The Lemon Fool

Could some kind soul tell me what I am missing here?

It was rolling along at 310ish, until the L&G Dutch assets purchase

http://www.investegate.co.uk/chesnara-p ... 01440316Q/

whereupon it jumps to 340ish ex action. So I now have the ability to buy more at 300; but it is not pricing the way I expect to see from a share with a rights issue, so it looks like a free lunch. Which is worrying, hence the question, what am I missing.

good question , i thought the same , dont know why the SP has risen.

this info from TDD brokers --

the response date is 07december.

(Entitlement ratio: 3.69-for-100) (Subscription ratio: 1-for-1) (Subscription price: GBP3.00) (New shares: 15th December 2016) (Option 1: Sub Shares to Lapse (Default)) (Option 2: Sub Shares to Exercise) (Option 3: Apply for Additional Shares) The default option will apply to all holders who do not make an election by the deadline date. Chesnara has announced an Open Offer, with an ex-entitlement date of 24th November 2016. Entitled shareholders have been credited with 3.69 subscription shares for every 100 existing Ordinary shares held. Each subscription share entitles the holder to subscribe for 1 new Ordinary share in Chesnara at a price of GBP3.00 per new share. Holders may also subscribe for additional shares in excess of their basic entitlement. Such excess applications may be subject to a scaling back.

I haven't found this easy to understand either. I am a holder of both Chesnara CSN and Legal & General LGEN. I was just getting around to topping up my holding of CSN at just over 300p when the deal was announced. In my mind usually the SP of the buyer tends to drop and the SP of the seller rises, but in this case they both have risen.
The offer document:-

http://otp.investis.com/generic/regulat ... 27&cid=694

states 'That it is a 'Firm Placing and Placing and Open Offer'. To me that means (all subject to shareholder approval) in the first part that a tranche of the shares are already placed with Institutions, in the second part that shareholders will be able to apply for shares in the Placing subject to 3.69 New Ordinary Shares for every 100 Existing Ordinary Shares and then there will be an open offer for the rest of the new shares that anyone can apply for. All priced at 300p with an SP today of 342.5. See:-

http://otp.investis.com/generic/regulat ... 11&cid=694

Assuming that this is an attractive deal for CSN then it would appear to be a no brainer that an existing holder takes up their full entitlement in the Placing and applies for as many shares as they can afford in the Open Offer - assuming that scaling back will apply.
However sometimes these things change between the deal being announced and closing date for the applications. Food for thought.

GN

GN100 wrote:

However sometimes these things change between the deal being announced and closing date for the applications. Food for thought.

GN

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yes! i wondered about selling now at 340 and buying back at 300 !

( not recommended! - the SP would certainly go higher still ! )

i wondered about selling now at 340 and buying back at 300

(You may notice I haven't got the hang of this quotes thing yet)

I thought about this too - having stood still price wise with the Phoenix PHNX purchase from Deutsche bank and their rights issue. It turns out that now I am the holder of all those lovely extra PHNX shares and that a nice profit early on in the deal has now dropped back to zero.

However, all deals are different but surely dilution will come in to play on the CSN deal??

GN

GN100 wrote:i wondered about selling now at 340 and buying back at 300

However, all deals are different but surely dilution will come in to play on the CSN deal??

GN

Sell and buy back is only a sure thing on the Open Offer - and you only get to do that for 3.69% of your holding.

The issue of dilution is what is exercising me - I don't understand the price movement. It appears I can at least attempt to fill my boots under the Excess Application, but I am hesitating on the basis that I don't understand the price movements that I am seeing.

It seems like the usual quandry with the open offer. If it's oversubscribed scaling back will apply, if undersubscribed you get all you apply for. This means a high risk if you do try and 'fill your boots' and the issue is undersubscribed.

GN

Some discussion of this over on the HYP Practical board:-

viewtopic.php?f=15&t=1071

GN