TAKEOVER CONCERNS, page-5

The hostile takeover question was raised at an AGM a few years ago and I believe Howard Digby answered that an acquierer is more likely to negotiate than to attempt an on market takeover. It was reported on HC, so one can search for the posts.

From memory Digby said something along the lines of a large accumulation would be flagged by significant holdings notices and the volume of liquidity soaked up would drive the share price much higher. I believe there is some value to this argument, look at today's volume so far, 5 million sold drops the share price 8%, and I've seen other days where 20-30 million shares are bought and the share price rises by 13%. The sell side rapidly gets tighter when pool of standing sells are absorbed and the inital profit taking trigger sales a wiped, which means the price rises more steeply as the move to accumulate continues. Imagine where the price would be if a significant holding notice lands and a steady accumulation looks to increase by a couple hundred million shares?

The outcome would be that if aggressive on-market buying occurs it will drive the price up to the degree that something close to fair value will likely be reached. So when the time comes the shareholder can take fair value from the negotiated or sell on-market to the hostile acquirer, with the caveat that if you sell too soon then it is possible to miss a lot of upside.

Obviously, that answer was given years ago and the RnD situation has changed, but the dynamic of on-market accumulation that Digby laid out would still stand.

If the board, has changed in their thoughts in light of recent developments I'd love to hear their take. Cheers.