can tell you that much !
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from what I'm hearing it sounds as though it was a double whammy ... more onerous licence agreements significantly reducing profits to RBD ... and an obligation to open more stores (Tahua committed to 50).
I had a look for the terms of the remaining existing franchise agreements with Yum. Pizza Hutt NZ got renewed for 10 years in mid-2018; I think KFC NZ still has 8 years to run on the 2006 deal, and I think there was a circa 10 yr deal with Yum when they bought Hawaii et al. KFC Australia - I'm not sure. I think it might be short - low intangibles on balance sheet - so that might be the one to worry about if Yum was to take advantage of its exit from store ownership in Australia to make more demands of its franchisees.
RBD need to select and monitor their Pizza Hut franchisees a bit better
https://www.stuff.co.nz/nelson-mail/...community-work
Sales not entirely booming. Headline number looks good but includes Aust KFC new stores
http://nzx-prod-s7fsd7f98s.s3-websit...105/287081.pdf
I only see positive same store salesin every region and its an extremely competitive market place for what they sell. I’d be pretty happy with that
Question i s how are they allowed to open dtores in Aus? I thought another cimpany on the ASX had the license agreement for that?
A bit of action
Is $9,45 enough icing on the cake to tempt me?
Maybe it is seeing many say the share market is about to collapse in one big heap
Under a buck seems so long ago
http://nzx-prod-s7fsd7f98s.s3-websit...456/288806.pdf
Why offer a 24% premium for a 75% stake? Will be following this with interest.
possibly they are not wanting to delist from the NZX and ASX
Is anybody familiar with the process of a potential partial takeover for existing shareholders.
i.e would everybody get the opportunity to sell 75% of their shares for $9.45?
Yes - you should have a look at the recent partial takeover bid for Abano Healthcare if you want a case study - in that offer the acquirer was after 50.01% of the subject company. Incidentally Ted, the RBD chair will be familiar with this as he was until recently on the Board of Abano.
It will depend on the offer documents that are not yet available.
You could potentially offer some or all of your shares to the acquirer (because if there are shareholders that don't want to offer any shares to the acquirer they might want all of your shares to get to 75%).
In the case, that the offer was oversubscribed (e.g. they were offered more than 75% of the shares on the registry) then they would be scaled down pari passu across all the shares offered so that they would get 75% of the shares on the registry. If the offer is unsuccessful, then they are under no obligation to take any of the shares - although they could potentially still try to acquire shares on the open market in the meantime up until the offer is made (and subject to what rules apply after the offer is made could still try and buy them on open market).
The big difference with partial offers is the "control premium" in that if they did take up 75% of the shares and had control, then the value of the remaining shares would probably diminish as they would be potentially less liquid and the acquirer can do basically what they want (ask anyone who has shares in Richina) - the market tends to not like partial offers because of that. Full takeover offers are usually all or nothing so at least you aren't stuck with shares with a minority interest beholden to a majority shareholder - on the other hand, there are shares with majority shareholdings and small free floats (BGR and MHI come to mind as well as the gentailers like Mercury, Genesis and Meridian as well as Air NZ) but these were sell downs with a known party not via a partial takeover.
The question for RBD holders is whether the $1 premium is enough for the control and what might happen with an unknown shareholder (so what might happen with your remaining shares).
I'd heed the warning of the board and wait to see more details about the offer as well as the RBD board's response - clearly the acquirer sees value in RBD and this isn't RBD's first takeover that they have rebuffed. CVC had a go in 2005 but couldn't sort a deal with Yum about the franchises... and the SP was $1.10 and subsequently went all the way down to $0.55 when Tower quit their 10% stake (they once had 20%) in 2007 but it's a very different company from what it was in 2005.
Disc: Holding RBD
Very good reply rep,most informative
thanks
I have had RBD in the stock picking competition for the last 3 years but never actually owned any. Bit silly.
yeh, as SteveB says, good post Rep.
This happened with NZO recently as well.
Holders can be left hanging.
Well I sold half of my RBD shares yesterday to have some cash on hand for any potential bargains. :( B***er! Freeking typical! Oh well I still have the other half :cool:
Thanks for the information Rep, very helpful.Quote:
es - you should have a look at the recent partial takeover bid for Abano Healthcare if you want a case study - in that offer the acquirer was after 50.01% of the subject company. Incidentally Ted, the RBD chair will be familiar with this as he was until recently on the Board of Abano.
It will depend on the offer documents that are not yet available.
You could potentially offer some or all of your shares to the acquirer (because if there are shareholders that don't want to offer any shares to the acquirer they might want all of your shares to get to 75%).
In the case, that the offer was oversubscribed (e.g. they were offered more than 75% of the shares on the registry) then they would be scaled down pari passu across all the shares offered so that they would get 75% of the shares on the registry. If the offer is unsuccessful, then they are under no obligation to take any of the shares - although they could potentially still try to acquire shares on the open market in the meantime up until the offer is made (and subject to what rules apply after the offer is made could still try and buy them on open market).
The big difference with partial offers is the "control premium" in that if they did take up 75% of the shares and had control, then the value of the remaining shares would probably diminish as they would be potentially less liquid and the acquirer can do basically what they want (ask anyone who has shares in Richina) - the market tends to not like partial offers because of that. Full takeover offers are usually all or nothing so at least you aren't stuck with shares with a minority interest beholden to a majority shareholder - on the other hand, there are shares with majority shareholdings and small free floats (BGR and MHI come to mind as well as the gentailers like Mercury, Genesis and Meridian as well as Air NZ) but these were sell downs with a known party not via a partial takeover.
The question for RBD holders is whether the $1 premium is enough for the control and what might happen with an unknown shareholder (so what might happen with your remaining shares).
I'd heed the warning of the board and wait to see more details about the offer as well as the RBD board's response - clearly the acquirer sees value in RBD and this isn't RBD's first takeover that they have rebuffed. CVC had a go in 2005 but couldn't sort a deal with Yum about the franchises... and the SP was $1.10 and subsequently went all the way down to $0.55 when Tower quit their 10% stake (they once had 20%) in 2007 but it's a very different company from what it was in 2005.
Disc: Holding RBD
Directors obviously supporting the partial takeover by committing their shares
This offer is brilliant for holders, why would anyone not take part...
Selling fully down when this is complete
If one doesn’t want to take a risk with the residual shares One can offer 100% of one’s shares and hope that total acceptances aren’t 75% ...or sell before hand at a discount to the $9.45
If the share price gets to $9.35 or more i’m selling, otherwise I’ll take my chances
Remember Russel said RBzd was going to be a $10 share one day
Not formal offer yet but according to the below link -
If the takeover is successful, Finaccess said it will keep the dividend policy unchanged for the near term, and promises not to de-list the company in the following 12 months unless it mounts a full takeover. If it does seek to mop-up the remaining shares, it promises not to offer a lower price, subject to wider movements on the benchmark NZX 50 index.
Not sure how that would work in practice, but once details are known could be worth holding on for the divvy. Risks- Finaccess sits on its 75%, which is control anyway; market takes a dive.
Re divvy - the company is likely to pay the next half year divvy anyway, possibly with a special if they have excess imp credits.
http://www.scoop.co.nz/stories/BU181...-finaccess.htm
PARTIAL TAKEOVER OFFER FOR RESTAURANT BRANDS AT NZ$9.45 CASH PER SHARE
Finaccess Capital, S.A. de C.V. (Finaccess Capital) is pleased to present to you this recommended partial takeover offer in relation to Restaurant Brands New Zealand Limited (Restaurant Brands). Our NZ$9.45 cash per share offer is in respect of 75% of the fully paid ordinary shares in Restaurant Brands (the Offer). The Offer is being made by our subsidiary, Global Valar, S.L. (the Offeror).
The Offer Document and target company statement (including the Independent Advisers Report) are available for download at www.rbdtakeover.co.nz.
We believe the Offer is a compelling opportunity for shareholders to realise significant value for their investment in Restaurant Brands, with the offer price of NZ$9.45 cash per share representing a 24.3% premium to Restaurant Brands’ last close price prior to announcement of our proposal and a 26.1% premium to the 12 month VWAP at that time.
Each of Restaurant Brands’ independent directors and Stephen Copulos (who is a non-executive director) recommend that you accept our Offer in the absence of an unmatched superior proposal and subject to the Independent Adviser’s Report continuing to conclude that our Offer consideration of NZ$9.45 cash per share is within or above the Independent Adviser’s valuation range of NZ$8.15 to NZ$8.92 per share. Further details of the recommendation are set out in the target company statement.
We have entered into a separate agreement with Mr Copulos, Restaurant Brands’ largest shareholder with a current shareholding of approximately 8.5%. As part of this agreement, Mr Copulos has agreed to accept our Offer for all of the Restaurant Brands shares he holds or controls, subject to directors of Restaurant Brands not withdrawing or qualifying their recommendation of our Offer. Furthermore, all other directors intend to accept our Offer in respect of all of the Restaurant Brands shares that they hold or control, in the absence of an unmatched superior proposal.
Anyone else thinking of not participating in this and just keeping shares?
Sounds like the Mexican company are a medium/long term investor who will look to grow the business, probably at the expense of paying dividends. But they're almost certainly not going to be interested in ever selling part/all of their stake for less than $9.45.
So if you don't need the cash and can tolerate the logistics of being a minority holder with the majority shareholder making positive long term noises about maintaining listings (and with a track record of growing its Polish LISTED equivalent), why not keep the shares?
I have already reduced my holding in the past year. I am in two minds in relation to my remaining holding. Just some thoughts, so as always DYOR....
We are in a period of consolidating asset prices after a long bull run. RBD has already outperformed the wider market in the last few years. The offer price is also at a premium to the previous price. On the other hand the purchaser over the next few years may we’ll see further opportunities for the company and new products to introduce through the RBD network in NZ to justify its purchase price.
More generally: Yet another NZ listed company is being bought by overseas interests. We already have a very small share market for the size of the economy. Is it a healthy state of affairs for NZ to have such expensive residential land and a hollowed out share market? Will there come a time when most of the investable companies have been bought up by overseas interests and profit and capital outflows will not be offset by inflows due to immigration and inward investment?
It's reasonably likely that you will have shares left over anyway even if you offer all of your RBD holdings. The price will drop after the offer goes unconditional - the document says probably to the level of just before the offer came out $7.68? - and then a lot of uncertainty...
- Finaccess might then be able to force remaining shares to be sold to them (full acquisition) but at what price?
- or possibly delist after 12 months.
- and/or possibly run the company very poorly and lose significant value
- or run the company incredibly well and make surviving shareholders rich!
I need to think about it a bit more, but I'll probably take up the offer to sell at least 50% of my holdings. The remaining 50% would then be a punt in the dark - hoping for greater things, but wiling to accept a loss.
My worst case scenario here is offering up 100% of my immaterial holding only for it to be decreased down to 25%.
I see a few favourable factors to continue holding:
- The residual shares in Finaccess's European investment have remained listed and Finaccess decreased its shareholding at least once
- Mounting a full takeover in future is not a simple process and if this was the ultimate end goal, why not just offer it now?
- RBD may perform well as a recessionary investment
- A multinational financial company is unlikely to sell for less than what they paid - so with a long term horizon I'd see $9.45 as a floor
- The European investment (per the offer doc) has performed very well since it was acquired
Cons:
- Dividend uncertainty
- Future capital raisings may require additional investment
- Illiquid market if wanting to sell
- Possible downward pressure on share price after transaction
I think the best outcome for everyone is to accept the $9.45 on offer. Even if you do not want to sell your shares. Post the offer the shares are likely to be trading lower and you can buy back to the amount you wanted to retain. So even if I end up with 25% of my holding, that is not a problem, I can always buy more or sell the remainder knowing I received $9.45 for the 75% taken over.
Some may wonder why I am choosing to express a somewhat critical look at the Mexican RBD takeover. What those that haven't read the offer document in full may not realise is that the 'independent' directors have been gagged. Look at section 10.3(l).ii. There you will find that RBD will be subject to a $7m fine if
"any director of Restaurant Brands fails to recommend the offer, or makes other adverse comments in relation to the offer."
The only exception to this is if the independent report recommendation decides the offer is not fair. I have two real concerns about this.
1/ The independent directors seem to have given the tick of approval of the deal, before the independent report on the transaction has been received. To me that is negligent behavior. They should not have signed up to do this at the behest of the bidder.
2/ It is not the job of independent directors to simply 'box tick' the independent report. As the independent report says in Appendix E
"The most important part of valuation is to evaluate the attributes of the specific company being valued and distinguish it from its peers so as to form a judgement as to where on the spectrum it belongs."
Judgement involves a reasoned valuation of the pros and cons as highlighted in the report , and that the independent directors have not done. The independent directors have disgracefully delegated away their responsibility and authority in my view. I am not saying the deal isn't a good one. But I think the process used to arrive at that good/bad conclusion has been corrupted. Clearly those independent directors do not understand what the word 'independent' means. The directors did not independently evaluate the offer as the quoted text implies. They were told: "You will recommend the offer or the deal is off!"
SNOOPY
The independent directors may have been silenced. But this hound is still free to howl. There are some key points in the takeover 'Recommended Offer' document that require more digging.
The offer price to acquire RBD shares has been highlighting at the $9.45 figure. But this offer to acquire shares is only for three out of every four shares on issue. One quarter of the shares on issue are not subject to the offer. The day before the shares offer was tabled, the share price was $7.60. So if that is an assessment of 'fair value' in the absence of the offer, then the real offer price is:
($7.60+3x $9.45)/4 = $8.99
The other thing shareholders need to remember is that the interim dividend that we shareholders should normally have received by now has been suspended. Last year that was 10cps. This year, given the higher declared profits, it may have been more. But we will stick with that 10c for the purpose of this exercise. If we shareholders today have to surrender this 10c payment, that means the real 'like with like' comparison value of the offer is:
$8.99 -$0.10 = $8.89
Grant Samuel, after evaluating the implied earnings multiples for the company, considers fair value to be between $8.15 and $8.92
So contrary to the conclusion of the report, the offer price is within the Grant Samuel fair value range after all.
This fair value range includes a 'premium for control We learn from section 6.1.1 of the 'Grant Samuel' report that:
"Shares in a listed company normally trade at a discount of 15%-25% to the underlying value of the company as a whole, but the extent of the discount (if any) depends on the specific circumstances of each company."
We also learn from section 7.5 that:
"It is not uncommon for takeover transactions to include a sharing of the "synergy" benefits from an acquisition between the buyer and the seller. As Global Valar is a financial buyer, there are no obvious operating synergies that should eventuate if the offer is implemented."
I take this to mean that the normal trading price in the absence of the offer may be only 15% below the offer price (i.e. the premium offered by Global Valar would likely be towards the low end of the premium scale).
If we divide my calculated value of the offer price by 1.15 (the multiple needed to translate a market price to a 15% premium), then we get a normal market price of:
$8.89/1.15 = $7.73
That is close to the $7.60 price point where RBD was trading the day before the offer. So it looks like the implied 15% premium that I suggested is fairly accurate.
The question that existing shareholders need to consider then is, is that 15% premium a sufficient price to pay?
SNOOPY
Another part of the agreement that shareholders need to think about is, if a full takeover is made within twelve months, then Global Valar has agreed that it shall not be less than the current $9.45 offer price. But this isn't the full story. That $9.45 offer price is to be scaled in accordance with the movement of the NZX50 at the time any wrap up offer is made. So if the NZX50 declines by 10% over that time, then 'Global Valar' are only required to offer:
$9.45 x 0.9 = $8.51 for the shares that are left. (See 'Recommended Offer' booklet Section 10.3(O)
Before any of this comes to pass there are a couple of 'outs' on the existing deal. If we look at the 'Recommended Offer' booklet, Section 9.2 on the terms and conditions, and the section titled 'Material Adverse Change', we see that if EBITDA falls by $10m from that budgeted for, then the deal can be called off. The budgeted normalized forecast EBITDA for FY2019, as found on p17 of the Target Company Statement is $98.9m. A $10m reduction on that is $88.9m. That sounds like a lot. But the historical EBITDA for FY2018 from the same table was $94.4m. So in fact the EBITDA only has to fall by 6% year on year for the takeover deal to be in jeopardy. Note that the above EBITDA figures exclude one off transactions, not related to normal operating performance.
The second 'out' is if the net tangible asset backing falls by more than $30m from the budgeted level. $30m represents $30m/123m = 24cps. This is quite a fall and would seem an unlikely scenario.
SNOOPY
Thank you Snoopy for your extremely interesting and useful analysis on this situation! I appreciate the time you've put in to peel back the layers to see what lies beneath the shiny wrapping.
Are you referring to information listed in the scheme of arrangement takeover offer? Or something else?
I don't have the offer document with me and don't know exactly what you are referring to. IIRC the Mexicans want 75% of all shares RBD. But if they don't get offered enough shares to reach that total, then they may at their discretion accept a lesser amount and still go through with the offer as long as they gain some kind of majority shareholding. If this were to happen it is likely that those shareholders who offered their shares to the Mexicans would get $9.45 for all of their shares and they would be left with none. If the Mexicans don't get offered 50.01% of the shares then the offer is dead and no-one gets $9.45 for any shares. That is the way I read it.
The terms of the offer are always at the discretion of whoever makes the offer. The only exception to this is that having made a formal offer, the Mexicans cannot reduce the consideration of that offer after shareholders accept the original terms of the offer. IOW they can't now say we will only offer you $9.00 per share for up to 75% of the company, not the $9.45 offered in the booklet. And they also can't say we will continue to offer shareholders $9.45 but only for 50.01% of their shares, not a minimum of 75%.
SNOOPY
Yes, this is the bit I am not so sure about, reading the document. If they get less than 75% I'm not convinced that "shareholders who offered their shares to the Mexicans would get $9.45 for all of their shares" - the oferror can perhaps only purchase a total of 50.01 at their discretion. Because it states in the document that if 75% is achieved then those who offered 75% of their own shares will definitely have them all sold. But it is not so clear if the 75% is not met.
Correct
Right - but in the case that they get 74.9% I fear that they can scale that back to 50.01.%. I am unclear about this part. PS: document is online at www.rbdtakeover.co.nz/
Thanks
Wease
Deep.breath.inhale.hold.exhale.
There is no advantage in accepting the offer by Global Valar now as the offer closes on March 12 2019 - still well over a month away. Those accepting the offer early - depending on the number of shares that they accepted the offer (including all the ones they currently own) effectively lock themselves into the offer for the accepted shares and there is very little to be gained from doing so under the offer as under the takeover offer scaling will be applied across all of the parcels that were offered if oversubscribed at the $9.45 mark. No one including Global Valar is going to really know what level that they will obtain until we get closer to March 12th - they are required to file SSH notices each time they receive acceptance of each additional 1% of the shares on issue via the offer AND they will be probably visiting as many of the large institutional holders to lobby as they can in the next 6 weeks.
In the week immediately preceding the March 12th you will probably see a flurry of postal acceptances changing the acceptance rate and the SSH notices being posted daily - again if you are filing your acceptance online then a holder will have the luxury of being able to see the level of acceptances right up until the day prior to close and then using their holder number and acceptance number to file their acceptance right up to close (depending on the vagaries of the internet and presumably LINK who seem to be processing the offer) - at that time you will probably get a fairly good read whether they will cross the 50% or 75% thresholds at $9.45. if they don't get want they want, they could always extend the offer and sweeten the pot (i.e. offer more than $9.45) but the new terms would then apply to all of the acceptances so even if you had accepted at $9.45 then if the offer rises to say $9.55 then everyone get the new price.
Do you own research and by all means worry about things you have no control over but focus action on the things you can control and if you have the luxury to wait for additional information that is costless (there's no advantage in accepting earlier than March 12th) then wait before making a decision. Me - I'm not worrying about what I will do until March 12th when I will have a better read on what the level of acceptance might be although I doubt Global Valar will be updating during the day unless they are getting close to 50% or 75% to push the deal through on fence sitters like me.
Remember the $9.45 offer is for control which is why it is at a premium over the current SP of $8.60 - if you are really worried about being a minority holder then you can always sell your shares on the open market. It won't be $9.45 but $8.60 at the moment for the lot is a premium on the SP of about $7.50 in December and in my case shiploads more than my weighted average buy price.
Weasel, let me preface my post by saying that I am not a corporate lawyer and not familiar with all the legal ins and outs of a "scheme of arrangement", such as being offered here. However, I do wish to remind everyone that the offer price is not $9.45, because that offer is only for a guaranteed 75% of the shares you own.
The day before the Mexican offer was tabled, the share price was $7.60. So if that is an assessment of 'fair value' in the absence of the offer, then the real offer price is:
($7.60+3x $9.45)/4 = $8.99
If, as you suggest, there is a 'get out' clause that enables the Mexicans to pull back and only get 50% of the shares then the real offer price is:
(2x$7.60+2x $9.45)/4 = $8.53
Thus those who accepted the original offer at an equivalent of $8.99 would suddenly lose 46c per share of the payout they were expecting. Furthermore to pull off this act of trickery, it would only require a single shareholder to not accept on behalf of the shares they own for the offerer to get 74.99% of the shares on issue not 75%, and use this shortfall to reprice the deal. Since it is almost certain that one shareholder at least will not accept the deal, that is tantamount to the original offer being a dishonest representation.
The Mexicans want 75% to gain control of decisions like potentially jettisoning a substantial part of the business in the future, a deal that could otherwise be blocked by minority shareholders. So there is a real reason to believe they really want 75% of shares, not 50.01%. Perhaps it will be clearer to you if you reread the offer and see that the Mexicans are after 75% of RBD shares in total, not 75% of your RBD shares.
SNOOPY
During 2016 'Restaurant Brands' has reinvented itself. What was a 'domestic franchisee' has become a 'multi-brand international restaurant business'. The vision is now:
"To be a leading operator of enduring and innovative Quick Service Restaurant (QSR) Brands in the jurisdictions in which the company operates."
Since this 'change of focus', there has been a push into the Australian and in particular the New South Wales' market. Restaurant Brands now owns more KFC outlets in Sydney/ New South Wales than any other KFC operator (61 stores). Similarly the push into Hawaii, with the acquisition of 'Pacific Island Restaurants', sees them controlling the largest QSR restaurant chain in that state (with 45 Pizza Hut Stores combined with 37 Taco Bell outlets). As part of this transition, the Starbucks franchise of coffee stores within New Zealand has been sold. The KFC chain (No. 1 in the fast food chicken market) and Pizza Hut (no.2 in the Pizza market) remain as part of the stable. Restaurant Brands is now the 'master franchisee' for Pizza Hut in New Zealand, with the provincial and lower volume stores being sold off to local operators. The roll out of the Carls Junior Burger chain seems to have stalled with total chain numbers down to 18. They are not a top three market player, being behind McDonalds (167 outlets), Burger King (83 outlets) and the locally owned Burger Fuel chain (52 outlets), and Wendy's Burgers (21 outlets).
Restaurants Brands must carefully follow the prescription of their master franchise owners for each restaurant concept. However there is some freedom and Restaurant Brands feel they can add particular value in both:
1/ Marketing AND
2/ Facility and supply chain management
Conclusion: Pass Test for New Zealand, Hawaii and New South Wales (with the exception of Carls Junior in the burger market in NZ).
I have used the net profit after tax, excluding non-trading items for the purpose of this comparison. Non trading items include those associated with store closures and sales transformation costs and insurance payments. These are omitted because they obscure how the business is performing on the ground.
Net Profit/No.of Shares
2014: $18.863m /97.871m = 19.3cps
2015: $22.523m /97.871m = 23.0cps
2016: $24.207m /102.871m = 23.5cps
2017: $30.567m /122.843m = 24.9cps
2018: $40.361m /123.629m = 32.7cps
Conclusion: Pass Test
Net Profit excl. non trading / Shareholder Equity EOFY
2014: $18.863m / $64.656m = 29.2%
2015: $22.523m / $71.210m = 31.6%
2016: $24.207m / $75.617m = 32.3%
2017: $30.567m / $192.059m = 15.9%
2018: $40.361m / $201.608m = 20.0%
Conclusion: Pass Test
PS For comparative trend purposes the annualized latest half year ROE is as follows:
HY2019: ($21.853m x2) / $217.075m = 20.1%
This is the net profit, excluding non-trading items, divided by the total sales for the year. Note that in a change from the 2015 perspective I am now including 'other revenue' as part of the representative ongoing revenue of the company. This is because the largest part of other revenue is money received from YUM to act as master franchise holder for Pizza Hut in New Zealand. And this is a revenue stream that will be ongoing
2014: $18.863m / $330.399m = 5.7%
2015: $22.523m / $372.803m = 6.0%
2016: $24.207m / $404.095m = 6.0%
2017: $30.567m / $517.549m = 5.9%
2018: $40.361m / $766.289m = 5.3%
Conclusion: Fail Test
SNOOPY
A significant progression has occurred since Restaurant Brands have shifted outlook from becoming a 'domestic franchiser' to an 'international restaurant developer'. The point of failure in the 'Buffett Tests' is now the seemingly ever decreasing net profit margin. To give this some context, I have stacked up the profit margin trend against the company that develops the KFC concept in China, YunChina (YUMC). YUMC is twenty times the size of RBD and operates in a different market. Nevertheless, the underlying mode of operation, developing new outlets for the master franchise holder in the US - YUM brands - is the same. Furthermore I have calculated the Net Profit Margin for the most recent half year reporting period for RBD:
$21.853m / $445.848m = 4.9%
and added that to the trend comparison. Note that I am comparing the RBD year that ends in March with the YUMC year that ends in December. The best overlap is to consider the RBD FY2018 year ending 31st March 2018 with the YUMC year ending 31st December 2017, So this is what I have done for all years
FY2014 FY2015 FY2016 FY2017 FY2018 HY2019 Restaurant Brands Net Profit Margin 5.7% 6.0% 6.0% 5.9% 5.3% 4.9% YumChina Net Profit Margin 4.1% 3.7% 5.4% 7.0% 8.3%
What can explain the two apparently diverging trends? The low profitability of YUMC in FY2013 and FY2014 can be explained by a supplier food handling scandal. In FY2014 that saw a same store sales decline of up to 40% at some KFC outlets. FY2015 was a period spent rebuilding from this. So it is the FY2016, FY2017 and FY2018 net profit margins are reflective of what shareholders might expect without these adverse conditions at YumChina.
By contrast at RBD, FY2017 and FY2018 are the periods where the great overseas expansion strategy was coming into play. In AR2018 p26 and p27, CEO Russel Creedy gives a candid interview. He says that to gain the 'growth' required for the company's strategic vision, to become a billion dollar company in revenue and market capitalization, it was necessary to buy that growth by investing overseas. Yet later in that same interview he admits that:
"Our growth strategy also includes new store builds which incidentally generate the highest return in investment."
Putting the two comments together, it is clear that growth overseas where you are generally buying stores rather that building them is less profitable. Sure Taco Bell in Hawaii has a high EBITDA as a percentage of sales at concept level. But this does not include the extra interest costs incurred in funding the purchase, nor the extra more bloated corporate structure behind the scenes needed to manage it. The RBD growth strategy contrasts very greatly with YumChina who develop all their own stores from scratch.
The ROE decline at RBD mirrors a similar pattern, although there are signs it has stabilized near 20%. This is still a good figure in absolute terms, albeit well down on 30% that was regularly attainable when RBD was an NZ focussed business. Yet so great has been the drop against a background of the NZ side of the business doing well, I think questions need to be asked as to what the ROE is on the overseas side of the business, and just how far above the cost of capital are these overseas business returns?
Taken overall it looks like RBD are on a path of increasing profits, even in eps terms, but decreasing profitability.. Are there shades of Buffett's much derided management phenomenon of the 'institutional imperative' at work here? The naval analogy of the 'institutional imperative' is that our 'captains of industry' would prefer to skipper a battleship, even one with dis-functional weapons than a smaller well armed frigate.
It is possible that RBD will be able to turn their overseas investments around, with more green field KFC projects in New South Wales and a rebuild program in Hawaii that will revamp that states restaurants so that earnings double in that state. However talk that RBD will instead look to acquire more existing restaurants on the West Coast of the United States as their prime growth plan would argue against the positive overseas growth outcome. I think Warren Buffett would be waiting to see if the overseas strategy was not going to degrade the profitability of RBD too much before investing his own money in the RBD story going forwards.
SNOOPY
discl: hold RBD myself, but bought many years ago
Dividends paid in the financial years below were as follows:
FY2014:: 9.5c, 6.5c
FY2015:: 10.0c, 7.5c
FY2016:: 11.5c, 8.5c
FY2017:: 12.5c, 9.5c
FY2018:: 13.5c, 10.5c
HY2019: 18.0c
The average annual dividend 20.6 cps fully imputed. 20.6c is equivalent to a gross yield of :
20.6c / (1-0.28) = 30.0c.
Current term deposit rates are around 3.5%. I would want a return two percentage points better than this to allow for the greater income volatility risk of share such as this. So my January 2019 valuation for RBD is:
30.0 / 0.055 = $5.45
This valuation is strictly from an 'income' perspective. With the share trading at $7.60 just prior to the 'Global Valar SI' takeover offer, this shows that there was a considerable growth premium built into the share price before the Mexicans came along. At an offer price of $8.90, there is now a huge growth premium built in. A premium I would suggest that can only be satisfied with a sustained push into Pacific rim markets.
SNOOPY
Having posed the above question, I think rather than speculating on what the answer might be, I should 'do the maths' and find out.
From the Buffettology Workbook, p149
"We take the per share amount of earnings retained by a business for a certain period of time then compare it to any increase in per share earnings that occurred during the same period"
In this instance the 'per share earnings retained' has been supplemented by a whole lot of new capital raised with the October 2016 cash issue. So in my judgement it is best to use the change in shareholders equity from the reporting date before the cash issue (EOFY2016) to the end of FY2018. FY2018 was the first full year of operation that included the Hawaiian and most (42) of the Australian KFC acquisition (18 more KFC stores were acquired over FY2018).
EOFY2016 Change EOFY2018 Normalised Earnings {A} $24.207m $40.361m No. of Shares {B} 102.871m 123.629m eps {A}/{B} 23.53c +9.12c {D} 32.65c Owner Equity {C} $75.617m $210,608m Owner Equity per share {C}/{B} 74c +96c {E} $1.70 Return on Incremental Equity / Share {D}/{E} +9.5%
The above should not be too much of a surprise. If the overseas operations are now roughly the size of the NZ business, the ROE before overseas acquisitions was 30% and the ROE after overseas acquisitions was 20%, then it would take a figure that low to bring the average ROE down to 20%. I would also argue that not all of that new capital has been in use all of the time (the capital raised one quarter of the way through the study period and gradually deployed over it).
I don't know what the generally accepted value of the cost of capital of RBD is these days. But I would guess that 9.5% 'plus a bit' is still above it. I suppose what this means is that real underlying growth for RBD will be much slower going forwards compared to the recent past.
SNOOPY
Couple of questions - Am I allowed to sell my shares on market if I have already agreed to the offer? This would affect the statistics that RBD periodically release saying what percentage of shares have been offered for the takeover. Second, if I purchase more shares on market can I offer them to the takeover immediately? thanks...
1. No
2. Yes - see p16: http://www.restaurantbrands.co.nz/gl...offer-document
...you'd probably want to read the whole document.
Probably off the menu for RBD (as they own the Carl's Jr franchise via CKE)
https://www.nzherald.co.nz/business/...ectid=12209170
Blackstone paid way over the odds in 2011 at over $108m (plus I think they took on a lot of debt), there was a large overhang of store upgrades that had to be done for franchise renewals and now 8 years later they are looking at selling for an estimated $20m...
Admittedly RBD didn't do particularly at the outset and saw the share price go from IPO at about $2 all the way down to $0.55 but now that's $8.75 (albeit supported by a partial offer at $9.45) - Blackstone have potentially hosed $80m here - OUCH!
Rep, the article you referenced said that the 'Burger King' Franchise in New Zealand made $20m profit last year, not that Blackstone expected to sell the chain for $20m, I doubt if Blackstone would be selling this chain on a PE of just 1. Unless there was some horrendous cost in the current franchise agreement that says all restaurants have to be rebuilt or something. Happy to be proved wrong if you have other information.
There is a precedent for RBD acquiring a rival chain and turning it into its own. Way back in 2000 RBD acquired the 54 store Eagle Boys chain and converted them all into Pizza Huts. Could 'Burger King' be acquired with all stores to be converted into 'Carls Junior' outlets? I guess it depends on the master franchise arrangement Blackstone has with the American master franchise parent.
SNOOPY
Anybody care to make a prediction if the take over is going to be successful.
I was initially very confident. But getting very close to deadline and only 32% shares offered so far. Not so sure now.
I wonder if the gagging of the independent directors is working against the takeover? If they were free to speak, there might be more debate in the media about the pros and cons of the offer. The directors are probably so terrified that if they open their mouths at all, then something they said could be misinterpreted as speaking against the deal. So all directors have remained silent. But the problem now is the deal is out of the news completely. If the deal had been free to be discussed openly, then it may have got more media and hence shareholder traction. A couple of weeks back, I got a card in the mail 'reminding me to send in my acceptance'. There was no attempt to resell the deal on that card, a fact that surprised me.
I have been one of the hold outs, but posted my acceptance form for all my shares away today. I too thought acceptances would flow in thicker and faster. But now you can do it on the net, there could be an ambush of acceptances at the last minute.
The fact that I chose to post in my acceptance is partly because I remain luke warm on the deal. I am half hoping the post service slow motion will kick in and my acceptance form won't make it in time!
As you can see in my post 2439, the real value of the offer is $8.89, not $9.45. So one way of judging the likely success of the offer is to look at the market price and see if it goes over $8.89. The share price spiked pretty close to that on 11th February (got to $8.84). But it has since fallen back. This to me is an indicator that the takeover will get there. But I am not sure that 'there' will end up at 75% of all shares. Global Valar might get to 65% and say that is enough, something they are entitled to do under the scheme of arrangement that they produced.
It would be fascinating to get an operational trading update for RBD, for the financial year just closed. But no doubt directors won't give we shareholders that. Perversely, if RBD is on or ahead of budget, that could be seen as talking down the value of the offer! $8.89 I think is a fair price rather than a great price. But it was the prospect of getting more of my shares paid out at $9.45 than the 75% of shares I expected to get, that finally got me to send in my acceptance form. Nevertheless, I hope to keep some 'skin in the game' after the Mexican takeover is over.
SNOOPY
I thought hard about doing the same as Snoopy but decided not to tender my 25k shares in to the offer and the same with another couple of other smaller but useful parcels I control.
After reading more from the Mexican's it may not be bad being a minor shareholder that is not gobbled up as part as the offer. I like this company a lot and feel that we shouldn't be giving away the opportunities too cheaply. If the deal doesn't succeed I'll be happy and if I'm left as a minority it will not be the end of the world as the company is to remain listed and I'm keen to have part of this company well in to the future.
Glennj I salute you! And if you ever see me waddling down the street I hereby give you permission to address me as "Sellout scum."
I guess I am not going to change your mind. But I do invite you to look at my post number 7 in the YumChina thread on the 'Overseas' forum. There I have compared the offer price for RBD by Global Valar, verses the private equity offer for YumChina made a year ago in EBIT and EBITDA multiple terms.
Good as RBD has been, it doesn't stack up that well compared to YumChina in terms of earnings metrics. Yet the offer price made by Global Valar is almost as good for the shares that get accepted:
1/ EBIT for RBD are 18.5 to 20, while (c.f. 20.5 for YUMC)
2/ EBITDA multiples for RBD are 12.2 to 13.2. (c.f. 13.5 for YUMC)"
The contrasting approach taken by the respective CEOs is interesting. Joey Wat of YumChina effectively told private equity to 'get lost' and refused to put their takeover offer to shareholders. One year on and YUMC has already rebounded to the private equity takeover price on operational performance since. Russel Creedy of Restaurant Brands OTOH rolled over and asked Global Valar to tickle his belly. When Creedy eventually retires, I expect he will nominate a spineless jellyfish as his replacement!
Anyway, I don't want to be too critical of Russel as generally I think he is an outstanding chief executive, even if I don't agree with every decision he makes. I do expect the RBD share price to drop after the offer is complete, although not by as much as some think. But I wouldn't be surprised if in twelve months time the price of those remaining shares is north of $9.45.
SNOOPY
Russel did say share price will be over 10 bucks ...didn’t say when
As announced to the stock exchange on Monday:
--------
The Partial Takeover was conditional on Finaccess Capital receiving acceptances for at least 75% of Restaurant Brands’ shares. Finaccess Capital has announced that it has waived the 75% acceptance condition and that, to date, it has received acceptances for 61.73% of Restaurant Brands’ shares.
As a result, the Partial Takeover is now unconditional as to acceptances,* and under the Takeovers Code the closing date for the Partial Takeover has been automatically extended to 26 March 2019.
--------
Looks like we have to wait for the end of the month to get our payout.
SNOOPY
Snoopy - thoughts?
One proposition is that given that Finaccess will achieve control, those shareholders who held out and wish to continue to hold could adopt the position that should accept the offer at $9.45 to realise the control premium on their holdings and then reacquire the original number of shares they had afterwards at the listed price less the control premium from the remaining float.
Some shareholders may find if there is scaling on the extended offer that they end up with small holdings that don’t want (or potentially below the min holding) so may wish to exit these holdings so there may be a bargain or not
The fact that some people may be left with small holdings that they wish to dispose of has always been the result of this partial takeover bid, once it has become clear that scaling is going to happen.
The market share price closed yesterday at $8.80. That is very close to the $8.89 in my post 2439, which I consider the real value of the bid. There is such a thing as 'minimum brokerage'. So I think there is now a case for those holders in danger of being stuck with a below minimum size holding to sell now on the market, effectively realising their premium from the 'Global Valar' on the market today.
On the eve of the offer closing, I would expect the share price to approach $8.89. Immediately after the offer closes, I would expect the price for the remaining shares to drop back to $7.60 (being the market price the day before Global Valar offer) all things being equal. But of course, all things are not equal, because we are about to learn the result for the FY2019 financial year in April. The sales figures already released look good. I wouldn't be surprised if the intrinsic value of the remaining shares is now greater than $7.60.
In the short term, the share price will be driven by supply and demand. After the offer the free float of RBD will reduce from approximately $1b to $250m. It is likely this will see RBD fall out of the NZX50 (although I could be wrong, it is on the cusp). That could trigger the index funds to sell their residual holdings. My hunch is that immediately after the takeover closes may not be the best time to top up one's holding because of this reason.
I am unclear what the position of the index funds is now. My broker suggested that they will offer up only 75% of their shares into this unconditional offer and retain the remaining 25% until the index issues become clear. I would be interested if anyone can clarify the index funds' positions in a partial takeover like this.
SNOOPY
I will seek to sell all my holding. It has already been a very good long-term investment for me. However it is a shame that yet another kiwi company slips out of Kiwi shareholders control.
On the application I allowed up to all my shares to be bought. Even if I want more later I can reconsider that in the future ...
"As at 12 March 2019, the total number of acceptances of the Offer is now 91,080,599 Shares comprising 73.01% (rounded to two decimal places) of the Shares."
So by the expiry of the original takeover date, Global Valar were short of their original 75% target. That is quite staunch resistance and I take my hat off to the 'remain in NZ hands' brigade who have not accepted the offer up until now. However, Bjauck has indicated that he will be joining me in 'sellout scum' street. And no doubt there will be others.
The interesting point in all of this is that up until the partial takeover bid, there weren't many unhappy RBD shareholders. There was no underlying appetite to sell out and no recent management stumbles (maybe Carls?). So I am picking that quite a few of you that 'sell down' will be looking to buy back into the remaining free float of shares which are left. That means I am expecting the share price to rise from the theoretical $7.60 post offer until that residual index fund selling kicks in. But if the initial rise is high enough, there may not be any need for index fund selling?
SNOOPY
You won't be the only one blackcap.
Last years earnings were 32.7cps. So the $8.50 you are prepared to pay puts this on an historical PE of 26. There is quite a bit of future growth that you are banking to justify paying a share price like that!
Of course, that is not to say such growth is unattainable. But our Russel has already admitted that expansion by acquisition is not as profitable as expansion by organic growth. He has sort of hinted that down the line there will be a capital raising. Discounted shares will be available at that point I think. But when will that be? And how much will RBD raise? All unknown. The trigger might be RBD purchasing some KFC outlets on the western side of the United States.
Taco Bell has been put on hold in NZ for years. But all I see is a cashflow drain for many years if TB comes to NZ. Reading between the lines, it looks like parent YUM is pushing for this rather than RBD itself. I have said before that when the Taco Bell tolls, that might be an exit signal for RBD shareholders!
Nevertheless I think that YUM has great faith in our Russel, to the extent they regard him as a cult figure who must be kept at almost any cost. Hence the $1m after tax payment to retain him to align his interests with shareholders (sic) so far. Added to that is the early vesting of his share options that were due to be cashed in only when the RBD share price got to $10 (now apparently $9.45 or is that $8.90 is suddenly enough).
When I buy something I like to stack it up against a measuring stick. If I look to the far east and China, I see Yum China (NYSE:YUMC) trading at $41.14 on my projected normalised NPAT for the year just gone of $1.61. That equates to a PE of 25.5. YUMC is twenty times the size of RBD. But to my mind, the growth path ahead has less risk. All YUMC has to do to triple in size is 'just keep doing exactly as they are doing'. No capital injections in the future required. I see far more execution risk for the future at RBD. So for me, topping up on RBD at $8.50 would be too high a price to pay.
SNOOPY
PS Not recommending buying YUMC at these price levels either!
Blame NZ Post?
For sure, if people think:
1/ They are going to sell significantly more of their own shares into the offer than they first thought, then they would be rational to pay more on market pre-offer than
2/ If they buy on market assuming only 75% of the shares they tender will be accepted.
But the more shares that are tendered, the more any implied market premium for being able to sell more shares to 'Global Valar' will reduce.
Reworking my 'before' and 'after' value equation, we can see how the 'remainder price' (RP) and 'market price' (MP) relate to each other. I use the $9.08 share price ('Market Price' MP), which is where RBD is trading as I write this:
($RP+3x $9.45)/4 = $MP
($RP+3x $9.45)/4 = ($9.08) => RP= $7.97
You can add 10c onto the remainder price. That is the 'foregone dividend' that those shareholders who have their shares accepted into the offer will never get back. Effectively the market is now telling us that the price for the remaining shares after the takeover is done and dusted, should be $8.07. Whether that is fair or not depends on how the results for the financial year just finished scrub up when they are presented in April (no doubt after the takeover is over).
SNOOPY
Wow, share price closing at $9.20 today. This is getting a bit crazy. Starting to think I should not have accepted the offer at all and just sold everything on market!
The more shares that are tendered, the more any implied market premium for being able to sell more shares to 'Global Valar' should reduce. As of today 87.1% of shares have been accepted, so this theory is looking a little fragile.
Reworking my 'before' and 'after' value equation, we can see how the 'remainder price' (RP) and 'market price' (MP) relate to each other. I use the $9.20 share price ('Market Price' MP), which is where RBD is trading as I write this:
($RP+3x $9.45)/4 = $MP
($RP+3x $9.45)/4 = ($9.20) => RP= $8.45
You can add 10c onto the remainder price. That is the 'foregone dividend' that those shareholders who have their shares accepted into the offer will never get back. Effectively the market is now telling us that the price for the remaining shares after the takeover is done and dusted, should be $8.55. Whether that is fair or not depends on how the results for the financial year just finished scrub up when they are presented in April (no doubt after the takeover is over). It seems some of those on market buyers must be expecting a very favourable result
SNOOPY
FWIW today my full service broker revealed that there is strong interest from those that tendered their stock into the Global Valar offer to buy back in to RBD.
I wonder what price those happy to buy back in will be happy to pay though? Blackcap has stated up to $8.50. A full service broker will add another 12c or so to that for brokerage. But the indicative price may have already gone above that level. I guess those that also hold ATM shares in their portfolio will buy back in at any price?
SNOOPY
I suspect that valuing RBD on an historical capitalised dividend valuation basis will not be realistic going forwards. Global Valar has got plans for growth. KFC / Pizza Hut concept owner YUM Brands is committed carrying out a sell down of almost all company owned restaurants, to their global franchisees, including the likes of Restaurant Brands, by the end of the calendar year just finished. (the remaining 2% of company owned restaurants on the books in December 2016 not yet sold would be sold down in due course).
Nevertheless, we can regard a capitalised dividend valuation as a 'base case' for a valuation. A middle of cycle business case valuation of $5.45, using my rule of thumb, gives a peak of cycle valuation 20% higher. That means $6.45. This is my target value for topping up my residual RBD holding in the future. That may sound far fetched.in today's heady price environment. But remember the cash issue price for the 26th October 2016 was just $5.15. And that was only two and one half years ago.
SNOOPY
Today is the last day to accept the Global Valar offer.
When do we get our money? The takeover booklet isn't exactly clear.
Of course, the offer date was extended to 26th March 2019.Quote:
When will I be paid if I accept the Offer?
3.5 If you accept the Offer, Global Valar will not pay you for any Restaurant Brands Shares to be acquired from you under the Offer until the Offer has closed.
As noted above, the closing date is 12 March 2019, being 60 working days after the date of the Offer.
I'm assuming we get our money by end of today or tomorrow?
Strange how they say "Global Valar will not pay you for any Restaurant Brands Shares to be acquired from you under the Offer until the Offer has closed"
It'd be clearer if they said "Global Valar will pay you ..."
I think 5 working days after close, if unconditional which it is. Can't recall where I saw that though.
Global Valar has announced to the market this morning, the day after the offer closed, that 91.32% of shares have been tendered. The Global Valar offer is for 75% of all shares. So those who have tendered their shares will not have all of them accepted.
75 / 91.32 = 0.8213
This means that for each parcel of 1000 shares submitted, 821 will be accepted. That's how I see the maths working out anyway, Having said that I am not sure what might happen if you owned 1000 shares and submitted only 821 into the offer. Would all 821 be accepted in that instance?
SNOOPY
This isn't about fairness Bjauck, What we are talking about here is the strict application of the law!
Section 4 in the offer document talks about the 'Scaling of Acceptances'.
---------
(a) the Offeror must take up from each Acceptor the lesser of:
(i) the number of that Acceptor's Shares that represents the Specified Percentage of shares held by that acceptor, and
(ii) the number of Shares in respect of which the acceptor has accepted the offer, and
(b) If the number of Shares that the Offeror takes up under clause 4.2(a) is less than the Specified Number, then the offeror must take up from the Surplus Acceptor, Shares which bear the same proportion to the Acceptor's Surplus Shares, as the balance of the Shares required by the Offeror to acquire the specified number bears to the total of all Surplus Shares.
--------
The 'Specified Percentage of shares held by that acceptor' is not the same as the number of shares submitted to the offer! My interpretation then is that our holder of 1000 shares who submits 821 for acceptance will get 750 of those accepted in step (a), leaving 821-750=71 in 'the surplus asking to be accepted' pool.
At the end of step (a), Global Valar should have 75% of 82.13% of shares , or 61.60% of shares tied up. This is short of the 75% target with another:
75% - 61.60% = 13.40%
of the total shares still on issue to be acquired to fulfill the takeover offer. However not all issued shares have been offered up to Global Valar:
100% - 92.13% = 7.87% of shares 'are off the table'.
The number of shares that are still 'on the table' are: 100% - 61.60% -7.87% = 30.53% of all shares.
The 13.40 'percentage points' of shares needed to make up the offer represents:
13.40 / 30.53 = 43.89% of that 'surplus asking to be accepted' pooll.
Our tenderer of 821 and owner of 1000 shares can therefore expect 43.89% of his 'surplus tendered shares' to be accepted as a 'bonus acceptance add on',
0.4389 x 71 = 31 shares.
So total shares accepted out of the 821 tendered should be:
750 + 31 = 781
This kind of ties in with what my broker told me what happens with index funds, His story was that they would submit just 75% of their index find shares into the offer (knowing thew offer was for 75% of all shares), expecting them all to be accepted. Not sure my broker is right on this issue. But it does tie in with the 'strict interpretation of the law' above.
SNOOPY
Section 4 in the offer document talks about the 'Scaling of Acceptances'.
---------
(a) the Offeror must take up from each Acceptor the lesser of:
(i) the number of that Acceptor's Shares that represents the Specified Percentage of shares held by that acceptor, and
(ii) the number of Shares in respect of which the acceptor has accepted the offer, and
(b) If the number of Shares that the Offeror takes up under clause 4.2(a) is less than the Specified Number, then the offeror must take up from the Surplus Acceptor, Shares which bear the same proportion to the Acceptor's Surplus Shares, as the balance of the Shares required by the Offeror to acquire the specified number of shares to the total of all Surplus Shares.
--------
The 'Specified Percentage of shares held by that acceptor' is not the same as the number of shares submitted to the offer! My interpretation then is that our holder of 1000 shares who submits 1000 for acceptance will get 750 of those accepted in step (a), leaving 1000-750=250 in 'the surplus asking to be accepted' pool.
At the end of step (a), Global Valar should have 75% of 82.13% of shares, or 61.60% of shares tied up. This is short of the 75% target with another:
75% - 61.60% = 13.40%
of the total shares still on issue to be acquired to fulfill the takeover offer. However not all issued shares have been offered up to Global Valar:
100% - 92,13% = 7.87% of shares 'are off the table'.
The number of shares that are still 'on the table' are: 100% - 61.60% -7.87% = 30.53% of all shares.
The 13.40 'percentage points' of shares needed to make up the offer represents:
13.40 / 30.53 = 43.89% of that 'surplus asking to be accepted' pool.
Our tenderer of 1000 shares can therefore expect 43.89% of his 'surplus tendered shares' to be accepted as a 'bonus acceptance add on',
0.4389 x 250 = 110 shares.
So total shares accepted out of the 1000 tendered should be:
750 + 110 = 860
Put another way, however many shares you put into the offer, if it was your whole holding, then you should have 14% of those 'prior total shares' left, once the offer is concluded. I think my maths and legal interpretation is right. But am happy to be corrected.
SNOOPY
Thanks for your reply and calculations Snoopy. I realise bringing up an undetermined notion of “fairness” was naive!
The other way to look at it is that you received a premium for the shares accepted and you have to net the commission paid on selling the remnants off the disposal. It sounds like a lot to dispose of a small parcel but in context it was a lot better than what you could have sold the shares in total prior to the offer.
If Snoppy is correct THEN Those who offered 100% of their holdings will on the whole proportionally get more of the shares accepted under offer and have a higher weighted average exit price after commission than those who offered less. Reinforces that if you wanted to hold after offer then you have tried to cycle as many shares thru offer to realise max level of control premium.
I haven’t decided whether I will exit small holding after scaling or buy in to top up. I’ll see what price does first.
Since the offer is closed, the price has already done its thing. $8.87 is the new buy in price!
$8.87 / $0.327 = a PE of 27.1 (historical PE)
That seems pretty rich for an operator of someone else's restaurant concepts. Then again maybe this years result is a boomer. I am going to wait for a couple of weeks and find out. But on what I know now, I am not tempted to top up at $8.87. Not yet ready to give up my long RBD association and sell out completely though.
SNOOPY
So the money is in the bank account, but I've not received an email (or snail mail) as yet confirming how many shares I've been scaled down to.
I could calculate it myself based on the Offer Doc but would hate to get the wrong number (and take action on it!)
Has anyone received an official notice?
I also checked my Computershare.
I can see the number of RBD shares subtracted from my balance, with transaction name "Takeover".
Friend just received payment $26941.95 for 3500 total shares = $7.6977c ........... he's not smiling
In hindsight that wasn't a very smart question. I could have simply taken the amount in the bank account divided by $9.45 to work out how many of my shares GV took.
If only I had blonde hair...
Dreamcatcher: suggest your friend checks their balance with Computershare