thoughts of a small time sdl shareholder

I’m just a small time shareholder with no claim to having made millions playing the market, but this is my take on today’s announcement.

Hanlong were less than honest, or at best, overly confident with their pitch to SDL directors. Their ability to secure funds would have been central to discussions, and several months on they have been unable to deliver even a letter of guarantee from China Development Bank. Forget having the cash, they haven’t even been able to secure a promise to guarantee the funds in May 2012.

SDL were negligent in accepting from Hanlong what was clearly a promise only to secure funds. Surely in accepting the TO offer, SDL would have, or should have, ensured they were dealing with a company with a certain (100%) ability to secure funding.

It is the equivalent of agreeing to buy a house, telling the vendor you can borrow the funds, then several months later after all other buyers have moved on, admitting you can’t secure the cash. You assure the vendor not to worry because you will find the money despite world financial circumstances worsening by the day, and incredibly, the vendor agrees. What do they say about one being born every day?

SDL in waiving what was several months ago a negotiated condition of their acceptance of the TO, have today revealed their complete desperation. Hanlong have failed the first condition of many, and yet directors have effectively said, “that’s a shame, but plough on boys. What we previously said was integral to this deal, is now only mildly important, and capable of being breached.”

We all know times are tough, etc, but money is still out there. FMS today secured a half billion TO offer. No offence to FMS (I hold a handful of shares), but the company has about 10% of the potential value of SDL. Atlas looks like selling their Ridley project to an Indian consortium (finally), and Murchison appear to have convinced the Chinese to part with $325m.

The writing was on the wall I guess when the SDL board agreed to the so-called revised offer of $0.57 which as was pointed out on HC, was no increase on Hanlong’s first offer given the depreciation in the AUD between their first and second offer. The AUD has of course further depreciated since, making the deal even better for Hanlong.

I obviously hope the Hanlong deal gets across the line, partly because it’s hard to see SDL getting near $0.57 in the short term.

The fact I have to wait until May next year (at best) is a disgrace, and one of many shocking decisions made by the board in accepting this offer.

All this said, I’m not bitter, just disappointed. I knew the dangers of dealing with Africa, and still I took the risk. We all did.

I hope, and let’s be honest, we will never know, that the directors have at all times acted in the best interests of the shareholders. The fact they have this incredible world class asset and yet are unable to secure a better offer than $0.57 from a company that can’t even convince its own bank to invest, suggests our board may not be up to the challenge of delivering on the many grand promises made to shareholders over the past 12 months.