Last month amidst the chaos that was playing out, I came across a announcement on the BSE (18th of October) about the outcome of the EGM conducted at Mather & Platt Pumps.
Mather & Platt Pumps is owned by Wilo which is a German company.
Details of the EGM is linked here and it gave a go ahead to the management to explore potential delisting of the company. The stock was hovering around the Rs 146 mark and I bought some stock. The company announced its delisting offer on the 23rd of October. I have enclosed the link here. Was caught up in work so didnt focus too much on it.
Surprisingly in the panic the stock still didn’t move. I managed to pick some additional stock at Rs 149 on the 27th of October. So the information was available in the public domain for over a week and the stock refused to move at all.
It started moving subsequently and I exited some of my positions today around the Rs 200 mark. My estimate is that the bookbuilding will throw up a price around the 200 – 220 mark. Not waiting to catch the top and also it is more tax efficient to exit through the stock exchanges.
Wednesday, November 12, 2008
Mather & Platt Pumps - Delisting Play
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10 comments:
Hi Ninad,
Just one query. Would appeciate a reply from you. You have mentioned that it is more tax efficient to exit through the exchange. I could not get the point. Generally we all exit through the exchange. Isn't it? For ex, if I trade via HDFC Secutity/ICICIDirect/Rel Money, all the translations are done through exchanges. Is not that. Then what is the other option in this case, not existing through exchange.
Thanks in advance for a reply !
Gcpradhan1
Hi Gcpradhan
When u avail off a open offer opportunity, you are essentially transacting directly with a company and the transaction is not routed through the exchange.
The transfer of stock happens through a off market deal and you dont pay STT on the transaction. In such a scenario the capital gains tax is higher as compared to when you transact through the stock exchange and pay STT.
Trust this answers u r query.
Cheers
Ninad
Ninad
Are there any other potential arbitrage opportunities that u r evaluating.
Pankaj
Hi Pankaj
I m currently evaluating a potential opportunity. Will post on it once I m done with the analysis.
Cheers
Ninad
Hi Ninad,
Now it is clear to me. Thanks a lot for your information. BTW I am trying to learn value investing basics from you and people like Rohit and all. So do not mind if I ask you trivial questions.
Warm Regards
Gcpradhan1
Hi Gcpradhan1
The pleasure is mine if we can be of any help.
Cheers
Ninad
Hi Ninad,
Could you explain your thinking behind buying Mather &platt. It looked very expensive even at 150, with nearly 20x pe, and 4.5x book - no dividend, and no liquid assets like cash, etc.
Thanks
Gummud
Hi Gummud
Mather is clearly not a fundamental call. The reason for me to pick up the stock was the imminent delisiting offer which WILO the parent company made for Mather. It was a pure arbitrage opportunity.
Wilo accepted the discovered price of Rs 250 thru the bookbuilding process yesterday and will now delist Mather.
The transaction gave good returns in the short run. Trust this explains my logic.
Cheers
Ninad
I guess what you are saying is "gosh! i got lucky here! so I must be correct" haha.. good logic
Hi Anon
The stock was around the 145-150 mark when Wilo made the delisting offer. I had run thru Wilo's 2007 annual report which had discussed about the roadmap ahead for the Indian subsidiaries.
Clearly when the company makes a delisting offer they expect the discovered price to be higher than the market price when the offer was made. Since in Mather's case the market price didnt move, to me the risk was low.
I surely got lucky bcos the market didnt seem to move to the opportunity. Dont think there would be too many such low hanging fruits.
Cheers
Ninad
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