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Low-ball specialist tries to preempt Dorchester Pacific's note buyback

Tuesday 31st July 2012

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Stock & Share Trading Co, a Melbourne-based company that specialises in making low-ball offers for securities, is trying to preempt Dorchester Pacific's buyback of its 2013 notes at a price that's 25 percent lower.

Stock & Share has sent an offer to noteholders of Dorchester offering to buy the notes for 70 cents in the dollar. That's well below Dorchester's own proposal to buy the notes for 92 cents per $1 face amount.

The notes last traded at 79.883 cents on the NZDX market.

Dorchester, which avoided failure in 2010 by convincing investors to accept a debt-for-equity swap, is offering to buy back the June 2013 notes early after gaining a new funding line for the purpose. The company has $14.96 million of the notes outstanding, according to the NZX.

An assessment from Simmons Corporate Finance says Dorchester's offer is fair as it is at the top of Simmons' valuation range of 88 cents to 92 cents a note.

The proposal requires a meeting of noteholders scheduled for Aug. 14. If approved, the notes would be bought back by Sept. 12.

"Directors strongly recommend that noteholders consult their financial adviser about the lower offer of 70 cents from Stock & Share Trading," Dorchester said today.

It isn't the first time Dorchester has been targeted. In 2010, Stock & Share offered to buy the firm's debentures, since refinanced, for just 5 cents in the dollar.

Stock & Share, which is controlled by Melbourne businessman John Armour, has been actively targeting New Zealand investors in the past 12 months, resulting in the Financial Markets Authority issuing a warning last year. Shareholders of PGG Wrightson and Rural Equities have received lowball offers this year.

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