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Chesnara Open offer/Rights issue.

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88V8
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Chesnara Open offer/Rights issue.

#9773

Postby 88V8 » November 28th, 2016, 6:02 pm

Chesnara. CSN. Zombie life company.
Recently bought the Dutch business of Legal & General.

An Open Offer they call it, that being what it is. The distinction being that one has an entitlement, but can subscribe for additional shares on the understanding that they may be scaled down depending on response.

Offer is 3.69 shares per 100 held, at 300p.
Current price c344p after a recent jump from 310p.

Ex date 24 November, pay date depends on your broker but around 7th December.

Yield 5.3% historic.
Divi covered 1.65.

Market cap £436mio. Some hold, including me.
The company seems to be doing well.
Will be subscribing for my allocation and some more.
Minimal downside is that one has to ante up the cash for the 'some more' without knowing whether one will receive them.

I also hold the sister zombie, Phoenix PHNX, which has a higher yield and similar cover. Half-dead. It's the way to be.

V8

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Re: Chesnara Open offer/Rights issue.

#9814

Postby Breelander » November 28th, 2016, 8:41 pm

Holders should note that this is NOT a rights issue - you won't get any 'lapsed rights' value if you decide not to take up the offer. Details here...

Chesnara PLC wrote:Qualifying Shareholders should be aware that in the Open Offer, unlike in a rights issue, any Open Offer Shares not applied for will not be sold in the market or placed for the benefit of Qualifying Shareholders who do not apply under the Open Offer, but will be subscribed for under the Placing with the net proceeds retained for the benefit of the Company and Qualifying Shareholders who do not apply to take up their Basic Open Offer Entitlements will have no rights under the Open Offer to receive any proceeds from it.
http://www.investegate.co.uk/chesnara-p ... 01440316Q/

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Re: Chesnara Open offer/Rights issue.

#9984

Postby spiderbill » November 29th, 2016, 12:33 pm

Just to be clear (because that is a long and complicated document!) will this be handled by our brokers in a similar way to a rights issue or do we have to actually handle it ourselves?

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Re: Chesnara Open offer/Rights issue.

#10002

Postby Dod1010 » November 29th, 2016, 1:05 pm

ATS has already sent me the bumph. I have subscribed my full entitlement according to my holding. I do not have spare cashto subscribe for any more. I think though that they should be a good buy at £3. Note that this company is not quite as 'zombie' as Phoenix Holdings. This new purchase is alive and kicking in the Netherlands and they have a similar operation in Scandinavia.

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Re: Chesnara Open offer/Rights issue.

#10033

Postby spiderbill » November 29th, 2016, 2:20 pm

Nothing in HSBC's Corporate Action section about it so I've sent them a form email asking about it. Doubtless they'll reply by the time it's over!

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Re: Chesnara Open offer/Rights issue.

#10093

Postby Jon46 » November 29th, 2016, 4:26 pm

Dod1010 wrote:ATS has already sent me the bumph. I have subscribed my full entitlement according to my holding. I do not have spare cashto subscribe for any more. I think though that they should be a good buy at £3. Note that this company is not quite as 'zombie' as Phoenix Holdings. This new purchase is alive and kicking in the Netherlands and they have a similar operation in Scandinavia.


Ditto, replied this morning to take up my alloc .in full , but without that much enthusiasm, did not try for more. Just trying to avoid being diluted.

I agree with Dod that CSN is not as 'zombie' as PHNX, and as a solid outfit CSN generally negotiate decent deals, but what worries me is the very enthusiastic sp reaction so far in relation to what is a business enhancing rather than a business transforming deal. Would not be surprised if they could be picked up again well below £3 post corporate action, as they were last time I topped up.

Jon

Holds both.

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Re: Chesnara Open offer/Rights issue.

#10122

Postby midgesgalore » November 29th, 2016, 5:35 pm

HL sent me a secure message today.

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Re: Chesnara Open offer/Rights issue.

#10164

Postby 88V8 » November 29th, 2016, 7:47 pm

Breelander wrote:Holders should note that this is NOT a rights issue - you won't get any 'lapsed rights' value if you decide not to take up the offer.


Good point, thankyou.

I've not participated in an Open Offer before. I wonder what the relative merits are for the issuer.

For the shareholder, it seems hard to calculate the post-notRights value, as one doesn't know the possible extent of dilution.

V8

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Re: Chesnara Open offer/Rights issue.

#10173

Postby spiderbill » November 29th, 2016, 8:16 pm

I think I read in the Investegate document that if you didn't take up the offer the dilution would be about 15%.

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Re: Chesnara Open offer/Rights issue.

#10177

Postby GN100 » November 29th, 2016, 8:31 pm

On the basis of a 15% dilution, taking the SP today as circa 340p, after the new shares have been issued then we are looking at a new SP of circa 290p. Not attractive having just paid 300p for them. On this basis it's not attractive either to subscribe to ones allocation - also at 300p.
In fact it would be more attractive to sell your existing holding at 340p and rebuy later when the dust has settled.

Or am I looking at this in the wrong way?

GN

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Re: Chesnara Open offer/Rights issue.

#10188

Postby jackdaww » November 29th, 2016, 8:48 pm

spiderbill wrote:I think I read in the Investegate document that if you didn't take up the offer the dilution would be about 15%.


============================

are we quite sure about this 15% dilution ??

. :?: :?: :?:

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Re: Chesnara Open offer/Rights issue.

#10192

Postby Jon46 » November 29th, 2016, 9:02 pm

jackdaww wrote:
spiderbill wrote:I think I read in the Investegate document that if you didn't take up the offer the dilution would be about 15%.


============================

are we quite sure about this 15% dilution ??

. :?: :?: :?:


The offer document states:

11. FINANCIAL EFFECTS OF THE ACQUISITION AND THE ISSUE

The Firm Placing and Placing and Open Offer will result in 23,333,334 New Ordinary Shares being issued. Upon Admission and assuming the exercise of options under any share option schemes, the Enlarged Issued Share Capital is expected to be 149,738,226 Ordinary Shares (excluding 147,535 treasury shares). On this basis, the New Ordinary Shares will represent approximately 15.6 per cent. of the Enlarged Issued Share Capital. A Qualifying Shareholder who does not take up their Basic Open Offer Entitlements in full (and does not receive any other New Ordinary Shares pursuant to the Issue) will have their shareholding in Chesnara diluted by up to approximately 15.6 per cent. as a result of the Issue. Furthermore, a Qualifying Shareholder who takes up their Basic Open Offer Entitlements in full (and does not receive any other New Ordinary Shares pursuant to the Issue) will have their shareholding in Chesnara diluted by approximately 12.5 per cent. as a result of the Firm Placing.


So the dilution with offer taken up is 12.5%.

Jon

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Re: Chesnara Open offer/Rights issue.

#10212

Postby GN100 » November 29th, 2016, 11:04 pm

Using the 12.5% dilution figure which assumes that you subscribe for your allocation at 300p then, using again today's SP of circa 340p, then when the dilution has happened, surprise, surprise the new share valuation would be circa 300p. It seems therefore that to preserve your position you need to take up your allocation. It also accounts for the SP rise to it's present level.
I am tempted to sell all my holding at the recent 340p price level and wait to see how things settle before re buying my holding. Naturally that probably will mean that the new SP remains stubbornly high and I can't get back in without paying for the privilege. Oh for a reliable crystal ball.

GN

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Re: Chesnara Open offer/Rights issue.

#10219

Postby Alaric » November 29th, 2016, 11:59 pm

GN100 wrote:Using the 12.5% dilution figure which assumes that you subscribe for your allocation at 300p then, using again today's SP of circa 340p, then when the dilution has happened, surprise, surprise the new share valuation would be circa 300p.


Thanks for that analysis which means that taking up shares in addition to the allocation isn't "free wealth".

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Re: Chesnara Open offer/Rights issue.

#10224

Postby tramrider » November 30th, 2016, 12:22 am

The Firm Placing and Placing and Open Offer will result in 23,333,334 New Ordinary Shares being issued. Upon Admission and assuming the exercise of options under any share option schemes, the Enlarged Issued Share Capital is expected to be 149,738,226 Ordinary Shares (excluding 147,535 treasury shares). On this basis, the New Ordinary Shares will represent approximately 15.6 per cent. of the Enlarged Issued Share Capital. A Qualifying Shareholder who does not take up their Basic Open Offer Entitlements in full (and does not receive any other New Ordinary Shares pursuant to the Issue) will have their shareholding in Chesnara diluted by up to approximately 15.6 per cent. as a result of the Issue. Furthermore, a Qualifying Shareholder who takes up their Basic Open Offer Entitlements in full (and does not receive any other New Ordinary Shares pursuant to the Issue) will have their shareholding in Chesnara diluted by approximately 12.5 per cent. as a result of the Firm Placing.


Offer is 3.69 shares per 100 held, at 300p.



I wonder why Chesnara only suggested buying 3.69 shares per hundred existing shares, if that leaves the typical holder with 12.5% less of the company.

Why did they not recommend buying about 18.5 shares per hundred, which should leave the holder with the same proportion of the expanded company and would ensure all the new shares were sold if the current holders take them up at this ratio?

Who do they want to buy the other shares?

Tramrider

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Re: Chesnara Open offer/Rights issue.

#10242

Postby Dod1010 » November 30th, 2016, 7:36 am

Alaric wrote:Thanks for that analysis which means that taking up shares in addition to the allocation isn't "free wealth".


Not a lot to do with Rights Issues/Open Offers yields 'free wealth' as you call it. Even selling your rights in a Rights Issue only gives the illusion of free wealth. Your cost is dilution of your share of the company and thus in consequent dividend income.

As for why an Open Offer? I can only imagine that it must be cheaper for them than a more common Rights Issue, or maybe they would like to broaden the shareholder base. Someone who understands this better than I can will no doubt answer. Meanwhile it seems to me that maybe they are able to issue new shares at a higher price than in a Rights Issue, but that we might as well subscribe for our entitlement and then wait until the dust settles and consider making up our 12.5% dilution by buying in the market at a later date. hedging our bets I suppose.

Dod

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Re: Chesnara Open offer/Rights issue.

#10250

Postby Jon46 » November 30th, 2016, 8:23 am

GN100 wrote:Using the 12.5% dilution figure which assumes that you subscribe for your allocation at 300p then, using again today's SP of circa 340p, then when the dilution has happened, surprise, surprise the new share valuation would be circa 300p. It seems therefore that to preserve your position you need to take up your allocation. It also accounts for the SP rise to it's present level.
I am tempted to sell all my holding at the recent 340p price level and wait to see how things settle before re buying my holding. Naturally that probably will mean that the new SP remains stubbornly high and I can't get back in without paying for the privilege. Oh for a reliable crystal ball.

GN


Not quite. According to the document, the Economic Value post deal will have increased by 27.7%, taking into account the increase in the number of shares post deal, and starting with the sp before announcement, the post deal sp should therefore be around 330p. Now the EcV is their assumption when all has settled in which will take a while(ie best scenario), and the base sp fluctuated a lot before. So like others, I think that there might be sp weakness post deal, for a bit.

I was tempted too to sell and buy back until I did the sum above and concluded against doing so as not clearcut. But I will top up back to weight if below £3.

The fact that as private shareholders we were not able to participate fully is nothing new, way of things.



Jon

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Re: Chesnara Open offer/Rights issue.

#10305

Postby Gengulphus » November 30th, 2016, 10:59 am

spiderbill wrote:Just to be clear (because that is a long and complicated document!) will this be handled by our brokers in a similar way to a rights issue or do we have to actually handle it ourselves?


Assuming you've got it in a nominee account, the broker has to handle it - you're not a registered shareholder and the company / its registrars cannot take your instructions (unless the registered shareholder - i.e. your broker's nominee company - instructs them to).

To deal with the other possibilities, if it's a certificated shareholding, you have to deal with it because there is no permanent link of it to a broker, and if it's held in a CREST account, it should probably be handled via your broker but check with your broker if you hear from the company and not from the broker.

Gengulphus

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Re: Chesnara Open offer/Rights issue.

#10320

Postby spiderbill » November 30th, 2016, 11:28 am

Thanks for the clarification Gengulphus, I'm sure I'm not the only one who is dealing with this type of offer for the first time and is glad of a little reassurance.

Interesting calculations on the dilution - yeah, these various kinds of offers are never as attractive as they initially seem once you dig into the figures. Basically just a way for the companies to persuade you to give them money while making you think you've got a bargain. Of the various rights issues I've dealt with all but two have felt like a bit of a con at the end of the day - only RPC (not a HYP share) has felt like I got anything positive out of it. On balance this one feels neutral so I'll probably go along with it as I'd been thinking of increasing my holding anyway if the price dipped (which it seems to do from time to time).

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Re: Chesnara Open offer/Rights issue.

#10346

Postby TheDove » November 30th, 2016, 12:03 pm

This just received from HL

"As outlined in our message dated 29 November 2016, Chesnara plc has recently announced details of an Open Offer giving you the opportunity to buy additional Shares. As a holder of Chesnara plc Shares in your Hargreaves Lansdown Vantage Stocks & Shares ISA you are entitled to participate in the Offer. It has since come to our attention that excess applications can only be made for up to two times the number of Ordinary Shares held at the close of business on 23 November 2016. Any applications above this level will be ignored and treated as an application for your maximum excess amount".

I normally wait until the last moment to take up rights etc, but I wonder what might have happened to 'excess' applications already received ?


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