Penguin International

[ghchua]

Hi Corgitator,

In your ideal world, there would be a key man risk isn't it? You are just depending on one ID to make the recommendation to shareholders. And as we have seen here, it is quite subjective. Different people have different views.

In this current framework, the IDs are still responsible for making their recommendations. However, we have a professional financial outfit (aka IFA) to give advice to them. Then, the IDs will make their recommendation based on the IFA inputs plus other factors which they might wish to take into consideration. Since not all IDs are finance trained, I think IFA did provide some value here in giving their advice to them.

[Shiyi]

Hi Corgitator,

In your ideal world, there would be a key man risk isn't it? You are just depending on one ID to make the recommendation to shareholders. And as we have seen here, it is quite subjective. Different people have different views.

In this current framework, the IDs are still responsible for making their recommendations. However, we have a professional financial outfit (aka IFA) to give advice to them. Then, the IDs will make their recommendation based on the IFA inputs plus other factors which they might wish to take into consideration. Since not all IDs are finance trained, I think IFA did provide some value here in giving their advice to them.

The offerors have managed to secure more than 50% shares and declared offer unconditional. What's strange to me is the fact that the offerors yesterday got around only 35% stake. 

Does it mean Keppel has accepted the offer? Anybody knows?

[Corgitator]

Hi Corgitator,

In your ideal world, there would be a key man risk isn't it? You are just depending on one ID to make the recommendation to shareholders. And as we have seen here, it is quite subjective. Different people have different views.

In this current framework, the IDs are still responsible for making their recommendations. However, we have a professional financial outfit (aka IFA) to give advice to them. Then, the IDs will make their recommendation based on the IFA inputs plus other factors which they might wish to take into consideration. Since not all IDs are finance trained, I think IFA did provide some value here in giving their advice to them.

Let's agree to disagree, because I think there's no right answer.

My analogy is that why should I seek a second opinion from Jim Cramer about investing when I could seek one from Warren Buffett.

1. Sure, occasionally, Cramer might be right while Buffett is wrong, but that's just probabilistically low.

2. There is a real cost to asking Cramer - you need to pay him, and you create noise and distraction that dilutes the message of Buffett.

3. Yes, the ID may not be a "Buffett" in the sense that they are not finance trained or understand the nuances of valuation. But that's the bedrock of my argument - shouldn't at least 1 of them be? How can I expect an ID to look after my interest in the company if not even 1 ID has that knowledge?

4. And while ID may not be a "Buffett", I'm pretty certain IFAs are close to a "Cramer". I've read enough of their analysis, and I have peers/colleagues working in those houses. Trust me, their analytical rigor/competence is no better than a sell-side analyst, and I'm already giving them credit when I say that.

5. Key-man risk is a subjective concept. I can argue it the other way - given that there's now greater responsibility/accountability placed on the ID, he might be more prudent/thoughtful. Can no longer hedge his views or hide behind an IFA's opinion. Thing is - I hate the culture of IDs relying on third party opinions to cover their ass. You are paid (both financial and reputation) to do a good job, so don't outsource your responsibility/accountability, even partially. If you don't have the requisite skill set, then don't take up the job.

[weijian]

End of the day, both minorities and offerors are opportunistic (who isn't?).

I think this statement probably sums up the majority of the dissension we see during takeovers.

With regards to the Buffet vs Cramer comparison, it is apt but unfortunately, Buffet is an outlier and Cramer is the norm. Buffet has mentioned that the "I" in IDs only appear when they do not need the money but have more to lose in their reputation - I think that is probably much true.

I think it was also Buffet who mentioned in 1 of his annual letter, on the solution to the conundrum of advising take overs. Basically 2 financial advisors would be engaged on each side of the argument. One would argue "to accept the offer" and the other would argue "to reject the offer". Basically only the advisor whose advice turns out to be the outcome, gets paid. This sets the incentives at the right place, nothing more nothing less. But of course, this isn't the norm in the financial advisory right now as they get paid for work, not for getting it right.

[brattzz]

IFA man-hour costs has to be covered, it's reasonable,
no third parties wants to state right or wrong... agreed this has to come from the insider board instead...

[ghchua]

The offerors have managed to secure more than 50% shares and declared offer unconditional. What's strange to me is the fact that the offerors yesterday got around only 35% stake. 

Does it mean Keppel has accepted the offer? Anybody knows?

Hi Shiyi,

I think you might have misunderstood those announcements. Allow me to explain why.

You see, when the offer hits 30%, it is a milestone event. So, they made an announcement that the offer had become a mandatory conditional offer. So, we know that the next milestone event is 50%, which is the acceptance level for the offer to turn unconditional. In between the time when the offer turns mandatory to yesterday (when they announced that the offer turned unconditional), there are acceptances along the way. But they did not disclose them until yesterday when it hits 50%.

What you are seeing almost every day is the amount of shares they have purchased from the open market plus the 30% acceptance milestone event that they have disclosed earlier. It does not include acceptances along the way since they hit 30%, until yesterday. So, don't be mistaken that there is a block of shares accepting the offer yesterday for the offeror to go from 35% to 50%. It is not the case.

Back to your question, did Keppel accepted the offer? Since they hold more than 5% of the shares and they are a substantial shareholder, they would have made an announcement if they have done so. Otherwise, we can just assume that they are still holding onto those shares.

[lonewolf]

Just to put some sense in the numbers reported in the latest filing by Fairy (up to 04 Mar 2021 6pm), here is the breakdown of the numbers:

Total no of shares accepted: 31,736,003 (14.41%)
Total no of open market purchase: 31,219,300 (14.18%)
Total no of shares tendered by concerted parties: 47,773,448 (21.70%)

Fairy will need to acquire another 87,424,046 (39.71%) shares to delist/compulsorily acquire the company. Personally, I don't think there will come close to that level. 

The offer has also been extended to 24 Mar 5.30pm.

Who wants to play 'Guess the Final Fairy Level at the End of Closing'? 

I start first: 66%

Fairy has been buying/accepting shares at roughly 1% per trading day. There are 14 trading days to the end of closing. I add in another 2% for fluctuations.

[Corgitator]

End of the day, both minorities and offerors are opportunistic (who isn't?).

I think this statement probably sums up the majority of the dissension we see during takeovers.

With regards to the Buffet vs Cramer comparison, it is apt but unfortunately, Buffet is an outlier and Cramer is the norm. Buffet has mentioned that the "I" in IDs only appear when they do not need the money but have more to lose in their reputation - I think that is probably much true.

I think it was also Buffet who mentioned in 1 of his annual letter, on the solution to the conundrum of advising take overs. Basically 2 financial advisors would be engaged on each side of the argument. One would argue "to accept the offer" and the other would argue "to reject the offer". Basically only the advisor whose advice turns out to be the outcome, gets paid. This sets the incentives at the right place, nothing more nothing less. But of course, this isn't the norm in the financial advisory right now as they get paid for work, not for getting it right.

Love this idea Thanks for sharing. Really can trust WB/CM to come up with great incentive systems that address conflicts of interests, because they understand the interaction btw incentives and human behavior so well.

[pianist]

Just to put some sense in the numbers reported in the latest filing by Fairy (up to 04 Mar 2021 6pm), here is the breakdown of the numbers:

Total no of shares accepted: 31,736,003 (14.41%)
Total no of open market purchase: 31,219,300 (14.18%)
Total no of shares tendered by concerted parties: 47,773,448 (21.70%)

Fairy will need to acquire another 87,424,046 (39.71%) shares to delist/compulsorily acquire the company. Personally, I don't think there will come close to that level. 

The offer has also been extended to 24 Mar 5.30pm.

Who wants to play 'Guess the Final Fairy Level at the End of Closing'? 

I start first: 66%

Fairy has been buying/accepting shares at roughly 1% per trading day. There are 14 trading days to the end of closing. I add in another 2% for fluctuations.

suggest to also add a bracket besides the % indicating your nickname and whether u 'already accepted' or 'play by ears' or 'not accepting'?
then we can have a sense of the grounds

[¯|_(ツ)_/¯]

PIL@65cents

When I read the offer letter, it's clear to me that Jeffery and James wanted to de-list the company.  It's very clear. Read it.

But, after I see the daily statistic (and also the latest >50% including those who surrender by returning the offer letter), it is clear that they won't be able to de-list the company.

I mean, before I saw the >50%, I thought that they won't be able to de-list.  After seeing the numbers, it's even clearer. 
Today ended @ 51.44%

Highly unlikely they could de-list PIL.

They must increase the offer price in order to get more support?
Or what else could they do to get more OPMI to accept at offer price of 65cents.

a) on one hand, they wanted to de-list PIL
b) on the other hand, it's clear that they won't be able to do that (even if they increase the offer price).

This contradiction was colliding in my head and I couldn't make up what happened.

Then, today, after reading so many valuebuddies posts, that a light bulk striked.

Jeffrey and James do not have the intention to de-list Penguin.

They need to do the low-ball offer because they have no other choices.

Some big seller is planning to offload Penguin.

This is a low-ball offer to get all of them to sell out 
- exactly what Jeffery/James plus IFA/ID saying all these while.

We all know that it's an unfair offer.
But, it is indeed a reasonable offer for large block of stocks to be sold (to Jeff/James).

With my light bulk still burning bright, I formulated my next game plan.

- accept the bid at 65cents.

Once the offer is off the table, I will re-evaluate and decide whether it's worth (re-)investing in Penguin (Jeffery/James) again.

At this moment, I'm out.

Thank you valuebuddies, for yet another brilliant recommendation. 

I benefited tremendously from your kindness and sharing.

Gratitude.