Shareholders treated as second class holders again by a company board. Sure, our company has been well run for many years (and we thank management for that), but why sell out for a modest premium to the underlying value of our company? And why the special treatment for the Chairman?
it is very hard to find companies of this quality - excellent business in growth industry, strong brand becoming global, low debt, high cash generation and returns on incremental equity.
Based on EPS of about 33c for FY19, the proposal on face value looks to imply a PE multiple of 22. But this doesn't do justice to the amount of free cash our company generates. The business tends to convert over 80% of net profit into free cash over the long run. Hence the reason we receive rising dividends, including an upcoming special dividend which we will get even if the proposal falls over.
i can't accept that our board is recommending we take the $6.70 on offer, yet our Chairman is getting special treatment by being able to keep a 15% holding and continue to participate in the upside of the business for between 3 and 7 years. He then can sell for no less than $6.70 under a put option, but more probably will receive a higher price should earnings continue to grow. Not sure how ethical that is.
Also, my reading of the break fee payable by Wellcom is that a $2.4m fee is payable to Innocean should a superior competing proposal come forward. Hardly an incentive for our board to go out and find other interested bidders so we, the shareholders, can get a more equitable price for our holding. A vote of NO from me.
WLL Price at posting:
$6.74 Sentiment: None Disclosure: Held
