RPC - Down 5% - Rights Issue

[grimer]

Hi,

I hold RPC. The capital growth has always outstripped the dividend and the yield is below 2% - despite double digit dividend increases.

They're down 5% today and I found this announcement online:

RPC Group announces the proposed buy of Letica Group and a fully underwritten rights issue to raise gross proceeds of about £552m.

The upfront consideration to be paid to the Letica shareholders was $490m, and total consideration, which included an earn-out consideration, was up to $640m on a cash-free, debt-free basis.

The additional earn-out consideration of up to $150m would become payable, on a rateable basis, subject to Letica achieving EBITDA greater than $140m and up to $201m over the two-year period commencing on the later of 1 July 2017, and the first day of the month following completion of the deal.

The upfront consideration to be paid for Letica represents a multiple of 8.5-times Letica's adjusted EBITDA for the year ended 30 June 2016.

If the full additional earn-out payment was achieved, the total consideration payable represents a multiple of 6.4-times Letica's average adjusted EBITDA over the Letica Financial Period.

Is the reduction in share price due to dilution of capital or simply adverse market reaction? If this is simply a proposal, I presume this is just the market panic selling?

Thanks,

Grimer

[spiderbill]

I too hold, and it's done very well for me - one of the few of the old MF Share Advisor fire suggestions that has. Saw the drop this morning and went looking for info as you did. What I find very odd is that initially the share price rose on the news but then reversed sharply. Seems a very strange reaction and not at all sure what to make of it. Or what to do next. Of course what the rights issue will be priced at is rather important to any decision.

[spiderbill]

Just found another another article about it
http://ican.tddirectinvesting.co.uk/alliance-news/update-rpc-trading-in-line-as-it-acquires-us-based-letica-alliss-09-02-2017/
which gives the rights issue price at 665p

[Lootman]

This will be their third rights issue since I first bought RPC. Annoying from a record-keeping perspective but I can't complain about the performance. I've declined the rights every time and probably will here as well yet, even so, it's grown to be my second largest shareholding that I bought for my dividend portfolio. So I guess they are doing something right.

[grimer]

It's just come at a rather unfortunate time. I'm buying a house and have been toying with liquidating my ISA shares to ensure I have the cash ready for the deposit. I'd happily take up the rights offer, because the previous ones have worked out very nicely.

How long do these things take to progress and is it like an ex-dividend date where I just need to hold the shares on a certain date to qualify for the discounted rights issue - for example:

These were the timelines of the last two rights issues:

18 DEC 2014 RPC GROUP - Rights Issue
09 JAN 2015 RPC GROUP - Notification of Receipt of Entitlements
05 JAN 2016 RPC GROUP - Rights Issue
20 JAN 2016 RPC GROUP - Notification of Receipt of Entitlements
15 FEB 2016 RPC GROUP - Notification of Receipt of Cash Entitlements

If, for example, I had held RPC on 18 DEC 2014 could I have sold them between then and 09 JAN 2015 and still received the rights issue?

[spiderbill]

And another big drop this morning.
Anyone understand what's going on?

The actual takeover surely hasn't had any direct effect yet and with RPC's track record on takeovers there seems little to be worried about in terms of making a success of it. On the face of it this drop seems like a golden opportunity to pick up more shares and then get a preferential price for even more.
Seems too good to be true, am I missing something here?

[spiderbill]

Replying to myself!
It seems I was wrong - the takeover process is underway rather than somewhere on the horizon and the shares are now trading ex-rights which explains the further drop. The golden rule about "if it seems too good to be true..." applies as usual.

[grimer]

Replying to myself!
It seems I was wrong - the takeover process is underway rather than somewhere on the horizon and the shares are now trading ex-rights which explains the further drop. The golden rule about "if it seems too good to be true..." applies as usual.

I was surprised how quickly I received my official notification. I've elected to take up the full rights.

[Lootman]

I was surprised how quickly I received my official notification. I've elected to take up the full rights.

That was quick - you have until the 24th. I usually wait, just in case something strange happens.

RPC is the only holding I have in both my taxable account and my ISA, the reason being the British Polythene deal last year left me with extra RPC shares.

I'll probably take up the rights in the ISA and take the money in the taxable account, given that the proceeds will fall within the "small distribution" tax rules, meaning I can defer the CGT liability.

[Bouleversee]

Replying to myself!
It seems I was wrong - the takeover process is underway rather than somewhere on the horizon and the shares are now trading ex-rights which explains the further drop. The golden rule about "if it seems too good to be true..." applies as usual.

How is one supposed to know they are trading ex-rights? Being unaware that this rights issue was under way, I topped up holdings (formerly British Polythene) in my children's ISAs with Selftrade this morning and nothing in the trading process/quote or the trade confirmation said I would be buying ex-rights but subsequently they have been credited with rights based on their original holdings but not for the ones bought today. And since I bought the price has gone down. Irritating. Do any brokers indicate that shares are being sold ex-rights if that is the case? I would not have made today's purchases if I had known.

I have a holding myself in an I-web ISA who did not give me any advance notice of the rights issue but sent me an email today alerting me to a notification on my account which informed me of my allocation and asked for my instructions. Bizarrely, my portfolio shows a loss of a few hundred pounds on my nil paid rights which I have not yet taken up, whereas Selftrade is showing a profit on those of my children. I also have a certificated holding of RPC, again acquired as a result of the BPI takeover, and haven't yet heard anything about a rights issue from the registrars.

[spiderbill]

I was surprised how quickly I received my official notification. I've elected to take up the full rights.

No danger of that with my HSBC account - they are dreadfully slow to tell you about rights issues and then you have to wait for a letter giving a code to be used online!! Twice I've had to phone them about rights issues in the last year. I suspect my newer TDDirect account would be much more efficient if the RPC shares were with them.

[Lootman]

No danger of that with my HSBC account - they are dreadfully slow to tell you about rights issues and then you have to wait for a letter giving a code to be used online!! Twice I've had to phone them about rights issues in the last year. I suspect my newer TDDirect account would be much more efficient if the RPC shares were with them.

You are correct. TDDI emailed me yesterday to notify me the action was pending. And you can subscribe via their online site so there is no need for telephones or postal communications.

[Bouleversee]

The postman brought me the correspondence from Equiniti on Saturday afternoon. There was a letter, without any company heading/address, from RPC's Company Secretary dated 9 Feb. (presumably sent 2nd class post) and a Provisional allotment letter, a document 4 x A4 pages long in print so small that even with a magnifying glass it was difficult to read. (I don't usually have problems reading.) It took quite a while to suss out what I need to do and there are things that still raise questions: 1) Why is the address on the reply envelope different from that given in the document? 2) Why should one have to send this document back when it contains all the info. we might need, not otherwise supplied? 3) Why do they want us to enter sort code and cheque number rather than account number? 4) How could dealings in the rights start at 8 a.m. on Feb. 10 when some/most shareholders had not received notification of the rights issue and their entitlements by then and the allotment is only provisional?

I don't remember similar queries arising over past rights issues.

If there are any other certified holders reading, I should be interested to know when they received their allotment letters.

[Bouleversee]

I spent ages (admittedly with some delays/interrjptions) composing a reply on here with some significant input and queries but my post seems to have disappeared into the ether. I give up.