scenarios

To those wise or silly enough to sell/hold, I thought I'd start a thread on potential scenarios that might play out for SBL/LG holders. Over the last few weeks/months, some of you have asked what happens to your shares after 90%. I didn't have an answer, and haven't posted much on HC until more recently anyway, but thought I'd do a bit of soul searching to see if I could provide some thoughts. And decided that a long post on potential scenarios for you to argue over might be the most informative approach.

I'll stick to scenarios for ASX securities and SBL.

But perhaps someone with some deeper research and knowledge into LG could add or start a new post on what some of the curveball options might be for LG, where they might have an effect on the SBL shareprice while it remains on the ASX. So:

Some posters mentioned they sold rather than wait for the cash. What's to say that if LG reach over 90%, they will offer cash?

From the rudimentary reasearch I've done, cash offers are mostly met with like for like cash offers to balance true value. Scrip offers could come through as either cash offers to mop up or like for like exchange of securities.

So the possibilities if LG reaches 90% might be:

1. Offer of 1/34 scrip, or
2. Offer of 0.02c cash.

If I'm right (tell me if not), then how might the other taker over (and any other factors)affect a like for like scrip buy out?

How might a 0.02 cash offer look if there are substantive changes in market value, either down or up?

I haven't researched past the last 6 months in Australia, but I didn't see a TO offer (scrip or cash) any less than the original offer.

My guess is that this is most likely due to historic class action that has set a precedence for 'fair value' ... that hostile companies understand this precedence and what it means for their offers, and want to avoid legal costs in fighting a previously upheld court ruling.

That's just an educated guess from me, I never did the research so please correct me if I've got that wrong!. IT seems logical though, because otherwise many of the efforts to mop up the final shares would be aimed at undercutting the cost of the buy out, and they'd be successful with getting lower prices because the transaction is compulsory ... if you get my drift.

Bear in mind that a couple of TOs I looked at do extend, with a higher price to capture the attention of belligerents like us. But I really figure that is unlikely with LG, so I'm going to discount that out of my set of scenarios (although it is technically possible).

If any of you are panicked into selling at 0.012/0.013, then just have a bit of a look at recent TO's to help settle your nerves. While it might not cover purchase price, 30-40% from todays prices is a realistic scenario if they take us out at 0.02 and the LG SP holds near enough to current values. Having done that research, I'm nopt going near a sell order until I know what the next offer will be!

Next issue:

LG's aggressiveness is appealing, but loss of focus from SBL, now that its still at under 80%, is slightly worrying to me.

So another scenario might be that LG do not actively pursue our shares, and are content with holding 75%. If this is true then SBL remains SBL, but it is a majority shareholder (and has control over management). But in a 6 month timeframe it seems unlikely that all the effort to takeover will just stall.

If this does happen though, and we enter a period of TO stagnation, then the fate of the SP really relies on:

1. Ongoing success for SBL. LG will need to show its existing shareholders that the dilution was worth the aquisition, lest they take profits above 0.80 on the sgx and pump their investments into something else.

2. Other components of the LG business. News from Mali or any other positive drivers - but also negative ones.

Here's another scenario. LG's business model fails, and they either sell the existing holdings back onto the ASX, or a second takeover deal emerges. I think this is a pretty bad scenario, and an unlikely one. A second bidder would only emerge now if LG was in crisis, and would take the asset at much lower prices. We then realise some really major losses, or hold and hope. But that's a low likelihood scenario to me.

And ...

LG get's taken over? Hmmm.

Finally, I don't tend to get too much time to post or conduct fundamental research, so if anyone has any knowledge about previous partial take ups of scrip offers and the outcomes )for better or worse) then I'd be really interested to hear them.

COLCOM