Ann: Annual Report to shareholders, page-8

Not unhappy with this at first glance.

The 2.25*[email protected] = [email protected] offer values it at NTA not at directors' valuation, which was always a little iffy (ie: if the valuation only works if Tandou's water isn't on the market), however if the SP of Webster continues climbing, then the value will more closely approach that value of [email protected] ~= WBA@$1.46. Particularly considering how the directors' valuation keeps on dropping. A minor factor is that a merger puts the company into the ASX300 which means more demand from index funds (eg Vanguard benches against the ASX300) and hence is likely to increase WBA's SP somewhat.

A merger means potential for economies of scale and increased profits -- higher dividends.  Webster will pay dividends at full year (June) only, so if merger goes ahead by then, then that's a possibility. On the other hand, their dividends are normally small, and with the M&A may be smaller than last year, so it's a mixed bag.

I really liked the idea of TAN not being a pure water play company, and being able to have success in both wet years and particularly dry ones, but their cost of sales (particularly recently) has been horrible. WBA's comments in Review of Operations suggests that they intend to keep cotton -- "Significantly the acquisition [of AgReserves Australia Ltd assets] brings a large and multi-crop annual cropping operation, which directors believe will be complementary to its existing permanent walnut growing operations.  The introduction of annual cropping is an important element in the chosen strategy... it is the intention of the company to ... grow the size of both the annual cropping and the walnuts operations."

-T.