Sold half of mine, and will consider selling down the rest.
Reason to sell:
- No likelihood of franked dividends. They don't have any franking credits at the half year and note unlikelihood of generating. Otherwise, this could have increased after tax value of $5.00 offer with a franked dividend.
- New financial year yesterday, so regardless, the capital gain will likely fall within this tax year if deal completes (I've still got some within 12 months which may scrape in depending on timing of completion of the scheme)
- No guidance on the scheme timing. Yes, approvals take a while but what has the bidder been doing - particularly on Foreign Investment Approval. The "Reverse Break Fee" does not apply if approvals are not obtained by the Bidder. With the time having passed, it would have been nice to see this risk on the Bidder (Malteries) i.e. they pay $15M if they don't get necessary approvals. The only one that worries me is merger control and anti-trust / competition-related regulatory approvals in relevant jurisdictions. Often routine.
- Possibility that this is still 4-6 months out from completion. Trading at 4.3% discount at $4.79, so effective interest rate is around 8% or so if you assume it completes in under 6 months (higher if you think it completes earlier). Risk of deal not completing has significantly narrowed but I sold half for option value in the event there is sell off in the broader market.
UMG Price at posting:
$4.77 Sentiment: Sell Disclosure: Held
