Bond International Software announced the acquisition of VCG today and the share price went up 24%. That's a clever trick - companies usually overpay for acquisitions, and therefore their share price usually suffers when the news becomes public.
The reason seems to be that they have funded the transaction by issuing new shares at 75p each - a premium of almost 50% over the previous day's close of 53p. But all is not as it seems.
The subscriber to all these new shares is Constellation Software, who now have an economic interest in 31% of Bond's shares. Constellation's announcement is here. As part of the deal Constellation have bought a large number of non-voting shares, and agreed not to buy further voting shares for 5 years - which seems a device to prevent them launching a takeover. Why that's in the best interests of Bond's shareholders rather escapes me - if they want to make an offer, making me a profit in the process, that would seem to be rather good for me. That's the first thing that smells bad to me - directors worrying about their own interests rather than shareholders.
The second thing is that over 50% of the money stumped up by Bond is going to (you guessed it) Constellation Software, in their guise as a holder of VCG promissory notes. It seems that the vast majority of the VCG purchase price is going into paying off their debt, with only a small amount left for their equity. The debt of a company like that is usually trading at a big discount to par - so I suspect the quid pro quo here is: you pay a premium for our shares, and we'll redeem your bonds at par.
Perhaps I'm too cynical, but I can't help thinking that there is more to this deal than meets the eye.
Thursday, 21 October 2010
Wednesday, 20 October 2010
The beautiful game
I haven't researched any individual companies lately, but I do have a new article on shareworld about investing in football clubs. In summary - I think it's a rubbish idea.
In other news: LLPC now trades higher than the offer price of 94p that I was so irritated to miss out on last year. So I had to wait almost 12 months, but it got there in the end. On the other hand if I'd managed to sell LLPC there was a decent chance I would have put the proceeds into NWBD - and that's returned 55% in the same timeframe. Hmm...
Friday, 24 September 2010
Fairfax
I've written a new article on shareworld, on the subject of Fairfax Financial Holdings. As it happens I like the look of them, but can't buy any shares, since my broker doesn't offer them (I'm limited to the UK, NYSE and a few selected others, but Fairfax is listed in Toronto).
Sometime in the next 3 months I need to sell my Berkshire Hathaway shares to realise the capital gain before I move to Norway (no capital gains allowance over there). At the same time I'll be opening a brokerage account I can use from Norway - possibly with Internaxx - and that should allow me to buy shares in Fairfax. I haven't quite decided yet, but there's a good chance I'll sell Berkshire and put some of the proceeds into Fairfax (probably not all of it, since I don't trust them quite as much as I trust Berkshire).
Sometime in the next 3 months I need to sell my Berkshire Hathaway shares to realise the capital gain before I move to Norway (no capital gains allowance over there). At the same time I'll be opening a brokerage account I can use from Norway - possibly with Internaxx - and that should allow me to buy shares in Fairfax. I haven't quite decided yet, but there's a good chance I'll sell Berkshire and put some of the proceeds into Fairfax (probably not all of it, since I don't trust them quite as much as I trust Berkshire).
Tuesday, 7 September 2010
De La Rue - buy
3 weeks ago I wrote an article on shareworld about De La Rue. The share price had suffered due to some quality problems, and although I thought it looked cheap, I was looking for a better entry point than 700p - preferably 600p.
Today De La Rue announced an update on the quality problems. To me this looks like good news - the recognized financial impact so far has been a meagre £35m before tax (£25m after tax) vs a drop in market cap of almost £300m. Although the final bill will likely be higher, I find it hard to believe it will be more than 10 times higher.
The market disagreed, and at one point De La Rue had dropped almost 10% to 640p. I didn't manage to move quickly enough to get that price, but I was happy to buy in at 677p. De La Rue is now just over 4% of my portfolio.
In other news I see that my views on Connaught (that there was an 80% chance of them being worth nothing) seem to have come true. Today's announcement has put paid to any lingering hope that they might trade their way out of trouble.
Today De La Rue announced an update on the quality problems. To me this looks like good news - the recognized financial impact so far has been a meagre £35m before tax (£25m after tax) vs a drop in market cap of almost £300m. Although the final bill will likely be higher, I find it hard to believe it will be more than 10 times higher.
The market disagreed, and at one point De La Rue had dropped almost 10% to 640p. I didn't manage to move quickly enough to get that price, but I was happy to buy in at 677p. De La Rue is now just over 4% of my portfolio.
In other news I see that my views on Connaught (that there was an 80% chance of them being worth nothing) seem to have come true. Today's announcement has put paid to any lingering hope that they might trade their way out of trouble.
Friday, 27 August 2010
Good timing (for once)
After buying a small stake in Southern Cross Healthcare on Monday, news emerges today that they are the subject of a "highly preliminary proposal with relation to a potential offer". That was enough for a 56% jump in their share price, making them the top riser of the day.
As usual in these matters, events occurred in completely the wrong order. First there was a 30% jump in the share price, then a statement from Towerbrook announcing an "indicative non-binding offer" (which triggered a further jump in the share price), followed by a sceptical response from Southern Cross: "the Board of Southern Cross has informed Towerbrook that it does not wish to enter into discussions at this time".
That triggered a brief downward blip, but the share price recovered to finish the day on 28.5p, up from 18p at opening.
I briefly thought about selling at 28p, but I've decided to hold on and see what happens. Southern Cross started off so cheap that Towerbrook could still afford a pretty massive premium over the current price, and I did buy on the basis that they were worth 40-80p.
As usual in these matters, events occurred in completely the wrong order. First there was a 30% jump in the share price, then a statement from Towerbrook announcing an "indicative non-binding offer" (which triggered a further jump in the share price), followed by a sceptical response from Southern Cross: "the Board of Southern Cross has informed Towerbrook that it does not wish to enter into discussions at this time".
That triggered a brief downward blip, but the share price recovered to finish the day on 28.5p, up from 18p at opening.
I briefly thought about selling at 28p, but I've decided to hold on and see what happens. Southern Cross started off so cheap that Towerbrook could still afford a pretty massive premium over the current price, and I did buy on the basis that they were worth 40-80p.
Monday, 23 August 2010
Southern Cross Healthcare
I picked up a few shares in Southern Cross Healthcare this morning at 19.47p. This article on shareworld explains why. SCHE now forms 1.4% of my portfolio.
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