When assessing if a company is worth taking a punt on there are a few things to observe and ask. These include:
- Share registry and existing shareholders - is the share registry wide open with a number of smaller holders or is there some big holders with blocking stakes? A register that has smaller holders means that taking control of the company is easier and may encourage more bids. When a major shareholder announces that they will accept the bid currently on the table than it is less likely that a counter bid will come.
- Trading after the initial bid is made - is the share price trading above or below the initial takeover bid? If the shares are trading above the bid price then the market is factoring in the possibility of an auction or another suitor emerging. Shares trading below the bid price may suggest the market believes another suiter may not come to the party or that there is too many conditions to the bid which may result in it failing. Shares may also trade at a discount if it is a script (share) offer because the takeover price is not finite and is linked to how the well the bidders share price is trading.
- Substantial holder notices - these are announced to the market by the bidder. It is a great tool to get an idea of how many other shareholders are accepting and if the bidder is gaining control of the company. The other key is if substantial holder notices are made by a non-bidder. This suggests that they accumulating before launching a counter offer or acquiring a blocking stake.
- Media commentary - quite often the media will publish articles detailing if there will be another bidder, this commentary is always speculation but nonetheless is good reading and though provoking.
Sin-Tang Development is an investment company based in Singapore. The company recently invested in Exco Resources (EXS) and last year in Royal Resources (ROY). Sin-Tang Development Pte Ltd must have plans for Sphere Investments by raising it's stake above 10% and thus defeating the condition by Xstrata that it receive acceptances of over 90% or by doing something different otherwise it would leave the company with only one option and that is to sell into the bid at $2.50 after paying above that price on market.
Broker Euroz has put a price target of $4 on Sphere Minerals and believes that "there is scope for a competing bidder and/or an improved offer from Xstrata"
In other takeover developments Dart Energy (DTE), the company recently that split from Arrow Energy, has made a scrip takeover offer for Apollo Gas (AZO). The offer comprises of 3 Dart ordinary shares for every 4 Apollo ordinary shares; and 3 comparable Dart options for every 4 Apollo options. The offer values Apollo Gas at $0.79 per share based on Dart Energy's closing price of $1.05 on 24/09.