Forum Archive Index - June 2004

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

Hi Robin,

Robin wrote:
> 
>Snoopy wrote:
> 
>>discl: hold WRI, and have not decided whether I will offer my shares
>>to Norgate and Co. yet!
> 
>The question is now whether "yet" has arrived ...
>

Dear Craig

So $1.65 is the new offer?    That's more like it.   I'm certainly not 
rushing to accept without some further thought, but at least I can take 
your offer seriously now.    Of course you have pitched your offer at a 
level that still makes us small shareholders think.  After all if you had 
plumped for a figure in the middle of the independent valuation range 
then everybody might accept, and that isn't what you want.   You only 
want 50.1% of the shares, so it is important that your offer isn't seen as 
'overwhelmingly generous'!

The offer is for 43% of the outstanding shares only.   That means that 
if I accept your offer I will still have up to 57% of my shares left.  The 
shares closed tonight at $1.55.   That implies an ex-offer price of

0.43($1.65)+0.57(EOP)=$1.55

That means an implied ex-offer price (EOP) of $1.47, which I would 
regard as close to fully valued.

Of course this is assuming that RD1 accepts the offer.   RD1 have 
previously indicated that they will hold all their shares.   If they still 
stick to that policy, even with the increased offer price (and haven't 
RD1 been quiet recently!), that will tighten up the number of shares 
available to RPI (yourself) considerably.  Instead of 43% of the shares 
outstanding you will need to buy 55%!   If we plug that number back 
into the implied ex-offer price equation we get:

0.55($1.65) + 0.45(EOP)= $1.55

That gives an implied ex-offer price of $1.43.  That is smack bang in 
the middle of the share price valuation range of $1.33 to $1.54 that 
Grant Samuel suggested was fair in the absence of a takeover 
premium.    But the comparison between the two scenarios is also a 
warning to us that if RD1 accept the offer, then the market share price 
of WRI shares will likely drop.

I like your idea of paying additional value to shareholders by paying 
part of the $1.65 offer price by way of a fully imputed pre-acquisition 
special dividend of up to 14cents per share.   That means you think the 
company WRI has around 7c per share of imputation credits that they 
can disburse to shareholders.    I know that means that you want the 
board to pay a dividend of 14c and you will then reduce your offer to 
$1.41 per share to compensate ( $1.65= $1.41 +  0.14 ).  However, 
despite that last bit adding up, something here *doesn't* add up.

You will need the board's agreement to make that special dividend 
payment.   Without control of the board you cannot make them do it.   
Yet if you do take control of the board then those 7c/share of 
imputation credits are lost!   If order for we small shareholders to get 
the benefit of those imputation credits both you are the board are going 
to have to co-operate.  That doesn't look like happening while the 
board still think of you as a bully boy!   Catch 22.   Unless you can sort 
this out then those imputation credits are going to be lost, and that will 
devalue your offer.

By how much?    7c tax I don't have to pay is as good as 7c cash in my 
pocket.  By my reckoning that reduces your offer to: 

$1.65- (7c /0.55) = $1.53, assuming RD1 hold their WRI shares

So much for any premium for control!  It just evaporated with your 
destruction of the imputation credits!   I wonder how many 
commentators have bothered to consider that the destruction of those 
imputation credits will destroy value for small shareholders?

So sorry Craig.  I'd like to see you on the WRI board, really I would.    
But you'll need a much more co-operative approach, something that 
will save those imputation credits, to win me over.    Until then, I'll be 
holding onto those WRI shares of mine.

Yours sincerely,

SNOOPY






--
Message sent by Snoopy 
on Pegasus Mail version 4.02
----------------------------------
"Stay on the upside of the downside, 
Anticipate the anticipation!"




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