re: Ann: Norfolk Group - Acquisition Proposal...
I suspect this information was available and could have been disclosed earlier if management had so decided. Presumably the timing of the release is an attempt to set a floor on the SP given recent volatility.
My thoughts (please do your own research etc):
(a) The share price decline has been overdone. Although times are tougher now and prospects less certain than 12 months ago, you would have to ask whether they are so tough as to justify a PE multiple of circa 2 times. Many smaller businesses without the scale and reputation of NFK are trading on far higher multiples.
(b) The SP suffers from generally poor liquidity. It only takes a few larger shareholders/institutions to place volume on the market and the SP will move markedly. In such circumstances, it is questionable whether true underlying value is reflected in the SP.
(c) If and when key substantial shareholders negotiate a lock-up agreement with a prospective acquirer (which would inevitably happen given the closely held nature of the company), it is reasonable to assume Maui et al will only sign up to something with a party that is prepared to look beyond short-term blips and acknowledge fundamental underlying value. I suspect that will need to be at a price well above Maui's average buy-in price of $0.675. Despite any pressures Maui may feel to return capital to investors in their Indigo fund, I cannot see them selling at a loss simply to release that pressure. Indeed, if NFK is to be Maui's first "exit", you would imagine they would want it to be half reasonable.
NFK Price at posting:
49.0¢ Sentiment: None Disclosure: Held
