Feltex (FTX) - All over for shareholders

[kura]

quote:Originally posted by minimoke
Which is why I'm suggesting GH got $203m in value for $140m.

Quite correct, but whenever receivers sell anything, it is generally a "fire sale" no body would buy anything off a receiver if it wasn't dirt cheap.

[rawdata]

quote:Originally posted by kura

quote:Originally posted by minimoke
Which is why I'm suggesting GH got $203m in value for $140m.

Quite correct, but whenever receivers sell anything, it is generally a "fire sale" no body would buy anything off a receiver if it wasn't dirt cheap.

Eric Watson knows all about about 'dirt-cheap' assets from receivers - Powerhouse.

[rawdata]

Live and learn from experience - preferably the painful experiences of others.

Too many bought Feltex as a recovery story - failing to appreciate that the company was living on borrowed times with a Board and management team bereft of talent and drive.

[kura]

quote:Originally posted by rawdata

quote:Originally posted by kura


Quite correct, but whenever receivers sell anything, it is generally a "fire sale" no body would buy anything off a receiver if it wasn't dirt cheap.

Eric Watson knows all about about 'dirt-cheap' assets from receivers - Powerhouse.

I recall being told at school "it is the exceptions that prove the rule" (Powerhouse seems a good exception)

I also wonder about the expression "dirt cheap" as I don't know about the rest of you lot, but in my part of the country, a patch of dirt sure aint cheap !

[Lizard]

One question - do GH acquire the receivables but not the payables? I'm not quite sure how those are handled in purchase from receivers as a going concern?

[Sideshow Bob]

'Bizarre' acts killed Feltex
08 October 2006

Directors were more concerned with reputation than reality, say sources close to the deal. Garry Sheeran reports.


Feltex directors' concern for their own reputations drove a nail through the heart of a sick company and through small shareholders' hopes to save at least some of their money.

Sources close to Godfrey Hirst, the company which last week bought the assets of Feltex from receivers, said a near-certain 12c-a-share deal for Feltex shareholders was blown by directors' "bizarre" actions after a buy-out had been agreed.

They also said Feltex refused to countenance an earlier reverse takeover offer from Godfrey Hirst which would have realised long-term value for the company. Had that deal gone through, Feltex shares could now be trading at close to $1, they said. But it was rejected because it would have crystallised short-term losses for shareholders.

"It was all about reputations," one source said. "Directors were always looking for something with a bit of blue sky in it, no matter how tenuous it might be. But they refused to countenance any proposal that drew a line in the sand for the company, stopped the music for them, and showed clearly what the company was really worth."

The buyout deal signed off in early August by both companies and negotiators for Feltex bank ANZ, did just that.

The proposal, which would have seen Godfrey Hirst buy Feltex's assets and delist the company, would have returned $18 million of the $243m that shareholders had invested in the business.

Coming after more than a year's negotiations and several non-consummated deals, Godfrey Hirst negotiators thought they had a deal.

They were then disconcerted to see Feltex continue stock exchange announcements saying they were still free to accept alternative proposals.

It was their legal right to say this, but, after the failure of the Talley's and other potential "saviours", this appeared to Godfrey Hirst to be one last ditch attempt to secure another tyre-kicker for the seriously ill business.

They were dismayed to see their 9c to 12c-a-share offer being portrayed as possibly decreasing to nothing in the wash-up of the sales process.

The emergence, two days later of the Turner brothers' bid for Feltex, saw Godfrey Hirst withdraw its offer. With it went all hopes of at least 12c-a-share for shareholders when the bank refused the Turner bid and put the company into receivership.

The one gamble which paid off for Feltex - but which proved costliest to shareholders - was the decision to float the company in 2004.

Last week it was disclosed by banking sources in Australia that the ANZ loan to Feltex had been a problem for the bank for several years before the float.

In fact, Godfrey Hirst's first pitch for Feltex had been tentatively made during a difficult period for the company when owned by CS First Boston in 2002 - and forcefully rebutted.

The float came on the back of two exceptionally good years for the building and associated industries in both Australia and New Zealand in 2003-04.

But the inevitable downturn in a notoriously cyclical business had Godfrey Hirst back on the prowl in April last year.

Initially advised by investment bank UBS in New Zealand, that role was taken over in March this year by leading Australian corporate restructuring advisor KordaMentha. KordaMentha's involvement came at a time when Godfrey Hirst had seen its merger offer rebuffed.

It also came as Godfrey Hirst was withdrawing from its second attempt to secure Feltex by standing in the market for shares in the company.

By mid-February it was the largest shareholder in Feltex with a near 9% stake. But the company sold out at a loss of $2m when it realised the strategy was not paying off.

Godfrey Hirst advisors believed Feltex was able to mollify its increasingly concerned bankers with the fact that a potential buyer was not only waiting in the wings, but was buying Feltex shares.

Godfrey Hirst's share buying activities also helped to

[Mr_Market]

'Bizarre' acts killed Feltex
08 October 2006

Directors were more concerned with reputation than reality, say sources close to the deal. Garry Sheeran reports.

Feltex directors' concern for their own reputations drove a nail through the heart of a sick company and through small shareholders' hopes to save at least some of their money.

Sources close to Godfrey Hirst, the company which last week bought the assets of Feltex from receivers, said a near-certain 12c-a-share deal for Feltex shareholders was blown by directors' "bizarre" actions after a buy-out had been agreed.

They also said Feltex refused to countenance an earlier reverse takeover offer from Godfrey Hirst which would have realised long-term value for the company. Had that deal gone through, Feltex shares could now be trading at close to $1, they said. But it was rejected because it would have crystallised short-term losses for shareholders.

"It was all about reputations," one source said. "Directors were always looking for something with a bit of blue sky in it, no matter how tenuous it might be. But they refused to countenance any proposal that drew a line in the sand for the company, stopped the music for them, and showed clearly what the company was really worth."

The buyout deal signed off in early August by both companies and negotiators for Feltex bank ANZ, did just that.

The proposal, which would have seen Godfrey Hirst buy Feltex's assets and delist the company, would have returned $18 million of the $243m that shareholders had invested in the business.

Coming after more than a year's negotiations and several non-consummated deals, Godfrey Hirst negotiators thought they had a deal.

They were then disconcerted to see Feltex continue stock exchange announcements saying they were still free to accept alternative proposals.

It was their legal right to say this, but, after the failure of the Talley's and other potential "saviours", this appeared to Godfrey Hirst to be one last ditch attempt to secure another tyre-kicker for the seriously ill business.

They were dismayed to see their 9c to 12c-a-share offer being portrayed as possibly decreasing to nothing in the wash-up of the sales process.

The emergence, two days later of the Turner brothers' bid for Feltex, saw Godfrey Hirst withdraw its offer. With it went all hopes of at least 12c-a-share for shareholders when the bank refused the Turner bid and put the company into receivership.

The one gamble which paid off for Feltex - but which proved costliest to shareholders - was the decision to float the company in 2004.

Last week it was disclosed by banking sources in Australia that the ANZ loan to Feltex had been a problem for the bank for several years before the float.

In fact, Godfrey Hirst's first pitch for Feltex had been tentatively made during a difficult period for the company when owned by CS First Boston in 2002 - and forcefully rebutted.

The float came on the back of two exceptionally good years for the building and associated industries in both Australia and New Zealand in 2003-04.

But the inevitable downturn in a notoriously cyclical business had Godfrey Hirst back on the prowl in April last year.

Initially advised by investment bank UBS in New Zealand, that role was taken over in March this year by leading Australian corporate restructuring advisor KordaMentha. KordaMentha's involvement came at a time when Godfrey Hirst had seen its merger offer rebuffed.

It also came as Godfrey Hirst was withdrawing from its second attempt to secure Feltex by standing in the market for shares in the company.

By mid-February it was the largest shareholder in Feltex with a near 9% stake. But the company sold out at a loss of $2m when it realised the strategy was not paying off.

Godfrey Hirst advisors believed Feltex was able to mollify its increasingly concerned bankers with the fact that a potential buyer was not only waiting in the wings, but was buying Feltex shares.

Godfrey Hirst's share buying activities also helped to prop up the Feltex share

[Mr_Market]

You beat me to it SB. Won't hurt to reinforce the point though.

[kura]

quote:Originally posted by Lizard

One question - do GH acquire the receivables but not the payables? I'm not quite sure how those are handled in purchase from receivers as a going concern?

Yes, that is exactly the way things happen in receivership, as in unsecured creditors "dip out" if there is nothing left after paying out preferential creditors (ie the bank that holds debenture)
While unsecured creditors rank above shareholders in the payout pecking order, they generally dont get much on receivership. The main exception to the rule is Employee Entitlements, as they are governed by special rules. In the lead up to receivership, it was reported that there was increased cash flow requirements as some suppliers refused to give extended credit to FTX, this is evidence of prudent self protection by suppliers (any rational person would want COD type terms in their dealings with a "fragile" company)

Another possible exception is the issue of warranty claims on defective products previously sold, while they will generally fall into the unsecured creditor category, a receiver has the option of passing on the warranty provision to going concern purchasers, if the receiver considers it will maximise the brands goodwill in the marketplace (and ultimate sale price)

Still another exception is those suppliers that have supplied goods with a reservation of title clause (legal title to goods does not pass untill payment is made) this gives the suppliers the right to "repossess" their unpaid goods on appointment of a receiver, however there are several hurdles that need to be overcome before this can be successfull, (ie the interest must be firstly registered on the "Personal Property Security Register" with all the necessary "i"s dotted and "t"s crossed)

[Lion]

A bit off topic, sorry, but - Kura, those two expressions are very old, from times when words and values were often not as now.
Dirt was once cheap.
And "prove" once had the meaning to "test", so the exception tested the rule. The expression has kind of reversed its meaning over the years.

Whew, I didn't buy any Feltex, although I thought about it at the IPO. What a mess, what a bloody scandal!