Help! What to do with takeover bid on your shares?

[Bandita]

Hi all,

We're got some "buy and hold" shares, that we don't do too much with. One is Colorado Group. AFR has made takeover bid on our shares at $4.70 a share. It was initially for $4.50 - which Colorado Group said to completely ignore, which I did happily . Now, it's gone up to $4.70 (which happens to be the exact same price we bought the shares for just over a year ago) - and AFR has said that Colorado Group has recommended to accept this offer - (though we haven't actually received anything from Colorado Group.)

My question is - if Colorado has agreed to this share price, do we have to sell our shares to AFR? What if we don't? Do they just stay as usual - we receive dividends, can sell them on the open market, etc? Never been in this position before!

Thanks for your help!

Cheers,
Jen

 

[The Y-man]

If you get a "recommend to sell" letter from Colorado - read this carefully, as it will detail your choices, and what will happen if you do not sell to the organization taking over.

In the worst case, the shares you hold may become worthless, so be careful.

Cheers,

The Y-man

 

[Macca]

Hi Jen,

Yes, you can sell them on the open market anytime a share is not suspended, just have a look and see if they are trading, if so, do whatever you like

You can also accept the offer after you get the official paperwork from AFR.

If AFR were to reach 90% ownership then, yes, they can compel you to sell your shares, if they do not get 90% acceptance then they will do whatever is in the offer document, but basically your shares may stay listed or you may have your shares exchanged for shares in AFR.

Hope that helps, main thing is don't worry, they can't rob you

 

[cazandpaul]

Colorado is being taken over by US funds manager ARH - price of $4.70 is made up of fully franked dividend and cash - Colorado board has recommended acceptance in the absence of a better offer.

Closed above $4.80 today but do not know the relevant dates to enable retention of the dividend etc.

 

[topcropper]

I believe Colorado is going ex special div tomorrow.

"quote....The amount of the special dividend will be deducted from ARH’s
offer price. COLORADO shareholders will receive $4.70 per share, comprising the 52 cent per
share fully franked special dividend payable by COLORADO and, as provided for under ARH's
offer, this amount will be deducted from the ARH offer price resulting in $4.18 per share payable
by ARH."

So a fully franked dividend ex div tomorrow. This would be worth about 74c counting franking, so expect that sort of drop tomorrow, and don't panic, it's good news. Add to that the $4.18, and it is worth about $4.92 to you.

You may have not have much capital gain from Colorado, but don't forget the dividends. I make out CDO having paid 24c fully franked, plus 40c special dividend fully franked. 64c! That's in 12 months! Not bad by any standards for a share worth $4.70. Work out the yield. And it just gets better. The tax man will think you bought at $4.70, and sold at $4.18, thus making a loss for you to claim on. But you get $1.16 [that's 24c + 40c + 52c] in fully franked dividends in 12 months.

Colorado is not about to drop to zero. It has almost no debt, and is a solid little company with a good brand. It's been a rollercoaster ride last 12 months though, mainly on bad sentiment to little retail companies, that's all.

I have held Colorado for many years, and it has done well for me.

See ya's.

 

[Ajax]

I refer to Y-man's post.

I currently hold quite a few Coles Myer shares (which may or may not be subject to a takeover offer).

I'm confused as to how shares in a takeover target could become worthless should a shareholder not accept a takeover offer. The shareholder may have their shares compulsorily acquired should a suitor move to 90% shareholding (in which case I understand the shareholder will receive the same consideration as the highest offer made)...but if the shareholder does not accept an offer how could the shares become worthless?

I am also unsure (should remember this from uni days) of the situation where a shareholder accepts an offer then the suitor makes a higher offer. In what situation can the shareholder who accpeted the lower offer particpate in the higher offer (I recall it has something to do with an offer being an on-market offer or another type of offer)

Interesting times ahead with takeover plays....I understand this has a lot to do with Australian stocks being on historically low comparative price/earnings ratios and generating good cashflows. Very attractive to any foreign suitor.


Ajax

 

[Bandita]

Thanks all!

I don't really want to sell them, if they keep go going as they are - I don't really mind the lack of Capital Gain as the yield has been great.

But what does a takeover really mean? Why would/could the price drop so much as to make it worthless? It's still going to be Colorado Group, yes? Or maybe no? I don't know anything about takeovers

Topcropper - you said you've held your CDO shares for years - are you selling them to ARH or keeping them? I've gotten all the official paperwork from ARH - but nothing from Colorado Group - have you? Perhaps I misplaced it?

Thanks again!

Cheers,
Jen

 

[topcropper]

Topcropper - you said you've held your CDO shares for years - are you selling them to ARH or keeping them? I've gotten all the official paperwork from ARH - but nothing from Colorado Group - have you? Perhaps I misplaced it?
Cheers,
Jen

I'm going to sell them. The price only took off when the offer was made. To be honest, I wasn't sure about the details of the offer so I just rumaged through the paper work. The last stuff I got from Colorado says that the offer closed on the 22nd, 3 days ago. It's is all complicated isn't it? I'll look into it.

I just remember the golden rule from the late Rene Rivkin about never selling on the first offer.

Cheers.