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(05-08-2014, 10:50 PM)BlueKelah Wrote: I am a little confused but what this means is that they are selling off everything and end up as a listed shell company?
does this mean it will eventually gap up to the cash value?
this one on my radar, was waiting for a bit more net cash to buy in. too late now
In a nutshell, yes. They will end up as a cash company assuming the sale is completed.
I think it will trade at a discount to the cash value as:
1) 5% of the purchase consideration will be retained by the purchasers for a 12 month period to cover pre-completion tax liabilities etc, which may or may not materialise. Although not explicitly stated in the announcement, it is typical for sale and purchase agreements to include reps and warranties and the 5% withheld could potentially be used to offset any warranty claims.
2) there is uncertainty as to how this cash will be deployed.
There is also no certainty that this transaction will complete as the entry into a SPA is still subject to a number of conditions, including due diligence.