Hi William I’ve recently come home after a hospital stay...

Hi William

I’ve recently come home after a hospital stay following a bad accident. I’m not supposed to type at all, so I should keep this short*- otherwise your questions need answers of many pages because the matters are so complex. I also repeat that I’m not a lawyer- and certainly not a takeovers lawyer- so I would welcome anyone with such expertise correcting any errors in my comments.

Pt. 2 Yes in theory: if PGH sells anything (whatever it is) for a convincingly good price that ought to help the share price. However, I think PGH’s share price now is largely driven by people’s opinions about future takeover prospects, less about fundamentals. Also of course trading is very thin, thus distorting any external factors.

Pt 3. I doubt that RG’s decision not to vote on Rem last year was “company policy” but you could ask PGH itself about that. I couldn’t find anything in the Listing Rules that would prevent his vote. Even if he doesn’t vote at the 24 agm, and there is a second strike, that would just be a nuisance. There might then be a board spill vote but I expect he would be allowed to vote against that. In the end it would be noise without substance- but check with the PGH co secretary.

Pt1. You ask several complex and inter-related Qs here. The result of the litigation court case would have nothing do with any objections about a future takeover, by Manipur or anyone else. Also it doesn’t matter how, when or why TIC may buy more shares. They could that, if they wish, at any time without limit because- unless RG sells -they can’t reach more than 12%, which is below the 19% cap in the law. I have no idea if they want to buy more shares or how much cash they have to buy more shares. However, I doubt that they would get access to the $30m (if they win) that they seek before Sept 2025 at the earliest, unless RG decides to settle before trial- which I doubt will happen.

In any case, I don’t think it’s relevant. Manipur et al have 6.5%. RG must in practice negotiate with them- even if Manipur buy no more shares. If RG wants to get to 100% (which I expect he does, eventually) he will almost certainly have to use one of the routes to compulsory acquisition i.e. under s661 or s664. He can of course stick at 88% forever if he wants to. I’m sure that in the end RG will have to find out what price Manipur and the other 3 or 4 biggest holders would require to sell.

Either route to CA provides a mechanism in the Corps Act for shareholders to object to the Court. Both routes to CA require an expert report (because RG is a director in the case of s661) or by law under s664. In s661 the board appoints an independent expert, and I think RG would need to recuse himself from voting on the choice of expert. In the case of s664 ASIC appoints the expert. In the case of s664 the law says that the IE must state a “fair price”; the same is implicit under s661. The Court does not determine a fair price- only the expert. The Court merely decides -in each case- whether to accept the objections of minority shareholders, or override them, and would obviously give great weight to what the expert says. I expect that the Court would give weight mainly to how many shares are held be the objectors, than to how many holders objected. I think (but this needs to be confirmed by a legal specialist) that the Court could in theory force Manipur et al to accept if it thought they were being very unreasonable- but with a 6.5% stake out of the max 12% minority holders the Court would think very carefully before forcing a big holder to submit. There have been several cases about such matters- but it would take ages to go through them and I’m not an expert anyway.

The relevant provisions of s661 and s664 etc do state that all the minority holders must be sent details of what is going on, who is objecting etc, so you would not be kept in the dark.

It is too early to speculate on all this, although I’m sure that Manipur et al are getting full advice on these matters. We small holders should be patient and wait. I’m still buying at around 85c as I believe it’s good fundamental value.

NB one important point. Again it is only my interpretation of the Corps Act and I may be wrong BUT I think that if RG goes over 90% NOT under a takeover, e.g. by using the creep, he would no longer be allowed to mount a takeover then CA under 661: I think he would have to use s664 for CA if he starts with over 90%. If I was RG I would not use the creep rule at all: mainly because even buying 1m shares would seriously boost the share price, but also because it would, I think, mean that he could not use s661 if he goes over 90% using the creep. He could then only use s664 for CA. On the other hand, as I said before, if he wants to mount a second takeover bid (which would be a pre-requisite for using CA under s661) he must get acceptances to over 97% before being allowed to use CA. That hurdle wouldn’t apply with s664 route to CA. However, in practice, whatever way he goes, RG will ONLY get to 100% if he can agree a price with Manipur and the other 4 big holders. In the end it will come down to a commercial negotiation. It would be stupid for RG to try to get to CA under either route if the big holders all objected.

You can see that this is very complex. One needs to have a very good understanding of ss661, 664 and the other sections that turn on them, read the cases of objected CAs, and the ASIC Regulatory Guides on takeovers. This is why lawyers charge $m for takeover advice. My guess is that RG will stay out of the market entirely to avoid boosting the short term price, and then probably go with s664, rather than s661- but that’s only my guess. Meanwhile don’t expect any dividends! I repeat that I am not an expert: I would welcome a critique from someone with the specialist knowledge.
DYOR. Not advice.

* I see that I failed!