Forum Archive Index - May 2004

["Fiona Phibbs" <fibz@xtra.co.nz>]

Hi sharecatters

 

I'm not so sure about this offer there appear to be several points that are worth considering some which are brought up in the offer appraisal report;

 

-- swapping your shares for junk bonds (and lets face it that's what they are) increases risk and decreases any upside potential         you would otherwise be able to participate in if the shares increase in value.

-- If the takeover is successful Norgate must milk the company to pay the interest on the junk bonds which could be potentially to the detriment of the long term health of WRI.  For example (sorry Snoopy) the company could reduce the dividend payout to take up an attractive acquisition or expansion, if Norgate takes over this may not be possible without an equity injection.

-- all I have heard from Norgate are negatives, no positive plans so far, if he is such a whiz kid in farming why did he get the DCM  from Fonterra?

--I'm sceptical of partial takeovers, of course it weakens the remaining shareholders position, for example look at the TTP position and the frustrated shareholders that seem to be banging their heads against the SEA 'brick wall'.  At least at the moment shareholders could get together to chuck out the directors etc, If Norgate gets control and makes (more) of a stuffup of the company the remaining shareholders can do virtually nothing.

--I'm not that convinced about the valuation in the report I've valued the company at around $1.21 using DDM, which may be more appropriate from a minority shareholders viewpoint, (can supply my input assumptions if anyone wants) but if farming is near the bottom of the cycle there could be some upside in the share price over the long term, especially if the exchange rate weakens.

--As one of the sharecatters put it if the company is so bad why is Norgate buying in? and lets face it he will want to pay the least he can, especially if he's part scot like me :-)

 

(Snoopy you've been so quiet the last few days I just know that you have got your head stuck in that report too, be interested to hear what you think?)

 

cheers Dean