takeover scenarios

The Fin Rev has confirmed that Jack Cowin is the new potential bidder for RHD and he plans to commence due diligence this week. Hopefully RHD will confirm this morning that they are allowing due diligence.


Here are some of the possible outcomes from this:

Scenario 1.
Jack Cowin doesn't make a bid and the RHD board backs out of the Peoplebank bid because the experts report doesn't find the offer fair or reasonable. Then nothing happens. This is not necessarily a bad thing - the share price will drop in the short term but if RHD is starting to put in some decent profits (as it appears) then there is no reason why they can't be paying out 6+ cps dividends and that is going to support a pretty good share price.

Scenario 2.
JAck Cowin doesn't make a bid and the Peoplebank bid proceeds at 61.5 cents. Peoplebank gets the deal of the decade and the RHD shareholders get ripped off.

Scenario 3.
Jack Cowin makes a higher cash bid for the company and Peoplebank makes no counter bid. The JAck Cowin bid then proceeds. This can be a great scenario or a poor scenario depending on how generous the bid is. He can either go along with the boards compelling value idea, so anything marginally over 61.5 is going to be even better than "compelling value" or he can make a more ethical bid somewhere at the low end of the valuation received from his KPMG report - I'll guess 75-80 cents. It's a bit hard for him to now say a bid of something like 68 cents is great value although such a low bid would show up the silliness of the RHD boards current position.

Scenario 4.
Jack Cowin makes a higher cash bid and the Peoplebank makes a counter offer. This would be the best scenario for shareholders.

There are plenty more scenarios but I think the above four are the main ones. My money is on Scenario 4 as the most likely, followed by Scenario 3. If Jack Cowin makes a bid up over 85 cents then this increases the chance of Scenario 3. Conventional thinking would be that the company should be worth more to Peoplebank than to Jack Cowin. If the due diligence process throws up strong first quarter performance then both parties are going to be a little keener than we currently realise.