It all depends on how you look at things.
The original real was for an upfront payment plus trailing payment based on an EDIT multiple of 7 for 2013 earnings. The new agreement is for a fixed total payable, give or take a few mil.
The original deal meant that we had no idea really what we would end up paying. If Crust's earnings have been growing rapidly then the revised forecasts for the total payable in the second tranche may have indicated that the total cost could have been significantly more than originally expected and thus the revised agreement to cap it at a fixed amount. This revised agreement may simply be a "meet in the middle" agreement between what RFG was originally anticipating and what the earnings to date numbers are indicating now.
While on the face of it this sounds like RFG is worse off, it indicates that the future earnings from this business are likely to be considerably better in the short term than originally anticipated. Also I suggest, once they looked at how to run two competing brands in parallel, it may have become obvious that the synergies and opportunities provided by RFG to its new business were somewhat sacrificial to one of its existing businesses and that the vendors of the new business shouldn't financially gain from the reduced competition. In other words the vendors should get full value for the business as it stands but RFG should get the cream from the synergies in future years.
Adding the vendors key people to RFGs management is also a plus. If that business is doing as well as the due dilligence comments infer it is then keeping the winning team together and letting them run with it seems like the logical thing to do. Absolutely nothing wrong with this.
All the above said, I haven't seen the numbers, ie the earnings, synergies, strategies and opportunities that would have been hacked out at length during the DD. I can only go on what management have indicated and it seems that what they found when they finally got a proper look at things was much more exciting than they had previously indicated.
Its easy to see this as an acqusition price going up but instead what you may have seen is the total cost going down while the earnings potential went up. Only time will tell.
The placement doesn't look too cheap either. This is well above the price the stock was trading at prior to the acquisition being announced. Its also only about a 3.5% discount to the weighted average trading price in recent weeks. Most placements are in the 10% to 20% discount range so if they get this one tucked away at $2.80, it will look like a coup IMO.
CRs already create angst and uncertainty for shareholders and the SP often suffers during the offer open period. The SPP is usually only a token gesture to apease shareholders and in this case I personally see the SPP as a mistake. Since the placement is at a tiny discount and shareholders could probably get a similar price on market once the trading halt was lifted, dragging out the open period for an SPP for a number of weeks is of no benefit to shareholders. I hate to say this because I have placements at the expense of shareholders but if they have already done it, scrap the SPP.
Anyway, just my assessment of the situation. Overall its looks very exciting, even if it is written in a way which confuses the market as to its message. May see a little price weakness on confusion and the traditional lack of commitment to buying during the offer period but I suspect we may see some broker recommendations coming from this.
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Last
7.0¢ |
Change
-0.003(4.11%) |
Mkt cap ! $174.4M |
Open | High | Low | Value | Volume |
7.3¢ | 7.3¢ | 6.9¢ | $13.97K | 200.1K |
Buyers (Bids)
No. | Vol. | Price($) |
---|---|---|
1 | 101449 | 6.9¢ |
Sellers (Offers)
Price($) | Vol. | No. |
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7.1¢ | 14085 | 1 |
View Market Depth
No. | Vol. | Price($) |
---|---|---|
1 | 101449 | 0.069 |
4 | 286456 | 0.068 |
5 | 229854 | 0.067 |
7 | 459018 | 0.066 |
9 | 1228314 | 0.065 |
Price($) | Vol. | No. |
---|---|---|
0.071 | 14085 | 1 |
0.072 | 278454 | 3 |
0.073 | 1389225 | 7 |
0.074 | 1590650 | 5 |
0.075 | 35100 | 3 |
Last trade - 15.59pm 06/09/2024 (20 minute delay) ? |
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