Firstgroup tender offer

[Gengulphus]

Firstgroup (symbol FGP) last had a HYP-qualifying yield getting on for 9 years ago, and judging by its long-term share price chart, probably failed to meet any sensible dividend sustainability criteria for a year or more before that, so is probably only of interest to highly dedicated non-tinkerers who have been HYPing for a decade or more. So this post probably has a rather limited audience! And some of those may well have seen tjh290633's mention of it in viewtopic.php?p=453493#p453493, but I'm starting this thread firstly to draw it to the attention of any who haven't, and secondly so that the question of how HYPers might want to deal with it can be discussed without going seriously off-topic for that post's thread, which is about HSBC.

So as tjh290633 says there, Firstgroup have announced a tender offer. This is quite an unusual type of corporate action which people may not have encountered before, but a brief summary is that they're offering to buy back up to roughly 38.9% of their shares in issue at 105p per share, making the offer directly to registered shareholders rather than selling them on the market. For those shareholders whose holdings are in a nominee account (as opposed to being certificated or in a CREST account), the registered shareholder is their broker's nominee company, so the offer can be expected to come via their broker, not directly.

So owners of FGP shares can expect to receive an invitation to make their shares available for this buyback by the company (known as 'tendering' them), either from the company or from their broker depending on how the shares are held. As far as the company is concerned, they'll be able to do that up to 1.00 p.m. on 29 November 2021, but nominee brokers will set an earlier deadline to give them time to collate the responses and pass them on to the company, and even those who hold their shares certificated or in a CREST account should note that the deadline is on the time the company receives the response, not the time the shareholder sends it.

Those tendering their shares can tender any number up to their full holding. Shares tendered up to about 38.9% of their full holding will be bought back, provided only that the tender offer goes ahead (it is subject to shareholder approval at a general meeting of the company). Shares tendered in excess of that might or might not be bought back - they'll only be bought back to the extent that they can be matched to other shareholders tendering fewer than the 38.9% of holdings they're entitled to get bought back. If they cannot be matched entirely, then shares tendered in excess of 38.9% will be scaled back.

One thing to note is that in the case of nominee account holdings, such scaling back might end up being done by both the company and the broker's nominee company, which can lead to some odd-looking results - as an example, if the shareholders of the company collectively tender 45% of the shares in issue, then the company will scale back all registered shareholders who tender over 38.9% of their shares. But if you tender your full holding and your broker's clients collectively tender only 35% of their shares, your broker's nominee company will have tendered less than 38.9% of its registered shareholding, so all of its tendered shares will be bought back, including your full holding. So the net result in that case is that the company announces that scaling back has been done - but it hasn't happened to your holding... Basically, information provided by the company about how much scaling back has been done only applies to registered shareholders, so not to those who hold in nominee accounts.

Last but not least (given that HYPers who still have FGP in their HYPs are probably highly dedicated non-tinkerers), doing nothing about this tender offer won't result in any sales from your HYP, nor the sort of effective sale that can result e.g. from a rights issue (where doing nothing usually results in the part of the capital value of the holding that is split off into the rights being sold off by the company and returned to you as a lapsed-rights payment).

Gengulphus

[Gersemi]

Thanks Genulphus, I am one such shareholder, I bought in 2010, and for some misguided reason topped up in February 2013, though I didn't take advantage of the rights issue in July 2013! I have been intending to sell this holding, so I'll probably tender all my shares.

[GrandOiseau]

Got an email today and much appreciate the explanation Gengulphus - as you don't recall such an action before.

I bought as an HYP share in 2010 for £3.85. Oh dear. Though thankfully not a significant part of my wealth. I haven't done much of anything with my HYP for a while.

So if I do nothing my holding won't change? Wondering if there any prospects for this dog...

[Gersemi]

Just to finish this off, as I indicated I offered my entire holding for tender, through a Halifax Sharebuilder account. 99.6% of my holding was redeemed.

As per https://www.investegate.co.uk/firstgrou ... 0000P181F/ the result of the tender offer was as follows:

618,262,070 Ordinary Shares were validly tendered in the Tender Offer and, following application of the scaling-down mechanism (as set out in paragraphs 2.13 to 2.15 of Part IV of the Circular), 476,190,476 Ordinary Shares will be purchased at a price per Ordinary Share of 105 pence, for a total cost of £499,999,999.80. This represents approximately 38.9 per cent. of the Issued Ordinary Share Capital of the Company. Shareholders who tendered more than the 38.9 per cent. Guaranteed Entitlement were scaled-down by approximately 53.6 per cent. of the number of excess shares tendered.

As I managed to tender considerably more than this I assume that Halifax submitted one offer on behalf of all shareholders within the Sharebuilder account and a large number of those didn't tender their entitlements. A pity there weren't a few more as I now have a silly little holding that isn't worth the commission to sell.

[kempiejon]

Just to finish this off, as I indicated I offered my entire holding for tender, through a Halifax Sharebuilder account. 99.6% of my holding was redeemed.

Same for me, I had both ISA and nonISA holdings so I now have 2 rumps but I can ignore rumps in my portfolio.

[csearle]

...

I don't hold but am very impressed with your explanation of the process and thank you for it. An Education. C.