I bought my first share in AVB well over a decade ago and it is the best investment from a return perspective I have ever or will ever make. ( I may have to name my next pet or boat - AVANCO). That said I have sold my full holding over the last 2 sessions.
My strategy over the years has always been to analyse how likely the takeover is to go ahead, the risks if it doesn't, whether there are other likely suitors, the upside if this occurs and then make a decision as to whether sell. I have never been a massive fan of holding a stock during a takeover period if the likelihood of another bid is limited. I would rather take a small discount now then have cash tied up for months with limited upside and significant downside risk.
In respect to AVB, I see the likelihood of a competing bid from another party as limited. The assets are too small for the majors to get involved but also the capital outlay is significant enough to chase away the smaller players. This is a mid tier play. I struggled to come up with other parties in the world with these characteristics that would have interest. The fit is perfect for OZ Minerals( declaration I hold OZL) - it gives them significant acreage in a premier basin, diversification, a suite of projects on the development spectrum and most importantly a proven management team to execute them. OZ minerals greater financial clout will put them in a much stronger position to exploit and extract value from these assets. In this respect I think the 50/50, scrip/cash bid is a good outcome for current shareholders that can extract cash from the investment but also share in the future upside. I think there is little doubt that OZ will achieve the minimum requirement of 50.1% and I would caution other shareholders considering rejecting the offer and remaining as a shareholder on the register in a listed company majority owned by its suitor. IMO that wouldn't be a good outcome for shareholders.
Furthermore I think criticism of Management is a little misguided. It is clear to me that they have done a good job extracting as much value as they can under the circumstances. Sure we all thought that the potential of AVB was multiples of the takeover price but as we all know in this game, that involves significant risk. That risk has now shifted to OZ Minerals. It is clear to me that without the support of the board the bid price would have been significantly lower. The management team of AVB is one of its most important assets and OZ Minerals are prepared to pay for them. It would have been a very brave board that rejected a takeover offer under the current circumstances at approximately 120% to the prevailing price. IMO management had little choice. What's more the part scrip bid means shareholders can still be involved in any upside in the future. The only criticism of management I would accept is their inability over the years to market the company in a way that increased the share price. In that respect they were good mine developers rather than good promoters.
Having had a lot of experience in the junior resource sector, I think shareholders should look at this as one of the good stories in an industry where success is scarce.
Good luck to all shareholders.
Locust
AVB Price at posting:
15.5¢ Sentiment: Sell Disclosure: Held
