DUPD – free put option on offer ?

Just bought quite a lot more DUPD – at an average price of just over 13p. .

I covered DUPD in a number of posts…

The investment managers Dragon capital have bought 10.69% from J&T Securities Management Limited this means they hold over 30% so need to make an offer at 13p for the rest of the company according to the takeover code.

I have bought as we are awaiting details of their offer.  I strongly suspect it will be higher than 13p, and even if it isnt, given that the bid price is at 13p you can just buy and sell the shares back for almost what you paid – getting a lot of optionality and paying next to nothing for it.

***EDIT 8/6 Offer details out at 13p. Needs 50% acceptances to be valid. Independent directors still to report so still chance they could raise over 13p. Have sold a bit and now wouldn’t add to this…***




Figures are laughably out of date but the argument still applies.  This is an out of favour, liquidating investment trust.  I have held it since February last year.

Short story behind this is that lots of money was raised at the top, invested and now we are picking through the remains.

There are reasons to suspect assets could be underpriced on the balance sheet.  Against the market they value their Arricano shopping centre holding at a discount of 70% OK its illiquid but I’m not sure its that illiquid.  They hold lots of little bits of land – near impossible to value as an outsider.  Even if we trust their valuations – which I dont, the company is worth $48m, I also notice on the balance sheet they have a large amount of accumulated losses ($225m), not at all sure as to the position in Ukranian tax, but this might be worth something for somebody.  This suggests losses can be carried forwards indefinitely in the Ukraine…

At the current price the offer is worth $17.62m.  Independent directors to me seem unlikely to recommend accepting an offer for less than 37% of what the company is worth, but I’ve been surprised before…

Further, large shareholders may no longer want the company managed by an investment manager which wants to take it off their hands and the inherent conflict of interest this could create.

Newsfeeds / volume today was very interesting.

Lars Earnst Bader (Hedge fund guy) busy buying all day at 13p went from 10.9% in the morning got to 15% as at close of business.

Other shareholders are Goldman Sachs at 15.5% and Guy Thomas / Hazell Carr Edwards FURB – 3.68%.

I think there is an element of risk on both sides, the investment management agreement expires in December 2018.  As a related party management can’t extend it themselves.  They dont have the votes to delist / do too much else unpleasant. particularly with the nature of the other shareholders, as Ukraine’s largest investment bank its well worth them owning this and equally its not in the interest of other holders to be too unreasonable as they can’t properly monetise it or manage it either….  I would also hope that as a large Ukrainian investment bank they would have a bit of a reputation to uphold so can’t behave too badly…

I strongly suspect a higher offer will follow.

There is some risk here, it is possible for the takeover panel to waive the requirement to make an offer (I dont think they will).  It is also putting money into ukraine – not the most stable part of the world.

My holding has increased from 2.7% of my portfolio to 13% and I am considering upping it further on weakness

*EDIT 8/6/2014 – see comment above, now not as attractive as I thought…


7 thoughts on “DUPD – free put option on offer ?”

  1. Hi thanks for this idea. What about them just making a low ball offer that gets rejected so they can go back in there and start accumulating around 13p again? How many times do you have to repeat a mandatory offer if you accumulate above 30 pct?

    1. Its a good question and a concern. I dont know of any instances where acquirers have kept going back. They have to offer at least 13p. With market today being willing to buy (a small amount) at 14 I suspect it will be higher. If u own more than 50% I believe no need to make an offer

  2. Seems this is going ahead at 15p. How do you look at take dark risk here? It does not seem they would like to pay the minority holders out at anything close to NAV at all.

    1. Yes, it seems they don’t want to pay more than 15p. Will they go dark and stop reporting? It doesn’t happen as much as in the US but there are ways.

      They need 75% to delist – I doubt they will get it. This will become another AIM company with a very concentrated shareholder base. One of my investment rules is I don’t get into companies with dominant (45%+) shareholders. I’m very concerned about getting screwed in various ways.

      The bid was just above 15p today – I suggest you take it. I may look at bending my rule and getting in if the price falls a lot.

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