From AFR Street Talk -
Humm shareholder targets board forentertaining ‘lowball’ offer
Self-styledactivist Jeremy Raper has little chance of swaying the Humm Group board toreject chairman and major shareholder Andrew Abercrombie’s $268 million bid.But he’s giving it a red-hot go anyway.
Speaking toStreet Talk, private investor Jeremy Raper voiced his frustration at theindicative offer to acquire Humm at 58¢ per share, noting it landed as thecompany traded around its record lows. But his primary beef is with thethree-person independent board committee.
By givingAbercrombie due diligence, Raper says this has anchored the expected pricemeaning any increases will be tied to that offer. Rather, he would have wantedthe board to initiate a strategic review and roll out the welcome mat to otherbidders, noting Latitude has shown interest in the past.
“The onlyreason Humm is trading so low is because major shareholder Tanarra Capital hasbeen in the market selling,” he said.
“I’m notsurprised Abercrombie has been opportunistic, but I didn’t expect the board tojust roll over and give due diligence.”
Raper, aformer Goldman Sachs associate who runs his own money at Raper Capital, is asmall shareholder and is powerless to do anything but shake his fist in theboard’s direction (and hope others join him).
He ownsaround 2.5 million shares, or 0.5 per cent of the register, aggressively addingto his position after Abercrombie launched his bid last week. Of note, Humm’sthree-year volume-weighted average price over the past three years is 55¢ –below Abercrombie’s indicative offer.
Raper’sview on price is backed by Shaw and Partner’s senior analyst Larry Gandler whodescribed the offer as “below valuation” in a note to clients last week andheld his buy rating.
“We leaveour 90¢ share target price unchanged as that is supported by reasonablevaluation metrics,” Gandler wrote, estimating NTA – the value of Humm’s assetsminus liabilities (less intangible assets) – at about 85¢ per share.
“Given thelevel of the indicative offer, it’s plausible The Abercrombie Group is merelyattempting to put HUM in play. The non-bank financial sector is ripe forconsolidation.“
Ultimately,it will come down to what the big shareholders want. Aside from Abercrombie,who has a 26.7 per cent stake, Renaissance Asset Management is the only otherholder above the substantial line with 5.1 per cent. The fund manager declinedto comment.
It ishighly unlikely Abercrombie will be allowed to vote on a scheme given hisassociation. Therefore, it would need 75 per cent of those who show up to voteyes. By Gandler’s math, shareholders other than Abercrombie voting in thescheme would need 17 per cent to 18 per cent to block the transaction.
Resistanceto Abercrombie’s bid comes three years after the chair voiced strong oppositionto a $335 million bid from Latitude for Humm’s smaller consumer financebusiness. Abercrombie’s primary issue was not with the bid itself but itsmajority script component."
