Following on from my earlier post, it is helpful to put a bit of thought into the interests of each party in the outcome that each funding option might lead to. I appreciate this is quite speculative, but I have found it helpful to think it through:
From an AZX shareholder perspective, accepting the bid may be the most rational outcome, in that their existing shares equate to just less than 50% of the asset under the terms of the bid (~49% iirc)
If there's a placing or rights issue, they either get diluted or have to put in extra cash to keep that same percentage of the asset.
Similarly, if AZX were to accept some cash from GGG, then no doubt GGG would want something in return (more of the asset or more shares in AZX through a CB, or warrants or similar), probably effectively diluting existing AZX holders more than accepting the bid.
But conversely, from a GGG shareholder perspective, it maybe better to go the latter route and provide some funding to AZX in return for a greater stake in AZX rather than see GGG pursue the bid, because that way the cash on the balance sheet can be used to secure a greater proportion of the asset.
However, accepting the bid would probably be the end of the road for Lawton so he will be desperate to find another way, if he can ensure his own survival.
I do think that we ought to be approaching the end game, as AZX must be close to running on fumes. And, finally, the slap on the wrist administered by the ASX must be an indication of the level of desperation in the AZX camp. I do hope this desperation doesn't lead them into even more damaging desperate actions.
AZX Price at posting:
40.5¢ Sentiment: None Disclosure: Not Held
