Very good chance that we will see a sale of the entire plot, with a short term lease on the current building whilst the rest is demolished for residential development. This would result in a sale price much much higher than book value I believe.
Printable View
Very good chance that we will see a sale of the entire plot, with a short term lease on the current building whilst the rest is demolished for residential development. This would result in a sale price much much higher than book value I believe.
It's nice to have these one off gains, but I'm more interested to see the business doing well ie. generating good cash flows annually, otherwise the SP is not likely to move up by much.
Yes, you are very likely correct on this point. A developer possibly said "Look, we will give you $X for the lot you have listed...but we actually want the whole campus, and if you sell it to us we will give you $2.5X for it all".
The long term development potential for commercial and residential is huge - and blocks of land this size with that kind of proximity to the city never come up anymore.
Sky is going to get paid a lot of money.
Then you enter this crazy La La Land. If they were selling the campus because Comcast are going to buy them and won't want the land/buildings there would be a disclosure to the market.
Six weeks since Jarden got involved and nothing - for the last time, a takeover is incredibly unlikely now!
You also need to remember, Studio One contains a huge amount of tech. I mean MASSIVE amounts...this is why they have put lease back provisions. They will be moving somewhere else more fit for purpose to their 'capital light' model. But until they confirm where that is, they need to stay put.
And I am confident that they are moving now that they are selling the whole campus...because a developer wouldn't want them stinking up the joint long term. They will be ok with some income from Sky for a short period, but then they will want them out so they can get on with developing the land.
The stock price is down 20% since investor day. I would say a takeover is much more likely now than it was 6 weeks ago.
I would say say that the lower SP means that interest from a third party in a takeover becomes more likely.
But the takeover itself does not become more likely. And the reason is that nobody is going to offer a price anywhere near what the board will accept.
And think about it...Sky will have $150M+ sitting in the bank by the end of the year once the property has sold. The quoted value for the entire business is only $280M - A third party would probably only offer $400M for the whole business now (23c/share).
Well, Sky will have ~40% of that offer price just in cash - and zero debt. So shareholders would effectively be selling the operations for $240M (not a lot of money for a company with 1M subs and FCF that will still be in the tens of millions each year even while they invest...)
I appreciate that Ogg would see any price above his average buy in as 'wonderful' because he just wants out now and has made a bit of a fool out of himself for the past 18 months predicting various takeovers and events.
But the long term investors and business owners...why would they want to sell out for so little now when Sky is about the be flush with cash and will have a lot of options moving forward?
Worst case is buybacks and dividends. Best case is they are able to use it for meaningful growth (possibly by making an acquisition of a business with a service that complements Sky's core offer).
Six weeks since Jarden got involved. Six weeks. And we have heard nothing. Whatever 'transaction' discussions have been had - it seems clear to me that The Board have rejected any proposals given (if, indeed, any formal proposals were given at all).
Ogg might have make friends with the Lady CEO (again) to see if she has future plans for a little Divvie on the
extended stay, if no Take Out or Buy the Sky occurs .. ;)
So there is one other possibility I can see for the cash generated from the sale of the Mt Wellington campus.
A Capital Return to shareholders whereby Sky are able to make a one-off payment to shareholders and it is tax free (unlike a dividend).
NZO did this back in 2017 when they sold Kupe to Genesis Energy. Because the funds come from the sale of an asset (and not cashflow from operations) there are allowances with IRD to distribute those funds to the owners without the Tax Man clipping the ticket.
Let's use round numbers and say that Sky have $100M after the campus sale that could be used for a Capital Return. There are currently 1,746,879,558 shares outstanding.
If they cancelled 1 share for every 2 shares held by shareholders they would cancel 873,439,779 shares. Shareholders would receive a one-off tax free payment of 11.45c/share ($100M/873.44M shares).
Existing shareholders still own the exact same % of the business as they did before - they just own half the number of shares they did before the CR and Sky have half the number of shares outstanding.
So I now think there are four options for the Board to consider. And my order of preference is as follows:
- Use the money to invest wisely and grow the business in a meaningful way. Secure the long term future of Sky by investing aggressively and diversifying revenue streams - most likely by acquiring another business that has a service which complements our Core Competency.
- Share Buyback - rewards long term shareholders by increasing their % ownership of the business.
- Capital Return - a one-off generous tax free payment to shareholders who can then invest that money as they see fit.
- Dividend. Christ I hate dividends - but only accept them reluctantly when all other options have been exhausted and there is no other rational way for the business to use/deploy the money.
You know one of the biggest impediments to a new supermarket player entering New Zealand is the lack of big parcels of available land in established suburbs. Also, big box retailers (and people who lease buildings to big box retailers) would love this location.
Is this going to be your bs excuse for why you don’t sell in two weeks Ogg?
Property sale has “changed the equation” I suppose?
What a joke.