In memory of a loyal dog of the ASX.  You turned out to be worth every cent.  You’ll be chasing downward trends in puppy heaven now.  Pablo.

Good-Natured Dog of ASX Successfully Rehomed

So the board of Greencross has found a buyer who are proud to put a collar on this unruly tramp [ASX announcement 5/11/2018 – Scheme Implementation Agreement].  Vermont Aus Pty Limited, a subsidiary of TPG Capital Asia and TPG Growth (completely unrelated to TPG Telecom of ASX fame) has now agreed to pay $5.55 a share.  Not a bad outcome, representing a mark-up of about 22% from the price of Greencross when the trading halt was implemented.

For shareholders the agreement has the appearance of offering alternatives to a cash settlement for those who are eligible, and choose, the equity options: the unattractive opportunity to hold script in the holding company of the holding company of a subsidiary of TPG.  You can probably tell that I don’t really get it and for that reason I can’t explain it properly.  For retail investors then, such as myself, the only real option is to accept the payment and wish this old dog all the best for his move to a nicer house with a bigger yard.

The scheme is scheduled for a vote in the third quarter of this financial year.  All things going well the deal will be implemented by the end of the financial year.

The scheme shows a degree of co-operation between the board and Vermont which suggests there will be no other suitors or counter-offers and I now firmly believe there will be no bidding war.  The flip side to this coin is that I feel the deal is quite safe.  I don’t anticipate any regulatory issues in relation to consumer protection as TPG does not appear to be already in this space in Australia.  On the off-chance the deal doesn’t go ahead I believe the value TPG sees will eventually show up on Greeecross’ ASX listing.  I think I’ll hold until I can get that $5.55 a share and say my last good byes sans brokerage.  Good boy.  Gonna miss you buddy.

Trading halt announced today pending takeover offer likely to be announced before Tuesday the 6th of November 2018.  It appears likely any offer will have the board’s backing and, for a reasonable premium, is likely to be passed by all shareholders.  Usually I’m first to sell on such eventualities preferring the discount to the risk that the sale could be frustrated down the track.  However, I’m likely to hold this one until it is no longer possible.  I’ve grown to like the business model and have had repeated recent experience of its stickiness as a customer.  Little bit jealous that the big dogs of private equity are taking away the opportunity to participate in this opportunity on the public markets.

Cat with nine lives?

Shares up over 15% today on the back of an ASX announcement by Greencross confirming truth to recent rumours of takeover negotiations (#Takeover? ; # Buying rumours, holding facts).  Hopefully this is the start of a bidding war rather than a dead-cat bounce.

When it comes to the famous St Bernards of the Swiss Alps we’ve all been buying a rumour since the year 1820.  This was when a young English painter first depicted one of the faithful rescue dogs carrying a barrel of brandy around its neck.

Now, any doctor - hell, probably even a vet - can tell you that you don’t treat hypothermia with liquor.  Whilst the dogs themselves are real and have been there for centuries, the cute little barrel of grog around the hound's neck is almost certainly a fiction.  Does this make much difference to the livelihoods of the souvenir sellers of Interlaken? Nah, they will happily sell you trinkets depicting the dogs in this fashion and gladly accept your very expensive Swiss francs in the exchange.

So what are the recent rumours of private equity wanting in on Greencross worth to us?

Whether one should ever buy a stock on the basis of an investment thesis that the company will be taken over is not this particular story.  Nor, is it necessarily important that any takeover ever actually eventuate.

The bigger story, as far as I’m concerned, is the suggestion that this company is now undervalued following a recent sell-off on some bad (actual) news regarding non-cash impairments.  The market may have over-reacted and sold that fact just a bit too hard.  There could be opportunity for value here for the longer term investor.  Maybe the precise manifestation of this value - be it a takeover offer from private equity, a bidding war, or simply the company’s current management getting back on track following a hiccup - should be as trivial as brandy barrels on dog collars.

The value is in the bigger story - not just whether it's private equity who adopts this puppy.