Markets live chat transcript for the chat ending at 12:16 on 10 Mar 2008. Participants in this chat were: Paul Murphy (PM) Neil Hume (NH)
PM: Hello
PM: Welcome to Markets Live.
PM: This is FT Alphaville’s daily market discussion – which you can join in by using the comment box at the bottom.
PM: Neil Hume is with me
PM: And just to be clear, feel free to use the comment box below to share your views.
PM: That’s right – you can use the box below.
PM: Try it. Type something in and hit “post”
NH: I should butt in here and explain.
NH: Murphy is feeling sore cos he went off for a week – and on Friday, when Helen and Rob were doing Markets Live, they got more than 100 comments.
NH: Murphy always planned to have a little celebration when we got more than 100 comments.
NH: And he missed it.
PM: I’m not sore. That would be silly.
PM: But why did Helen get 100 comments?
PM: Helen’s rubbish.
PM: She can’t get out of bed and in to work on time.
PM: She can’t spell.
PM: She drinks too much.
PM: She’s SO SLOW on Excel
PM: She never does her expenses on time
PM: And she has no idea how to read the Value at Risk tables in investment bank accounts.
PM: She’s rubbish.
NH: Er, Murph.
NH: That’s you.
NH: You’re the one that can’t get in to work on time, doesn’t know what VAR is, drinks too much, doesn’t get expenses done etc etc.
PM: Oh yeah.
PM: 
PM: Anyway, we’re not so insecure as to go fishing for comments.
PM: 
NH: yeah, but her picture has been photo shopped
PM: airbrushed
PM: We should get with the task in hand.
NH: Which is All Hail the King of Marks & Spencer.
PM: Yes we had news about 45 minutes ago that Lord Stuart Rose is becoming EXECUTIVE CHAIRMAN of Marks & Spencer.
NH: That’s right. Shoo in on the retirement of Sir Terry Burns.
PM: Think you’ve got your peers and knights mixed up.
NH: Whatever
PM: Bizarrely, shares in Marks & Spencer are down slight on the news that Stu Rose – as his friends call him – is to be the new chairman.
PM: Of course this was such an opportunity for the company – to get Lord Rose in as chairman – that it didn’t matter that this blows a raspberry at all the corporate governance guidelines.
PM: Doesn’t matter that M&S is one of Britain’s biggest firms – largely owned by Britain’s pension savers.
NH: Who cares about Cadbury? How could M&S possibly have attracted someone as good as Stu to the chairmanship?
NH: Why would a company like this need someone vaguely independent running the boardroom.
NH: That would be stupid when someone as classy as Lord Rose is available.
NH: There’s a raft of boardroom changes at M&S of course. David Michels coming in as deputry chairman.
PM: Nice guy Michels – former boss of Hilton.
PM: And former smoker.
PM: I remember if you ever mentioned staying in a Hilton he’d jump to his feet and say: “Always stand for a customer!”
NH: Kate Bostock will be in charge of all clothing at M&S, not just womenswear.
PM: Actually, we’re just getting a news flash through on M&S…
NH: Blinking eck.
PM: BREAKING NEWS
NH: Marks & Spencer is changing its name!
PM: From June 1 the company will be formally known as…
NH: Marks, Rose and Spencer
PM: Or Marks, Rose for short. M&R
PM: And they are introducing new labels, new branding.
PM: Label is going to be “St Stu”
NH: I’m surprised it has taken them so long — the St Stu brand has just been sitting there for the taking. St Michael was so old school. Saint Stu is a real 21 century retailing label.
PM: How are shares in M&R responding to that?
NH: News hasn’t sunk in yet.
PM: Clearly not. The market has not yet woken up to the fact that not only is Stu becoming chairman, but he has also committed to staying with the company until 2011.
PM: So it’s not like your position Neil, where the FT employs you and gives you a job for as long as the company decides.
PM: At Marks & Rose, Lord Rose decides how long the company will have him.
NH: As Great Executive Chairman
PM: Get his title right. It’s Great Executive Chairman in Chief.
NH: Of course.
PM: Next store opening Pyongyang
NH: anway, M&S shares down 2p at 376p
NH: they were a bit weaker before the big news – hit 365p
NH: and I was thinking before all this happened just how poor the shares looked
NH: tried to rally them after the disasterous trading update
NH: got above 400p but could not hold
PM: ta
PM:
PM: This exciting Marks & Rose news has rather thrown us off the bear scent.
PM: missed all the action being off for a week, no?
NH: Footsie down about 400 points over nine days.
NH: About 7 % fall.
NH: Dreadfull
PM: And today?
NH: currently up 8 points at 5,708.3
NH: started pretty weak though
NH: got down to 5,647
PM: but then the entire world of credit does seem to be imploding.
PM: And we’ve got some sort of domino show going on in the hedge fund sector.
NH: We certainly have.
PM: Can I just blow a whistle?
NH: What for?
PM: Carlyle Capital Corporation.
NH: ???
PM: This was leveraged THIRTY TWO TIMES!!!!!!
PM: Hello? Levered 32 times !?!?!!?!
PM: here’s the fund’s guff
PM: CCC was established on August 29, 2006 with the objective of achieving attractive risk-adjusted returns for shareholders through current income and capital appreciation. CCC invests in a range of fixed income assets including high-grade mortgages and credit products.
PM: Can we just put down a pixelated record here – this fund is/was run by one John C Stomber.
PM: Here’s his biog:
PM: Mr. Stomber is a Managing Director of The Carlyle Group. He came to Carlyle from Cerberus where, as Managing Director, he focused on structured transactions with banking and securities firms. Prior to Cerberus, he was Senior Vice President & Global Treasurer of Merrill Lynch & Company where he worked on the post-1998 turnaround of the firm, serving as a Member of the Executive Management Committee and Chairman of the Asset & Liability Committee. Before Merrill Lynch, Mr. Stomber was a Managing Director at Deutsche Bank from 1991 to 1999. At Deutsche, he held several senior positions including Treasurer of the Americas, where he was responsible for funding and risk management for capital markets and banking activities, and principal representative with federal regulators. He subsequently managed and contributed to the growth of Deutsche Bank’s North American fixed income and foreign exchange swaps and derivatives business. From 1981 to 1991, Mr. Stomber served in various capacities at Security Pacific Bank and prior to that he worked at Crocker National Bank. He earned a BA from Franklin and Marshall College and an MBA from New York University.
PM: Spot that?
NH: Ah, he worked at Crocker National Bank
PM: Yes, this was a scandal in the pre-Applegarth era – pre-dates Northern Rock as a public company.
NH: Yeah, Midland bank bought Crocker in the 80s. it just about crippled the bank, which was subsequently taken over by HSBC.
PM: So that was the original Crock, where this John C Stomber worked.
Readers may also know this former bank as Northern Rock.
NH: Before running Carlyle Unbelieveably Leveraged Capital.
PM: 32 times !?!?!?!?!?!
PM: What did the police say?
PM:
NH: question on Gibbs & Dandy below
NH: stock has been moving up over the past couple of session
NH: rumour is that the company poised to recommend a 450p a share offer
NH: names in the frame are Saint Gobain and Travis Perkins
NH: stock currently 10p better at 390p
PM: That’s firm call
NH: 
NH: just going back to the wider market and the question from Fitz about the miners
NH: two things we think are causing the sell off
Rio Tinto (RIO:LSE): Last: 5,386, down 208 (-3.72%), High: 5,431, Low: 5,295, Volume: 2.65m
BHP Billiton (BLT:LSE): Last: 1,529, down 61 (-3.84%), High: 1,552, Low: 1,510, Volume: 8.69m
Anglo American (AAL:LSE): Last: 3,235, down 65 (-1.97%), High: 3,281, Low: 3,161, Volume: 3.36m
Kazakhmys (KAZ:LSE): Last: 1,610, down 53 (-3.19%), High: 1,658, Low: 1,589, Volume: 1.01m
Antofagasta (ANTO:LSE): Last: 754.50, down 32 (-4.07%), High: 782.50, Low: 742.00, Volume: 2.15m
NH: it seems not everyone believes in de-coupling
PM: wiot?
NH: well, its seems a lot of investors in mining stocks are worried about the demand outlook if, as looks very likely, the US heads into recession
PM: interesting
NH: they clearly are not betting that the BRIC economies will be able to pick up the slack if the US goes into a serious downturn
PM: There is also the China factor –
NH: what’s that???
PM: it’s gone ex loony growth
PM: latest new issue only up 28%
PM: Inflation pushing at 8%
PM: Gov action to cool the economy inevitable
PM: And they’ve foiled a couple of terror attacks
PM:
PM: To points below
NH: I’m with FXTrader
PM: certainly the case — interesting point Helen put up from fintag last week — basically banks nitpicking at every opportunity with hedge funds
NH: it is quite clear that the banks are causing the trouble here
NH: and if they are askinig their best clients for their money back we have to ask why
NH: seems like there is more pain to come from the banking sector
NH: i hear on the grapevine that UBS contributed to some of the problems at Peloton
NH: and is has caused quite a stink in the hedge fund world
PM: As for knowing how levereged a fund is — for naive and anon — we dont know unless a fund tells us
PM: 32 times leveraged…
PM:
PM: how about some RAW — how about addressing Tuna’s question below???
NH: Burberry and IMI
NH: been following them quite closely
NH: in fact it was us that first mentioned IMI and Honeywell
NH: now, what we understand is as follows
NH: Honeywell have been doing some work on a bid
NH: the company has said that it plans to make a few acquisitions this year
NH: and IMI would make a good fit
NH: and don’t listen to analysts who say otherwise
NH: they have got a division that would is involved in a lot of fields where IMI is active
PM: This is very interesting — clearly im out the loop
NH: called Automation and Controls solutions
PM: Spent too much time doing Cat3 networks, and not enough looking at IMI
PM: You reckon this is a runner??
NH: Oh, yeah. definitely being looked at, whether they press the button and move I don’t know
NH: but it certainly looks more likely than it did a week ago
NH: since then the company has announced a decent set of figures and more importantly said that any fine from the DoJ would not be that big
NH: thhe only think with Honeywell is
NH: IMI might be a bit big – Honeywell looking for bolt ons
NH: and also it would have to sell some of IMI’s smaller divisions
NH: that could be a problem at the moment
PM: Ok, thanks for all that
PM:
PM: And Burberry??
NH: yep, more bid rumours
NH: stock was blazing on Friday
NH: up 7%
NH: everyone thought it was just a bear squeeze
NH: as there had been rumours of a profits warning earlier in the week
NH: but the market is rethinking that view
PM: why?
NH: coz the stock is blazing again this morning
NH: Up a further 28p to 463p
NH: word in the market is of a bid from the US
PM: from who?
NH: Company called Coach
NH: market cap $10bn
PM: Coach & Horses?
NH: make posh handbags
NH: Coach, Inc. (Coach) is a designer and marketer of handbags and accessories. The Company offers luxury lifestyle accessories to the customers and provides consumers with fresh and relevant products. Coach’s handbags and accessories use a range of quality fabrics and materials. Coach’s primary product offerings include handbags, women’s and men’s accessories, footwear, outerwear, business cases, sunwear, watches, travel bags, jewelry and fragrance. It operates in two business segments: Direct-to-Consumer and Indirect. Handbag sales accounted for approximately 64% of net sales during the fiscal year ended June 30, 2007 (fiscal 2007). Accessories sales accounted for 28% of net sales during fiscal 2007
PM: 
NH: they have been linked with a bid for Burberry before
NH: Merrill Lynch did a good note on Coach a while back and concluded that
NH: buying BRBY would be an “incredible” tie-up.
PM: ok — ta for that
PM:
PM: Any more RAW??
NH: FKI
NH: stock up 2.5p to 71.75p
NH: and that follows weekend press reports that Blackstone, which offered 130p a share of the company last summer
NH: has hired advisers and is plotting a possible counter bid
NH: remember here that Melrose, the listed buyout vehicle, has offered 85p a share for the company
NH: well it had offered 85p
NH: strip out the 3p dividend included in that figure
NH: and the weakness in Melrose shares since the deal was announced and it is lower
PM: so there is a paper component to this deal
NH: yep
NH: effectively it’s all paper because the company needs a rights issue to pay for the cash portion
PM: an ambitious deal then?
NH: yep
NH: and they are planning to take on all FKI’s debt
NH: which the last time the company reported was £350m
NH: but analysts suspect the figure was actually much higher throughout the year
NH: MRO shares were trading at 153p before the deal was announced
NH: now some people say institutions have been shorting stocks ahead of the placing
PM: well, that seems rather premature as they deal is not even going ahead yet
PM: I am right, this has not been agreed yet has it??
NH: Nope, still subject to due diligence and some other conditions
NH: got a note from Landsbanki on the latest twists in the bid
NH: here it is
NH: Unsurprisingly the weekend’s press discussed the unfolding Melrose (NR) and FKI (H) situation at length. We saw two points of particular interest: the first being that US private equity house Blackstone has apparently appointed Credit Suisse to advise on an offer for FKI (source: Telegraph), potentially raising the chances of a counter bid above Melrose’s claimed 82p cash and shares offer (‘claimed’ because the value of the offer would likely ultimately be considerably lower, possibly as low as 66p, as Melrose shares are likely to fall following the planned equity placing).
NH: The second being that Melrose apparently has sufficient finance to repay FKI’s €600m Eurobond (source: Sunday Times). Doing so increases flexibility, enabling Melrose to sell any of FKI’s businesses without triggering the Material Adverse Change (“MAC”) clause under the Eurobond. FKI shares have fallen from Wednesday’s 75p to just under 70p at the close on Friday and the risk/reward in our view has become much more interesting. Event-driven investors might consider selling Melrose shares, buying FKI shares and/or selling short-dated FKI credit protection.
PM: what are the terms of the deal again??
NH: 43p in cash (which includes a special
dividend of 3p per share in lieu of the final dividend that FKI shareholders
would have otherwise received in October 2008) and 0.277 of a new Melrose share
per one FKI share
PM: it seems hugely ambitious
PM: I know these Melrose people are supposed to be super smart
PM: but please
PM: i remember them floating originally back in the early 90s — with Wassal
NH: well, the McKechnie deal was a success
PM: Same old PR line has been used ever since — Ex-Hanson, dont you know
NH: thought they would have made more of the Dynacash/Mckechnie deal
PM: So what that they are ex-Hanson>
PM:
PM: just to comments below/….
PM: SFB — not sure which Schroders mention you are referring to
PM: But then we churn out some much guff here….
PM: interesting stuff aon Japan…
PM: Tuna — the IMI rumour is six quid
PM: allegedly
PM: Burberry — Neil is clue less
NH: I am not
NH: Burberry is really RAW – just market gossip
NH: i still think there is a big bear being closed
NH: but on IMI i think it is being looked at
NH: but I am sure Honeywell looks at lots of things and does not bid
PM: And thank you Puny!
NH: that’s the reality
NH:
NH: Housebuilders taking a beating this morning
PM: yes saw that
Persimmon (PSN:LSE): Last: 688.00, down 19.5 (-2.76%), High: 699.00, Low: 669.50, Volume: 1.34m
Taylor Wimpey (TW.:LSE): Last: 164.40, down 8.3 (-4.81%), High: 174.00, Low: 163.20, Volume: 4.81m
Barratt Developments (BDEV:LSE): Last: 396.25, down 8 (-1.98%), High: 402.25, Low: 390.00, Volume: 1.91m
PM: what’s happening??
NH: results from Bovis Homes
NH: well, actually it is the outlook statement with the results that has spooked investors and caused the sell off
NH: and it is pretty gloomy
NH: and I would say more realistic than some of the glass half full stuff we have heard from Barratt and Persimmon
NH: they were rather upbeat, which defied logic
NH: anyway in the case of Barratt’s they had there own reasons for talking things up
PM: Such as?
NH: their share price, debt levels, defending the acquisition of Wilson Bowden at the top of the market
PM: ok
PM: lets get back to Bovis
NH: right
NH: most analysts are now saying that their 2008 forecasts are way too optimistic in light of its order book at March 7 being down 20%
PM: nasty
NH: sure is
PM: so what sort of downgrades are we talking about
NH: I don’t have any figures at the moment
NH: but they will be pretty chunky
NH: however, I do have some early thoughts from Landsbanki and Cazenove and Numis
NH: here’s Numis
NH: March 2008 stand at 1262, down 20% from last years 1582 units. Furthermore, given that 2008 includes the recent acquisition of Elite Homes we would estimate that like for like completions are c.30% down – versus a 7% decline for Barratt. Bovis remains committed to paying its 2007 and 2008 dividend pledge subject to market conditions.
NH: Whilst we feel this is achievable based on the group’s prudent level of gearing the company holds one of the lowest levels of dividend cover in the sector making a deviance from previous guidance more likely than its peers.
NH: Overall, Bovis states that the outlook for the year in uncertain and unless there is decisive action in the form of rate cuts then volumes in 2008 will be materially below 2007. We remain of the view that Bovis’ land holdings are amongst the best in the sector however its low ROCE and high valuation suggest better value exists elsewhere. We continue to prefer Bellway.
NH: this is Landsbanki
NH: BOVIS Current outlook is cautious – surprise surprise – with the order book at 7th March down 20% in volume at 1262 – a decline similar to that recorded at year end, although its average sites are higher in part reflecting the Elite acquisition.
It is predicting lower volume in 08 unless conditions improve. The land bank is lower in consented terms (a positive?) at 11,413 with only c800 plots acquired in the open market during the year.
NH: My numbers are almost certainly now too optimistic at £113m/66.9p which had assumed unchanged volume, now potentially 20% lower. Even the consensus for 08e of £105m/59p would look exposed, perhaps quite significantly. On a 9x PE, yield 7% and price/book of 0.9x, the stock is trading at the higher end of sector valuation but after the dust settles I think a premium is justified by Bovis’ defensiveness of margins (22.4%), balance sheet and land value.
NH: and finally this is from Caz
NH: Full year results in line with our expectations following the full preclose trading statement.
Our interest therefore shifted to the market outlook. Bovis chose to paint a more gloomy picture than Barratt and Persimmon, its commentary more inline with that of Taylor Wimpey, Redrow, Kier and Galliford Try, namely to expect a challenging year with declining volumes and a continued mix shift to social housing.
NH: The Group did not comment in detail on the use of sales incentives, however we believe that there will be increasing pressure this year to use more of them and we are forecasting a decline in margin of 26bp in the year to 19.8%.
Looking forward the current housing market is weak. For the year as a whole, unless decisive action is taken now to reduce interest rates and more normal conditions return to the mortgage market, it is likely that volumes will be well below those achieved in 2007. We are estimating a 10% decline in completions in the year
to 2,650.
NH:
PM: thanks for that
PM: We should pickup on VP’s news…
PM: Carter & carter have gone to the wall
PM: Got the statement neil?
NH: Update
The Company previously announced, on 15 February 2008, that it was in
negotiations with its lenders (the “Lenders”) regarding a consensual
restructuring. The Lenders have informed the Company that this consensual
restructuring is no longer considered a viable option by them and negotiations
in this regard have now been terminated.
Following the termination of those negotiations, the Board has considered
alternative options available to it and has concluded that no viable alternative
option is available to meet its cash needs in the short term. Consequently, the
Company has today instructed its lawyers to file a notice of intention to
appoint administrators over the Company.
The Company will seek to work closely with the administrators, the Learning and
Skills Council and the Department for Work and Pensions to minimise the effect
on learners, clients and employees.
NH: of course, Carter & Carter former PLC award winner
PM: Ah, and i missed last week’s event
PM: Who won ??
NH: well, the winner of New Company of the Year was
NH: drum roll
NH: New Britain Palm Oil
NH: now given that PLC awards have been something of a curse
PM: Sorry?
PM: NBPO
NH: I would be slightly worried if i was a NBPO shareholder
PM: 
NH: listed only in December
NH: New Britain Palm Oil Limited (“NBPOL” or the “Company”) (NBPO.L), the largest
palm oil producer in Australasia, with over 40,000 hectares of planted palm oil
plantations, five oil mills, a refinery and a seed production and plant breeding
facility,
NH: placed at 250p
NH: even after recent share price weakness, stock is still up 100%
PM: But off 4% today to 522p
PM: get out now!
PM: Book those profits!
NH: don’t be so hasty
NH: Kaupthing Securities reckons there is another 40% upside
NH: to 800p
PM: Oh yeah — was that written before or after the PLC awards
NH: dunno but here it is
NH: NEW BRITAIN PALM OIL (Corporate) – We initiate coverage with a target price of 800p per share, implying 45% upside. The palm oil price is up to around US$1,300/tonne recently. Strong long term fundamentals remain (increasing global demand from the food industry, substitution within vegetable oils, bio-fuels demand), and recent events like 1/ deteriorating outlook for this year’s Brazilian and Argentinean soybean crop due to poor weather conditions, 2/ severe Chinese winter affecting some winter crops, 3/ the implementation of a higher export tax on palm oil in Indonesia – a key producer (on 6 February), 4/ lower import tax in India – a key consumer, and 5/ high oil prices (now trading around US$100), give a bullish outlook for the palm oil price in H2 2008 and 2009. We now expect NBPO to reach average palm oil selling prices of US$925/tonne in 2008 and US$950/tonne in 2009. The company currently trades at a P/E 2008E of 13.8x, well below peers trading at 18.8x on average. We believe that due to its high quality (one of the best yielding plantations in the world, 40 year history, solid management, leader in sustainability), NBPO will gradually close the valuation gap with its peers. Our 800p is based on a DCF model using a conservative long term palm oil price of US$750/tonne.
PM: So its definitely a sell then
NH: of course, the biofuel companies have mostly been a disaster for shareholders
NH: Biofuels went under last year
NH: and D1 Oils is shaping up to be another disaster
PM: hang on a minute, karl Watkins is involved with this company
PM: and he was the man who said
PM: and I quote
PM: this from CIityAM in January
PM: SHORT-selling of stocks is the biggest threat to the Alternative Investment Market (Aim), according to veteran City figure Karl Watkin.
Watkin is threatening to withdraw China Goldmines, the company he founded in 2005 and floated on Aim in 2006, from London’s junior market if nothing is done to reduce the risk.
Speaking from China, which he is visiting as part of the prime minister’s trade delegation, Watkin said he would transfer to Hong Kong if the Financial Services Authority and the London Stock Exchange did nothing to improve illiquidity and shortselling.
PM: Short-sellers hope to profit from a fall in a share price by selling shares they do not own, in the hope of buying them back at a lower price.
He said: “It’s something everyone is talking about but no one is doing anything about. There should be a limit on how much you can short.”
He also called for more disclosure.
NH: 
NH: well, I think a few people are shorting D1 Oils, where he was chairman and remains a non-exec
NH: stock slumped almost 40% on Friday following news that the company was reviewing the future of its refining and trading businesses
PM: what does that mean?
NH: well, the statement went on to say that they had started “consultations” with staff
PM: ah, we all know what that means
NH: Basically, the refining business is being hit by cheap subsidised imports from the US
NH: anyway, house broker Dresdner Kleinwort responded by increasing its loss forecasts for the next three years
NH: and warning the company will run out of cash in 2009
PM: that’s not good
NH: it’s not
NH: here’s the note for anyone who missed it
NH: basically this company is not going to make any money for years
NH: and could end up going the same way as Biofuels, if things go against it
NH: here’s the DK note
NH: D1 Oils has announced plans to review its downstream refining and trading operations – an excercise that, we believe, will lead to the mothballing of its capacity. While clearly not positive, the decision should not be a surprise given end-markets (high feedstock prices, B99 import competition, wavering political support). The core value potential in its agronomy JV with BP
NH: As announced in December, D1 is continuing to review its downstream operations, given the negative impact of subsidised B99 imports and high feedstock prices on the current profitability of biodiesel production. As part of the review, D1 has commenced consultation
NH: Over 80% of the cost for biodiesel production is the feedstock. As shown below, the price of soy bean oil has increased 128% in the past 2 years to over €1000/tonne. The increase reflects poor harvests in Europe, increased demand from biodiesel, crop shifts in the US
NH: While D1 is currently negatively impacted by sharply rising feedstock prices, the situation is, in fact, a validation of the company’s core strategy of focusing on non-edible sustainable feedstocks (such as jatropha). The value of its JV with BP in this area is not affected by decisions on refining.
On the assumption that D1 focuses solely on its wholly-owned plant science business and its agronomy JV with BP, we have lowered our estimates over the forecast period to reflect the lack of biodiesel revenues. We continue to look for losses for the coming years, with a forecast net loss of £19m in 2007E (was £17m), £20m in 2008E (was £11m) and £16m in 2009E (was £4m).
NH: As at year-end 2007, we estimate D1had a net cash position of £15m. By year-end 2008, we forecast this to have fallen to £1m of net cash – i.e. there appears to be no imminent concern on liquidity. External funding does, however, appear a likely requirement in 2009
We continue to value D1 Oils using a SOTP. We move the value of the refinery business to zero to reflect the announced decision to review this operation. Based on a DCF of the agronomy operations and a 15% WACC, we reach a value for the remainder of the business of 200p/share. While the industry newsflow is unlikely to improve in the near term, we continue to believe in the long-term value creation potential of D1′s jatropha strategy. The recent decision by BP to partner in this venture adds further confidence.
PM: Hang on
NH: 200p, not sure how DK got to that
PM: As at year-end 2007, we estimate D1had a net cash position of £15m. By year-end 2008, we forecast this to have fallen to £1m of net cash – i.e. there appears to be no imminent concern on liquidity.
PM: No imminent concern on liquidty???? really?????
NH: well not until the end of the year
PM: they are living in cloud cuckoo land
NH: you won’t be surprised to know the stock is lower this morning
NH: off a further 5p at 57p
PM: Sell while you can!
NH: D1 won’t see 200p again
PM: what you mean it has??
NH: 260p last summer
NH: right around the time Mr Watkins started selling stock
NH: 20 July 2007
D1 Oils plc (“the Company”) announces that it received notification on 19 July
2007 that Karl E. Watkin, Non-Executive Director, sold 250,000 ordinary shares
in the Company at 268p on 19 July 2007.
Mr. Watkin now holds an interest in 2,596,250 ordinary shares in the Company
(4.19% of the issued share capital of the Company).
PM: excellent
PM: Thanks for that
NH:
PM: anything else before we go?
NH: there is one thing
NH: a bit technical but really interesting I think
PM: oh go on
PM:
NH: came out on Friday and was probably overlooked by most people
NH: this
PM: waht was?
NH: ISSUE OF PRACTICE STATEMENTS NO. 20 AND NO. 21 AND AMENDMENT OF PRACTICE
STATEMENT NO. 12
PM: er, I am not surprised no one looked at it
PM: sounds boring
NH: well it isn’t
NH: : loads of fascinating stuff
NH: about takeovers
NH: and it really does dispel a few myths
PM: such as?
NH: the 10% rule
PM: what that if a price moves 10% a company has to say something
NH: yep
NH: and that’s rubbish
NH: as is the idea that a company does not have to say something about an approach unless it is written down
PM: really
NH: here are a few of the most interesting pars I found
NH: the Executive interprets the term “approach” broadly. Each case will turn on its own facts, but the Executive normally considers an approach to have been received when a director or representative of, or an adviser to, an offeree company is informed by, or on behalf of, a potential offeror that it is considering the possibility of making an offer for the company.
This may be at a very preliminary stage in the offeror’s preparations and the manner of the approach may be informal and no more than broadly indicative. For example, there is no requirement for an approach to be made in writing, or for an indicative
offer price (or any terms or conditions) to be specified, and it could be made as part of a conversation on unrelated matters.
PM: that’s interesting
PM: v interesting
PM: would say that not everyone is abiding by the letter of the panel rules
NH: Share price movements
NH: 4.5 Note 1 on Rule 2.2 requires that the Executive should be consulted at the latest whenever there is a material or abrupt movement in the share price of the potential offeree company after the time when an offer is first
actively considered by the potential offeror. For these purposes:
(a) a movement of 10% or more above the lowest share price since that time is regarded as a material movement; and
(b) a movement may be abrupt even if there has not been a material movement: for example, a price rise of 5% in the course of a single day is normally regarded as being abrupt. When calculating share price
movements in the course of a single day, the opening price should normally be taken to be the previous day’s closing price, in order to ensure that overnight movements are taken into account.
The Executive should be consulted in the case of any doubt as to how share price movements should be monitored and calculated.
PM: So 5% is an abrupt move
NH: yep
NH: When an offer is first actively considered
4.6 In interpreting the phrase “the time when an offer is first actively considered”, the Executive recognises that many potential offerors will, as a matter of course, continually assess the performance of potential acquisition targets and may run internal valuation models as part of this assessment.
However, the Executive interprets the phrase “first actively considered” as drawing a distinction between, on the one hand, such routine assessment of a company’s performance and, on the other, an increase in the intensity of the
potential offeror’s assessment of the potential acquisition to a level where it is being given more serious consideration.
4.7 The time when an offer is first actively considered will therefore depend on the facts of a particular case. All relevant factors will be taken into account in determining this, including the extent to which, for
example:
(a) the possible offer has been considered by the board, investment committee or senior management of the offeror;
(b) work is being undertaken by external advisers; and
(c) external parties, such as potential providers of finance (whether equity or debt), shareholders in the offeror or the offeree company, potential management team candidates or potential purchasers of assets, have been approached.
NH: here’s another interesting one
NH: c) The requirement for an announcement
4.8 The Executive considers that rumour and speculation relating to the offeree company which refers to the
potential offeror in the context of the possible transaction under consideration will normally, of itself,
give the Executive reasonable grounds for concluding that it is the potential offeror’s actions which have
led to the situation, and for determining that the requirement to make an announcement has been triggered.
The Executive does not consider that it is required to establish whether the rumour and speculation in
question can be definitively linked to the potential offeror – for example, by establishing that
conversations were held by a representative of the offeror with the journalist concerned. In addition, the
Executive’s determination will not normally be affected by some inaccuracy in the rumour and speculation (for
example, as to the level of any indicative offer price).
NH: there’s loads more like this in the statement
NH: including some stuff on blogs
NH: well worth looking into if you are interested in Takeover stuff
PM: very interesting
PM:
PM: no we have got to finish
PM: Otherwise people will think we are hanging on long enought to get as many commetns as Helen and Rob
PM: We would be sad
PM: So we are off — i have a lunch date
NH: no time to look at Phorm today or Friends Prov
PM: Other than tell people to be cautious
PM: Thanks for joining us
PM: We’ve got to run — be back tomorrow at 11am
NH: bye