RBD - Restaurant Brands

[artemis]

Not formal offer yet but according to the below link -

If the takeover is successful, Finaccess said it will keep the dividend policy unchanged for the near term, and promises not to de-list the company in the following 12 months unless it mounts a full takeover. If it does seek to mop-up the remaining shares, it promises not to offer a lower price, subject to wider movements on the benchmark NZX 50 index.

Not sure how that would work in practice, but once details are known could be worth holding on for the divvy. Risks- Finaccess sits on its 75%, which is control anyway; market takes a dive.

Re divvy - the company is likely to pay the next half year divvy anyway, possibly with a special if they have excess imp credits.


http://www.scoop.co.nz/stories/BU181...-finaccess.htm

[Jonboyz]

PARTIAL TAKEOVER OFFER FOR RESTAURANT BRANDS AT NZ$9.45 CASH PER SHARE Finaccess Capital, S.A. de C.V. (Finaccess Capital) is pleased to present to you this recommended partial takeover offer in relation to Restaurant Brands New Zealand Limited (Restaurant Brands). Our NZ$9.45 cash per share offer is in respect of 75% of the fully paid ordinary shares in Restaurant Brands (the Offer). The Offer is being made by our subsidiary, Global Valar, S.L. (the Offeror). The Offer Document and target company statement (including the Independent Advisers Report) are available for download at www.rbdtakeover.co.nz. We believe the Offer is a compelling opportunity for shareholders to realise significant value for their investment in Restaurant Brands, with the offer price of NZ$9.45 cash per share representing a 24.3% premium to Restaurant Brands’ last close price prior to announcement of our proposal and a 26.1% premium to the 12 month VWAP at that time. Each of Restaurant Brands’ independent directors and Stephen Copulos (who is a non-executive director) recommend that you accept our Offer in the absence of an unmatched superior proposal and subject to the Independent Adviser’s Report continuing to conclude that our Offer consideration of NZ$9.45 cash per share is within or above the Independent Adviser’s valuation range of NZ$8.15 to NZ$8.92 per share. Further details of the recommendation are set out in the target company statement. We have entered into a separate agreement with Mr Copulos, Restaurant Brands’ largest shareholder with a current shareholding of approximately 8.5%. As part of this agreement, Mr Copulos has agreed to accept our Offer for all of the Restaurant Brands shares he holds or controls, subject to directors of Restaurant Brands not withdrawing or qualifying their recommendation of our Offer. Furthermore, all other directors intend to accept our Offer in respect of all of the Restaurant Brands shares that they hold or control, in the absence of an unmatched superior proposal.

[Zeitgeist]

Anyone else thinking of not participating in this and just keeping shares?

Sounds like the Mexican company are a medium/long term investor who will look to grow the business, probably at the expense of paying dividends. But they're almost certainly not going to be interested in ever selling part/all of their stake for less than $9.45.

So if you don't need the cash and can tolerate the logistics of being a minority holder with the majority shareholder making positive long term noises about maintaining listings (and with a track record of growing its Polish LISTED equivalent), why not keep the shares?

[Bjauck]

Anyone else thinking of not participating in this and just keeping shares?...

I have already reduced my holding in the past year. I am in two minds in relation to my remaining holding. Just some thoughts, so as always DYOR....

We are in a period of consolidating asset prices after a long bull run. RBD has already outperformed the wider market in the last few years. The offer price is also at a premium to the previous price. On the other hand the purchaser over the next few years may we’ll see further opportunities for the company and new products to introduce through the RBD network in NZ to justify its purchase price.

More generally: Yet another NZ listed company is being bought by overseas interests. We already have a very small share market for the size of the economy. Is it a healthy state of affairs for NZ to have such expensive residential land and a hollowed out share market? Will there come a time when most of the investable companies have been bought up by overseas interests and profit and capital outflows will not be offset by inflows due to immigration and inward investment?

[Jonboyz]

It's reasonably likely that you will have shares left over anyway even if you offer all of your RBD holdings. The price will drop after the offer goes unconditional - the document says probably to the level of just before the offer came out $7.68? - and then a lot of uncertainty...

- Finaccess might then be able to force remaining shares to be sold to them (full acquisition) but at what price?
- or possibly delist after 12 months.
- and/or possibly run the company very poorly and lose significant value
- or run the company incredibly well and make surviving shareholders rich!

I need to think about it a bit more, but I'll probably take up the offer to sell at least 50% of my holdings. The remaining 50% would then be a punt in the dark - hoping for greater things, but wiling to accept a loss.

[Zeitgeist]

My worst case scenario here is offering up 100% of my immaterial holding only for it to be decreased down to 25%.

I see a few favourable factors to continue holding:

- The residual shares in Finaccess's European investment have remained listed and Finaccess decreased its shareholding at least once
- Mounting a full takeover in future is not a simple process and if this was the ultimate end goal, why not just offer it now?
- RBD may perform well as a recessionary investment
- A multinational financial company is unlikely to sell for less than what they paid - so with a long term horizon I'd see $9.45 as a floor
- The European investment (per the offer doc) has performed very well since it was acquired

Cons:
- Dividend uncertainty
- Future capital raisings may require additional investment
- Illiquid market if wanting to sell
- Possible downward pressure on share price after transaction

[blackcap]

I think the best outcome for everyone is to accept the $9.45 on offer. Even if you do not want to sell your shares. Post the offer the shares are likely to be trading lower and you can buy back to the amount you wanted to retain. So even if I end up with 25% of my holding, that is not a problem, I can always buy more or sell the remainder knowing I received $9.45 for the 75% taken over.

[Snoopy]

PARTIAL TAKEOVER OFFER FOR RESTAURANT BRANDS AT NZ$9.45 CASH PER SHARE Finaccess Capital, S.A. de C.V. (Finaccess Capital) is pleased to present to you this recommended partial takeover offer in relation to Restaurant Brands New Zealand Limited (Restaurant Brands). Our NZ$9.45 cash per share offer is in respect of 75% of the fully paid ordinary shares in Restaurant Brands (the Offer). The Offer is being made by our subsidiary, Global Valar, S.L. (the Offeror). The Offer Document and target company statement (including the Independent Advisers Report) are available for download at www.rbdtakeover.co.nz. We believe the Offer is a compelling opportunity for shareholders to realise significant value for their investment in Restaurant Brands, with the offer price of NZ$9.45 cash per share representing a 24.3% premium to Restaurant Brands’ last close price prior to announcement of our proposal and a 26.1% premium to the 12 month VWAP at that time. Each of Restaurant Brands’ independent directors and Stephen Copulos (who is a non-executive director) recommend that you accept our Offer in the absence of an unmatched superior proposal and subject to the Independent Adviser’s Report continuing to conclude that our Offer consideration of NZ$9.45 cash per share is within or above the Independent Adviser’s valuation range of NZ$8.15 to NZ$8.92 per share. Further details of the recommendation are set out in the target company statement. We have entered into a separate agreement with Mr Copulos, Restaurant Brands’ largest shareholder with a current shareholding of approximately 8.5%. As part of this agreement, Mr Copulos has agreed to accept our Offer for all of the Restaurant Brands shares he holds or controls, subject to directors of Restaurant Brands not withdrawing or qualifying their recommendation of our Offer. Furthermore, all other directors intend to accept our Offer in respect of all of the Restaurant Brands shares that they hold or control, in the absence of an unmatched superior proposal.

Some may wonder why I am choosing to express a somewhat critical look at the Mexican RBD takeover. What those that haven't read the offer document in full may not realise is that the 'independent' directors have been gagged. Look at section 10.3(l).ii. There you will find that RBD will be subject to a $7m fine if

"any director of Restaurant Brands fails to recommend the offer, or makes other adverse comments in relation to the offer."

The only exception to this is if the independent report recommendation decides the offer is not fair. I have two real concerns about this.

1/ The independent directors seem to have given the tick of approval of the deal, before the independent report on the transaction has been received. To me that is negligent behavior. They should not have signed up to do this at the behest of the bidder.
2/ It is not the job of independent directors to simply 'box tick' the independent report. As the independent report says in Appendix E

"The most important part of valuation is to evaluate the attributes of the specific company being valued and distinguish it from its peers so as to form a judgement as to where on the spectrum it belongs."

Judgement involves a reasoned valuation of the pros and cons as highlighted in the report , and that the independent directors have not done. The independent directors have disgracefully delegated away their responsibility and authority in my view. I am not saying the deal isn't a good one. But I think the process used to arrive at that good/bad conclusion has been corrupted. Clearly those independent directors do not understand what the word 'independent' means. The directors did not independently evaluate the offer as the quoted text implies. They were told: "You will recommend the offer or the deal is off!"

SNOOPY

[Snoopy]

Judgement involves a reasoned valuation of the pros and cons as highlighted in the report , and that the independent directors have not done. The independent directors have disgracefully delegated away their responsibility and authority in my view.

The independent directors may have been silenced. But this hound is still free to howl. There are some key points in the takeover 'Recommended Offer' document that require more digging.

The offer price to acquire RBD shares has been highlighting at the $9.45 figure. But this offer to acquire shares is only for three out of every four shares on issue. One quarter of the shares on issue are not subject to the offer. The day before the shares offer was tabled, the share price was $7.60. So if that is an assessment of 'fair value' in the absence of the offer, then the real offer price is:

($7.60+3x $9.45)/4 = $8.99

The other thing shareholders need to remember is that the interim dividend that we shareholders should normally have received by now has been suspended. Last year that was 10cps. This year, given the higher declared profits, it may have been more. But we will stick with that 10c for the purpose of this exercise. If we shareholders today have to surrender this 10c payment, that means the real 'like with like' comparison value of the offer is:

$8.99 -$0.10 = $8.89

Grant Samuel, after evaluating the implied earnings multiples for the company, considers fair value to be between $8.15 and $8.92

So contrary to the conclusion of the report, the offer price is within the Grant Samuel fair value range after all.

This fair value range includes a 'premium for control We learn from section 6.1.1 of the 'Grant Samuel' report that:

"Shares in a listed company normally trade at a discount of 15%-25% to the underlying value of the company as a whole, but the extent of the discount (if any) depends on the specific circumstances of each company."

We also learn from section 7.5 that:

"It is not uncommon for takeover transactions to include a sharing of the "synergy" benefits from an acquisition between the buyer and the seller. As Global Valar is a financial buyer, there are no obvious operating synergies that should eventuate if the offer is implemented."

I take this to mean that the normal trading price in the absence of the offer may be only 15% below the offer price (i.e. the premium offered by Global Valar would likely be towards the low end of the premium scale).

If we divide my calculated value of the offer price by 1.15 (the multiple needed to translate a market price to a 15% premium), then we get a normal market price of:

$8.89/1.15 = $7.73

That is close to the $7.60 price point where RBD was trading the day before the offer. So it looks like the implied 15% premium that I suggested is fairly accurate.

The question that existing shareholders need to consider then is, is that 15% premium a sufficient price to pay?

SNOOPY

[Snoopy]

The question that existing shareholders need to consider then is, is that 15% premium a sufficient price to pay?

Another part of the agreement that shareholders need to think about is, if a full takeover is made within twelve months, then Global Valar has agreed that it shall not be less than the current $9.45 offer price. But this isn't the full story. That $9.45 offer price is to be scaled in accordance with the movement of the NZX50 at the time any wrap up offer is made. So if the NZX50 declines by 10% over that time, then 'Global Valar' are only required to offer:

$9.45 x 0.9 = $8.51 for the shares that are left. (See 'Recommended Offer' booklet Section 10.3(O)

Before any of this comes to pass there are a couple of 'outs' on the existing deal. If we look at the 'Recommended Offer' booklet, Section 9.2 on the terms and conditions, and the section titled 'Material Adverse Change', we see that if EBITDA falls by $10m from that budgeted for, then the deal can be called off. The budgeted normalized forecast EBITDA for FY2019, as found on p17 of the Target Company Statement is $98.9m. A $10m reduction on that is $88.9m. That sounds like a lot. But the historical EBITDA for FY2018 from the same table was $94.4m. So in fact the EBITDA only has to fall by 6% year on year for the takeover deal to be in jeopardy. Note that the above EBITDA figures exclude one off transactions, not related to normal operating performance.

The second 'out' is if the net tangible asset backing falls by more than $30m from the budgeted level. $30m represents $30m/123m = 24cps. This is quite a fall and would seem an unlikely scenario.

SNOOPY