This letter is misleading by omission. What the Independent...

This letter is misleading by omission. What the Independent Expert actually concluded is “that the Revised Offer is not fair but reasonable to Pact Shareholders.” It is only “reasonable” in the sense that there are few alternative courses of action, and shareholders would be “reasonable” to take the easy option and accept the bid, despite it being unfair. Shareholders should focus on the words “not fair” rather than the vaguer word “reasonable”. The language of ASIC’s RG 111 which regulates experts reports- using terms like fair and reasonable- has been distorted over the years by breaking this phrase into its separate words and then arguing about those words separately. This has enabled experts to write reports when bids lie in the grey area between very good and very bad, but has done a disservice to retail investors. It’s like trying to understood the true meaning stated within the polite formulae of diplomatic messages It’s high time that ASIC rewrote its RG111 because many shareholders are confused by the way the word “reasonable” is used in takeover reports.

Bidder says that the IBC “unanimously” supports the bid. True, but unanimous is a strong word- here it applies to the support of only 2 people. The IBC consists [only] of Michael Wachtel and Carmen Chua.

“On 11 December 2023, Pact and Bennamon agreed to a number of arrangements relating to the conduct of the Offer and related items. This includes: Pact agrees to use its best endeavours toprocure that the Independent Directors and senior executives of Pact supportthe Offer and participate in efforts reasonably requested by Bennamon to promote the merits of the Offer”. Best endeavours are a very strong obligation. This level of support demanded of the IBC and Pact is a very high price to pay for the IBC’s capitulation: I would argue that to capitulate at 84c, and agree to support the 84c bid, was far too weak a response. If the revised bid had been at $1.00+, for example, that would be a different matter. The IBC appears to feel that it has done its job by obtaining a 23% improvement on the initial very low bid, and that having done so it can give up.

Kroll also seems to have bent its arguments a long way towards supporting the offer.

“The Revised Offer is within the Independent Expert’s valuation range of $0.83 to $1.24 per Pact share on a minority basis”. True, but only just- by 1 cent. Moreover the main emphasis of the original Expert report was “We have assessed the value of a Pact Share on a controlling interest basis to be in the range $1.06 to $1.51”. Following brow-beating by the Bidder, Kroll has implicitly retracted its valuation using a control premium and is now referring mainly to its much lower “minority valuation”. Kroll should either have the courage of its original convictions or explain why it now believes its first use of a control premium was inappropriate. The price difference of the two approaches is substantial.

BUT 4.1 new Kroll report: “[Kroll] confirms that there are no material changes inthe parameters that would cause us to change our valuation of Pact Shares. Accordingly, our assessed value of a Pact Share on a controlling interest basis is unchanged and remains in the range of $1.06 to $1.51. Kroll’s assessed value of a Pact Share on a minority interest basis is also unchanged at $0.83 to $1.24.

“4.2.4 There continue to be significant risks associated with an investment in Pact" but this heading is contradicted by the text following. "Since the October 2023 IER was prepared, Pact has completed the sale of a 50% interest in Crate Pooling and macroeconomic conditions have remained broadly unchanged with the Reserve Bank of Australia raising official cash rate by 25 basis points in November 2023 and keeping the rate flat in December 2023 alongside a slowing inflation rate". This is odd. In essence it means very little change, and the above Para in 4.1 confirms that. Of course there are risks with an investment in anything- listed or unlisted. That statement is glib and empty.

“4.2.5 In the absence of the Revised Offer, the Pact share price is likely to fall

“If Pact remains listed, there is a significant likelihood that trading in Pact Shares will become illiquid, and the share price may fall to levels below trading prior to the announcement of the Original Offer or Revised Offer. Should Pact be delisted, it is not clear how Pact Shareholders would be able to exit their investment at a time of their choosing or at what price.” Yes, perhaps the price would fall- in the short term- but that doesn’t necessarily reflect long term value. On the second point, shareholders can always seek to negotiate an off market sale to other shareholders or third parties, or (after a 6 month gasp) with the Bidder itself. . Yes, off market sales are more cumbersome than ASX sales, but not impossible.

An unhappy business.

Not advice.