Takeover (Focussed thread please)

While Takeover (T/O) may be off the cards for now, I thought I would start this thread, just in case we come to it.

PLEASE, let’s keep this thread clean and focussed and aim for the posts to actually have content or generate useful and relevant discussion; positive or negative. Please feel welcome display maturity to shake off (likely deliberate) "irritating" posts that may get under your skin ... or "take it outside", ..., there is a banter and general discussion thread for that on MSB forum.

Let’s start with a couple of relevant links that explain T/O rules in quite simple terms:

https://takeovers.gov.au/resources/key-concepts/summary-takeover-provisions

https://content.allens.com.au/the-allens-handbook-on-takeovers-in-australia/contents/

The following is *my understanding* and my experience with T/O (which may be wrong - this is not to be taken or used as advice in anyrespect. DYOR):

A shareholder need to announce T/O if their holding reaches 20% (bar exceptions such as the creeping rule that allows 3%\ increase in holding every 6 months). A holding of less than 20% does not stop a bigger to inform of their intent.

A bidder needs to give at least 1 month notice/time to shareholders to consider the bid. The bid can be extended several times but not beyond 12 months from the initial bid. The bidder will need to inform of their position as their holding change/increase.

*A* (*NOT* ANY) bidder needs to pay the maximum bid price to those who sell their shares under the bid by accepting the T/O bid offer (but not for example to those who sell their shares on market after the T/O announcement). That is, if a bidder increases the bid price they will have to back pay those who earlier sold their shares *to that bidder* under the T/O bid for a lesser price. NOW!!! HERE IS THE CRITICAL point: If a new/competing bidder comes with a higher bid price, the new bidder does not have to back pay the price differential to those who went head over toe and sold their shares (for a lesser price) to the first/earlier bidder! As far as the new bidder is concerned, all those who had sold their shares, are out of the equation. The new bidder only deals with those who hold at the time of their new bid! A new bidder may end up buying the shares of the earlier bidder for the higher offer. And YES, the first/earlier bidder will pocket the profit NOT those who sold early to the first/earlier bidder!

Following a first bid, it is (almost) always the case that a first bid is a low-ball and there will be higher bids, either by the same bidder or another bidder, and usually keep competing.

Now, again, the risk of going head over toes and selling shares too early in the T/O process, is that a different/later bidder, will not pay back the new/higher price to those who had already sold their shares (even if they had sold under the bid offer to an earlier bidder). Hence, to me, there is NO sensible reason to sell the shares the shares too early. BUT some may say; a T/O bid may fail and the SP may drop back! Yes of course that may be the case, but it is then when it will become critical to think of the value of a company. A failed bid does not necessarily mean a company will not be attractive to future T/O candidates and it is usually for a good reason, as the shareholders obviously feel the bid is a low-ball and not reflecting the value of the company.

A 90% holding will be required for compulsory takeover (and 75% of that will have to be acquisition under the T/O bid). That is, if a bidder reaches 90% holding, *ONLY* then they can force buyout the other 10% at a latest bid price. Now here is my experience; even if there is no blocking power, e.g., 25%, then if enough shareholders with a total of at least 10% resist the T/O, or do not accept its conditions, then the bidder will have to do what it takes to make any part of the remaining holders happy to reach 90%. In a sense, the 10% will practically hold the power/leash. For example, if the resisting >10% demand higher price, the bidder may have to consider it. Now, of course if the bidder agrees to pay higher price to them, then the bidder will have to pay the same price to those from whom the bidder earlier bought shares under the T/O bid - now aging, here is the point: If the bidder is not the same bidder which some sold their shares to too early, then those who sold will miss out - quite possibly by a substantial amount.

Now, more specific to MSB:

A blocking voting power is already in place (GG+SI=25%) and likely other LTH (including myself) will also add to this. Hence no real cause for concern ... unless GG & SI work together *with* a T/O bidder. I have seen this before with other companies where the management "unanimously” recommended a T/O, and the shareholders simply ignored it.

Usually Big Pharma do not take the hostile T/O approach as they want to maintain good relationship with often smaller drug developing companies. They tend to approach as a partner in clinical trials etc. However, considering MSB's prime position in the game, with much sought after "gold standard" science/treatment, and the late stage it is at with its drugs and its indications, add to that kinder political/regulatory environment to cell therapy now, any T/O bid will quite likely trigger competing T/O bids, likely by BIG pharma … and gloves will come off. In that case the retail holders will just simply need to sit back, relax and do nothing, and enjoy the show, bidders fighting and beating one another in offering higher price. In a scenario like that, those selling too early will likely regret (as explained above).

Now, what I am unsure of is whether there are sufficient holdings by other retailers than GG and SI to "unite" to resist a T/O if they feel the offer is not a suitable representation of value but GG+SI will take the opportunity to cash their fortunes.

To me, MSB is worth every share to resist a T/O and hopefully either create better opportunities once we have more approvals or at least force a T/O to pay a decent price.