Hi Lambingflat Having attended the PAC EGM, there was some...

Hi Lambingflat

Having attended the PAC EGM, there was some discussion about the points you have raised - and thank you for doing so. My interpretation of what took place (and I am not professing any sophisticated financial skills) is as follows.

In regard to how the price of a possible buy back might be determined, it looks like Flagstaff Partners have been engaged to provide advice as an independent expert. The end result from Flagstaff's opinion plus Board input (not clear if it will be non conflicted Board members only or whole Board) will be put to shareholders via another EGM putting forward price and conditions for the buy back, in July. So shareholders will have the final say on buy back price.

In regard to who might take up the offer of a buy back, I have made a few assumptions. With the current prospect of around AU$275 m being used for the buy back, and a current market capital for PAC of around AU$550m, it looks like shareholders could expect an opportunity to sell back around 50% of their shareholding (this market cap is based on the current share price of around AU$10 per share. If the offered share price is more like AU$11 per share or more, then the percentage of shares that may be bought back will reduce). Whether the current major shareholders will participate is unknown. Given that the only major broker covering PAC is Ord Minnett is suggesting the shares are worth around AU$12.50, they might decline the offer and let their economic interest edge up for a better end of day resolution of the asset value.

It sounds like all shareholders will be canvassed, after the buy back price has been determined at the July EGM, to see who wants to participate. If the major shareholders hold back then minor shareholders will be able to sell back more than their pro rata holding.

In regard to how the shares might trade over the next few months, I think the arbitrage activity is already in full swing. There seems to be a current market demand for the shares around the $10 mark, with a prospective buy back of around 50% of these shares, in the range of $11 to $12 in 4-5 months time. Further down the track, the value may be significantly higher, depending on the economy and growth of FUM in the residual boutiques retained.

Other considerations include the prospect that once the buyback has been completed, is what might the eps be, and will the company continue to pay dividends, or will they keep them back for capital growth or for further boutique purchases.

I would hope most of these issues will be addressed in press releases over the next few months.

So the only reason I am putting pen to paper is that there was minimal attendance from retail investors at the meeting, and to date not much detail on the way forward has been provided. So do your own research.

Cheers Westwind