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ZEN zenith energy limited

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Ann: Change in substantial holding, page-4

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marcus A

447 Posts.

305

12/03/20

13:57

Post #: 43449904
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Originally posted by danhoff: ↑

Here is my thinking for sitting tight and not selling out. This is just MY position and MY thinking.

Surely there must be some 'chance' the sale can fall through. Even though I consider the bid price 'low', in this market, we are making a good immediate profit on our holdings. In my spreadsheet, if the sale falls through I 'lose' $2 from where we are now. If the sale goes ahead, I make $1 extra. The current price is short of the $1.01 and franking. And I think a fall through plummets the share down to 70 again.

There is some chance a superior offer comes along. But, again, in this market, that seem unlikely. A bidder may want to wait for the overall market to fall more and pick up other things better value.

So, all things considered, the risk to me (of losing $2 is much, much less compared to me making an extra $1). This takes into account my capital gains position. The longer I hold the shares the less my tax. And the franking is important to me.

Also, let us say the sale fell through, the value of Zenith has been 'declared' to the world. So all that would happen is, when the virus has passed (say in 1 year to 2 years (passed or vaccine), a new buyer will come along at a higher price, or we will just have our regular old Zenith pouring out eps - half year after half year.

From a PEP point of view, they know the books. They know the value. They even know that Zenith is making good margin right now with their clients - and the virus (price of gold) helps their bottom line. They know they have bid unders - but they likely bid what they did knowing the state of the market. But last Friday, when the deal was signed, most people knew the virus was going to damage the overall economy. So PEP should be happy to stay their course.

So, in the end, it seems Doug and Hamish and Graham have done good for themselves and also the share holders. And PEP have done well for themselves. A deal that is win-win. It should stick. But again, what if, what if..... the virus spooks the world more than it should. (can the world be more spooked?... is the world OVER spooked?)

I am sitting tight. But honestly, that is just my decision. My book is

90% chance the sale goes through as stated $1.05 to holders (1.01 cash plus franking)
2% chance a higher bidder shows up (say $1.15 (10% more))
7% chance the sale stops, and we will end up back around 70 cents share price
1% chance the world goes insane, the sale stops, and the price goes back to 50 cents in a panic scenario

Now if you read the BID documents signed last Friday re the sale, my 90% is likely too low. It does seem a sealed, finished deal. But I am sure a bidder can likely find a 'reason' in there somewhere to pull out - if they want. However, if PEP pulled out because of the virus, they would tarnish their brand. No one would believe them anymore when they came to bid on other companies.

I am sitting tight. But I actually understand any seller. And I understand any buyer. What I would like to see is another PEP substantial holder declare. That is, they should be buying on market - not only declare an interest in Doug's shares. If they are 100% committed at $1.01, they should be buying millions at 96 to 97 cents. If they are thinking of wriggling out of their bid, then they would not buy, and just wait. Interesting days!

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Hi Danhoff,

Congratulation, it looks like you faith in ZEN has been rewarded and you will be enjoying a big payday just when the markets are bottoming! I missed the opportunity to reinvest some of my PEA profits into ZEN as I was waiting for it to go back under 60c (which it probably would be at now if not for this bid!), so I have had to pony up 96c to get in on the arbitrage opportunity and hopefully make a quick and dirty 5+c per share in these difficult times.

My reading of the scheme DOA is that there is not a lot of wriggle room for PEP to drop their bid; "not subject to financing or due diligence" takes out a lot of doubt, and of the standard Conditions Precedent, (FIRB approval, independent expert opinion, shareholder vote, court approval etc.) the only issue could be the target specific no material adverse change, performance rights and warranties clauses, so if PEP were to waiver those we are pretty well home & hosed.

There was some superior bids for PEA tabled after the initial bid so there is some possible upside here also, and with only a $1.5m exclusivity break fee payable, if there were to be another serious bidder in the wings that is unlikely to be a big issue.

I think the reason that PEP is not buying up at 96c. on market is that once they have lodged an on-market takeover bid they are required by law to "stand in" the market and purchase at the bid price - $1.01 - if this is not the case please feel free to correct me.

Anyway, well done - but maybe spread you gains around a bit wider next time!

ZEN Price at posting: 95.5¢ Sentiment: Hold Disclosure: Held
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