Bouleversee wrote:Dod101 wrote:Bouleversee wrote:
Obviously, it is down to the shareholders at the meeting at the end of the day so why say "accepted" rather than "recommended"? What I don't understand, to be precise then, is why they have recommended the offer which might be off-putting to other potential bidders waiting in the wings. However, I live in hope that such a low price might bring a few more interested parties out of the woodwork or that the sale will not go ahead at all.
Softbank took over Arm Holdings a few years ago to my annoyance as it was one of my best holdings and have now sold it on to a US company at a large profit. We need more chip makers in this country. And I seem to remember Fortress making allegations about a company which have recently been proved wrong but I could be wrong about that.
If the word 'accepted' has been used it is on the secondary site and of course by Fluke, possibly without thinking too much about it. As I think Gengulphus said, you really ought to go to the Morrison site. In the official statement they use the expression 'recommended offer'. I have never understood why people refer to secondary sites like cityam except as a news channel. If they want the information in all its glory then refer to the official announcement. I doubt very much that a recommendation from the Directors would put off any potential bidder, but it would seem that they have come to the conclusion that the new bid is as good as it is going to get. Who knows?
I think you are splitting hairs, Dod. City AM and the Today programme and all the subsequent news announcements on BBC said the offer had been accepted by the Board which does not necessarily mean that it will be accepted by all major or minor shareholders and this is what the company announcement says: "The boards of directors of Wm Morrison Supermarkets PLC (“Morrisons”) and Oppidum Bidco Limited (“Bidco”) are pleased to announce that they have reached agreement on the terms of a recommended all cash offer by Bidco for the entire issued, and to be issued, share capital of Morrisons (the “Offer”)". Surely this means so far as the Board is concerned, it has accepted the offer and recommends that other shareholders do likewise. ...
No - the company statement you quote means what it says: the board has agreed the terms of an offer that it feels it can recommend to shareholders. It says nothing about the board accepting the offer, for the very good reason that a company board as a body
cannot accept a takeover offer. That can
only be done in two ways, depending on what form the offer takes:
either by individual shareholders accepting with regard to their own shares
or by the shareholders as a body passing a couple of votes by 75% majorities to effectively accept with regard to every shareholder's shares (this offer takes the second form, but reserves the right to convert to the first if the Takeover Panel agrees to that change).
And I don't think pointing out the difference between 'accepting' and 'recommending' is splitting hairs, because of what the terms normally mean. If e.g. a second-hand car dealer makes you an offer for your old car and you accept that offer, it's a done deal; in the unlikely event that an acquaintance were to try to accept it without your permission, you would rightly protest that no, they cannot accept an offer for a car they don't own. In the same situation, if an acquaintance recommends you to accept the offer, you would give that recommendation whatever consideration it was due (which might well depend on how knowledgable you reckoned the acquaintance was about second-hand car values, as well as on things like whether their view of your eagerness to sell correctly reflected how eager you actually are), but you would be quite clear that it wasn't yet a done deal and might never be.
So the important difference between 'accepting' and 'recommending' in the normal use of language is that 'accepting' implies a done deal and 'recommending' implies the opposite. So talk about company boards 'accepting' takeover bids fairly strongly suggests that the deal is done and there's nothing to be done about it - and unfortunately, it isn't anything like as obvious to individual shareholders as in the example of the used car that company boards
cannot make a takeover bid become a done deal.
Of course, board recommendations do very commonly end up with takeover bids becoming done deals, as large shareholders very often accept or vote in line with them and small shareholders who don't agree with the recommendation usually don't hold enough shares to outweigh them. But there's a vicious circle there: the greater the extent to which board recommendations end up with takeover bids becoming done deals, the more small shareholders get the impression that the board recommendation has decided the issue and there's no point trying to change that decision - and so even more board recommendation end up with takeover bids becoming done deals... And that circle is made more vicious by all the things that make it easier for small shareholders to go along with the recommendation than the opposite, such as nominee holdings often being hard to vote.
Personally, I think the fundamental flaw in the system is the very existence of board recommendations. The board's basic job is to
run the company,
not to give financial advice to its shareholders. In the normal course of events, if a shareholder were to approach the company and say "I've been offered XXXp per share for my holding - should I accept?", the company would be obliged to respond along "Sorry, we're not authorised to give financial advice - you'll have to get it from your own financial adviser" lines. The situation is different when the offer is being made by someone bidding for all the shares the company has in issue, and I don't see any good (IMHO) reason for it to be different...
Gengulphus