Cheers Xerof, much appreciated!
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We should have kmd management recommend early next week.
Just as well there is such things as 'Chinese walls'
Goldman been buying heaps of KMD lately / Goldman advising Kathmandu
And didn't Goldman do well at the IPO? Part owners they were with Were and Quadrant. Got more than KMD worth today they did.
Roger, those Quadrant guys pretty clever and know when to time exits eh.
The current offer results in KMD share holders taking the majority of the risk as to whether BGR is able to turn things around and continue their success in their current business. 20c cash is very low in my view. However, with BGR already paying around $1.8 (slightly lower if you count original build of 5%) they have used now the majority of their cash in their balance sheet. Although they don't have any debt they do have a whopping $106m in operating leases - will be interesting to see their willingness to issue debt to support the takeover.
I suspect the first offer is a low ball offer giving them room to move up. How much cash they are willing to offer will be of question. I think 40c is much more of an acceptable offer when taking into account the proportion of shares vs cash.
I would have though the opposite. More than 50% of the risk is being passed to BGR and KMD holders benefit from the diversification of retail brands than BGR has.
Also, shareholders in KMD can either put their faith in a brand new CEO or in Duke who, while new to KMD, has significant experience in NZ retail.
All quite on the western front.
Share price drifting down and quite a way off the 180. Probably following the BGR price down.
Market suggesting the takeover a non-event?
Or plenty of action soon.to get things going again.
Price could also be supressed due to some big players selling their stake e.g. National Bank of Australia.
I'm expecting a psotivie reaction when KMD board makes their comments.
Those Quadrant boys are very clever...never get on the other side of a trade with them, you're the very short priced favourite to lose.
I think the drift down in the SP is recognition of a number of factors.
1. Market risk - Grexit
2. BGR shareholders underwhelmed and not convinced shareholders will be able to extract synergies very quickly and in sufficient quantity to make the offer worthwhile...e.g. while over time as N.Z. leases expire its quite plausible that Rebel sport could incorporate the KMD stores within their store footprint AKA a store within a store, there's far more KMD stores in Australia so how do they extract synergies there ?
3. KMD shareholders not impressed with the new proposed group structure and very low cash component, don't want a top heavy scrip offer and also not convinced regarding synergy execution
4. Downwards market bias
5. Take the money and run...so many other cheap shares out there
6. Unlikely to be a more compelling bid or full cash bid in this difficult market
All of the above.
One can only speculate, but I think the sell off is more of a reflection that the BGR offer is to low. Therefore, investors with a short-term focus are not wanting to hold.
If you look at the cost of creating a company similar to Kathmandu and also its Earnings Power Value (EPV) with a concervative WACC of 15%, while also taking out any potential for growth, I still get a price at around $2.
The reaction is the deal won't go through because the takeover offer is too low. Given they are being offered $1.72 given BGR share price today, the $1.60 is a big sign of sentiment that the deal won't go through and that everyone thinks the share price will head south when it blows over, thats what I get from the market sentiment anyway. It seems BGR shareholders aren't happy about the takeover in general cause that share price is heading way down.
Yes, it appears that Mr(s) Market needs to seek some counciling as he/she is likely to be diagnosed with schizophrenia. Selling something for less because it is worth more than offered is not something that someone with a stable mind would do.
I think your logic has gone a bit back to front & then front to back here Mr Blizzard - the take over is too low so the share price will head down if it fails? Hmmm. If it doesnt go through - it must be perceived to be worth more.
Think there are alot more factors playing on the current SP.