After 6 months of waiting, our thoughts are wandering aimlessly while we wait, wait wait .....
IMO while Xtrata may like to make a lowball T/O offer and in desperation this may appeal to long suffering (? planned suffering) AOH retail holders with substantial portions of their portfolio on this baby, I'm not worried.
Remember that AOH has a large percentage of stable institutional holders - including a significant European base (presumably related to Finnish link).
Furthermore, particularly in a T/O scenario, I find it difficult to believe that the valuation results won't leak
Let's discuss a few what ifs:(CAUTION: My Wild Thoughts Only)
1) Xtrata declines the option and makes no offer (initially at least). Given the time we have been waiting for a 'quick return'!! and the relatively substantial retail position may posters seem to hold, I would expect an initial drop. Given that Finland is arguably worth the current price I doubt major holders will sell, particularly given the added potential of Roseby. Remember that potential will now have the backing of an independant valuation. Of course (in theory at least) no one will be told this value! Apart from the fact that my other holdings are crap and additional liquidity zilch, I would be a buyer on a fall. I suspect the insto's might take the opportunity to top up holdings. Given the present situation with Earnest Henry, I doubt that Xtrata will surrender quietly. They may be tempted to try and buy cheaply from highly frustrated retail holders selling on impulse or margin calls. Xtrata would also be competing with institutional buyers. I would expect that the share price would be back up quickly. I can't see this scenario being attractive to Xtrata - a quick dip on the price with no guarantee they will pick up significant numbers of shares, loss of leverage of having 51%, still need to make a bid and importantly opening the door to others. I don't see this 'what if' high on the probabilities. Should it eventuate, Roseby valuation comes into play - even if we don't know how much, we will all know that it is significant enough to have bowled Xtrata out. I for one would assume that at a minimum it is the average of the various broker valuations. Then add some more for a bit of blue sky, as it may be even higher. With Xtrata out of the way, the added potential from further exploration should add further blue sky and with AOH prospects now being promising and indeterminate it may attract the traders/optimists. I would have thought the short term doubling of the present price to be conservative, given the future earning capacity and the security of an income stream from Finland.
2) Xtrata declines the option and goes for a direct takeover. There has been much discussion about the longterm capping of the SP. Now this may or may not have been at the behest of Xtrata. Paradoxically I believe that the current low price is counterproductive to a lowball offer. Firstly the offer clearly has to be above the current share price. So no panic - our current position is insured. Secondly, the current share price is barely (if at all) accounting for Finland on its own. As in 'What If Numero 1', we can guess that the valuation was substantial and likely to be more expensive that the takover route. Problem for Xtrata we know they want it, we reckon its valuation is substantive, and the ballpark is now open to all comers with little downside to shareholder waiting and seeing. The problem (for Xtrata) with the current low SP is that a low ball offer would be transparently seen for what it is - low. I would argue that a higher current SP incorporating reasonable value for Roseby may have clouded the upside valuation enhancing chance of successful T/O. SP likely to drive higher for same reasons as #1.
3) Xtrata buys 51% - great. We leverage the other 49% to the max.
4) They buy 100% - why worry _ I am confident our directors won't have parted with our 49% for a song.
AOH Price at posting:
29.0¢ Sentiment: LT Buy Disclosure: Held
