wa1 Chart, page-1873

@Clairvoyant239

Takeover offers are usually at a premium to the share price. Bidders will use the VWAP and then package an announcement offer to make it look like they are doing shareholders a favour by giving them an offer that is above that rate. There are a few ways it can transpire.

1. In the case of AZS, SQM lobbed some laughable offers (still above the trading price), but management ignored them and didn't even disclose the initial takeover offers until subsequent higher offers became public. For example in our case, a company comes tomorrow and offers $14 unconditional takeover. The board may not even tell us about it given our future prospects.

2. Another company provides an offer, could be accepted by the board or it could be a hostile offer. This generally sets a new floor for the share price. So in the case of the $14 example above, the share price will jump to $14 immediately because that is the new bid. This is irrespective of whether we take the offer or not. The fact that is has been tabled has given us a new floor to work from.

3. A less likely but slimy tactic we have seen on the ASX of late is a company providing a conditional offer, and then pulling the offer, causing the price to fall. MIN resources acquired ESS for less than an initial offer in their takeover of Pioneer Dome. Albermarle offered $3 for LTR only for Gina Reinhart to amass a blocking stake. Once ALB pulled the offer, the share price fell overnight by a big amount.

Giving a crappy offer doesn't mean the market will think that Luni has less value. Think about when you go to an auction, you start with your lowest bid and work your way up. A lowball offer often has nothing to do with the quality of the asset in question.

Hope this helps!