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$5.28 galaxy resources limited

I am interested to see what happens to the Orocobre share price...

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Thesi

8,740 Posts.

2622

20/04/21

12:39

Post #: 52590701
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Originally posted by butcherboy ↑

Scheme of Arrangement (SoA) voting details:

"For the scheme to be approved, a resolution in favour must be passed at the scheme meeting by each class of target shareholders by both:

75% of the votes cast on the resolution;

andmore than 50% in number of the target shareholders voting on the resolution (in person or by proxy)."

https://www.minterellison.com/articles/how-a-scheme-of-arrangement-works

I went through this with KDR (Kidman Resources) when it was bought out by Wesfarmers and the takeover was recommended by the KDR board. Note: the GXY-ORE MergeCo is a merger not a takeover, but the SoA process is the same.

Anyway, in the depths of the lithium price catastrophe a couple of years ago, almost all the retail KDR shareholders here on HC were whinging and moaning saying 'we can get a better deal', 'it's a disgrace', 'the board should be sacked', 'blah blah blah'. It freaked me out to the point where I made sure I had sold all my shares at or very close to the offer price before the vote happened, because I knew that if the vote failed the KDR share price would have crashed. I needn't have been so worried as the vote went through very smoothly, probably because it was recommended by the board, and they're insiders, so they have better intel on the true state of the company and the wider M&A and lithium markets.

So, the moral of the story is that the noise from the armchair experts here on HC can be very different to what is actually happening out there in the real world.

Expand

I am interested to see what happens to the Orocobre share price over the coming months prior to the vote.

If we see the Galaxy price continue to rise, and the Orocobre price go down, it might indicate that another party will be working to ensure a vote of NO from the Galaxy side is secured.

What we are currently seeing is that Galaxy's share price is worth more than that of the merger 0.569 shares per GXY share. Of which right now we would expect that Orocobre would be worth $6.71 but not only are they falling albiet slightly, they are still less than where they should be expected.

It seems to me that the market is seeing more value in Galaxy than that of Orocobre and the chance that a more respectable offer might emerge.

Originally posted by trez133 ↑

Hi Thesi

There seem to be a number of inaccuracies in your post:

"If Tesla had hoped to receive supply from James Bay, maybe that will still happen, or maybe Toyota might not want to provide that to them. This deal very much placed the ball in Toyota's court. Whilst I have heard commentary that the merged entity might make a good takeover target, I am wondering how easily that might be achieved with Toyota having 15% ownership."

As others have noted, post-completion Toyota will own more like 6-7%. This is a decent stake but unlikely to be a blocking stake. However, as I noted in one of my posts yesterday though, the combination of no talk/no shop/no DD clauses and break fees means it's going to be pretty hard for someone else to lob a takeover bid, or for GXY to accept any such bid.

In terms of James Bay supply, holding 6-7% of shares on issue won't get you the ability to block strategic partnerships with other companies that would otherwise benefit the company - it's not even enough to get you the ability to appoint one board director, so that's another non-issue.

"I would also put to everyone that by Galaxy not presenting to the market a plan for a converter tied to James Bay at the time of that announcement that it affected the share price negatively, and I would use Piedmont as an example of what might have occurred had they bothered to do so. - This would have probably improved Galaxy's shareholders value going into the new entity."

I think most here would agree that the reason Piedmont shot up late last year was not simply because they had a converter, but rather because they announced a sales agreement with Tesla, so I think the comparison is a bit disingenuous. Also, you know companies can't just announce things that they have no intention of doing, right? That's against the law (see s 1041H of the Corporations Act). Clearly, without the scale of the combined entity GXY did not view a converter as something that was financially viable (or sensible) for them to do alone given the amount they had to spend developing SdV in parallel, so they didn't announce it. Simple. Conversely, if they had tied up with a partner for the development of a converter, that would have diminished the value in the merger for Orocobre, because a significant part of the upside to James Bay would be gone. In fact, this is where the benefit of the merger comes: they now do have the ability to pursue development of a converter with a partner, and somehow you don't like it, despite pushing for that to have happened for the past two months!

"Also, we could see that Galaxy's share price yesterday morning didn't match the merger attributed value.... Galaxy was well ahead...."

What on earth are you talking about? Orocobre and Galaxy traded pretty similarly all of yesterday and continue to do so. The "merger attributed value" is directly in proportion with their respective market caps, at 45.8% GXY and 54.2% ORE...

"I also wonder how pleased Simon Hay really was with this deal, because if you listen to his answers to the questions I provided, it appeared to me that he was not and was just going through the motions he was told to do."

This seems to me to be the proof that you are for whatever reason just biased against GXY and are searching for things to retrofit your views. Because what I heard on the conference call was a very confident Simon Hay, who not only participated actively in the conversation, but in fact jumped in to expand enthusiastically upon many of Martin's answers. For example (and this is just off the top of my head), when Martin was asked about synergies between the two companies, Simon jumped in and expanded on certainty of supply and bargaining power of the combined entity, when Martin was asked about cultural differences between the two entities Simon jumped in and enthusiastically talked about how they had worked together over a prolonged period and how the similarity in assets across Argentina meant they were well-placed. If anything, I left the call thinking that Simon should be the man in charge, as he often had the more substantive answers...

Expand

Answering each of your points...

Yes, post completion Toyota will be down to less than 7% and they are entitled to maintain their ownership in Orocobre at 15%. This is dilution for all holders, but significantly worse for Galaxy shareholders considering how skewed the deal is towards Orocobre.

Galaxy in 2019 at the AGM indicated that had/have a plan to have a 40,000 tpa converter tied to James Bay. This information was already shared with the market but the company didn't capitalise on it in their announcement for James Bay which they could have done.
Or was them telling shareholders at the AGM the plan to build that converter against the law?

At the close on Friday Galaxy was already higher per ratio to that of Orocobre, and still remains higher. $3.82 vs $6.54
Otherwise Galaxy would be trading at $3.71.

I don't understand your point of being biased against Galaxy... None of what I am writing is biased against Galaxy at all, it is factual information about both companies.

With regards to Simon however, I think it was obvious that he was making a good go of Galaxy and it seems that he has had his legs cut off whilst he was just getting to a running pace. - Under this scheme he is being demoted from CEO.
Though on the answers provided to the questions I asked, well I'll leave that to everyone else to be the judge. It isn't a criticism of him, it's how the deal is structured that controls the responses he was able to provide.
GXY Price at posting: $3.81 Sentiment: None Disclosure: Held
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