One of the resolutions that I made this year was to be regular on the blog both in terms of posting as well as responding to queries. It has of course taken me 17 days in the new year to move on this resolution. It is not really the best of starts but the intent is to be more regular this year in terms of posting on the various special situation transactions that I look at and also in terms of long term value picks.
I have been tracking a special situation case covering the acquisition of Midday’s print business by Jagran Prakash.
Midday as a company can be broken up into 2 pieces the relatively valuable print business with a good franchise and the cash guzzling radio business.
Structure of the deal
Under the scheme of arrangement Jagran Prakash will acquire the print business on a slump sale basis. As part of the arrangement the Midday shareholder will get compensation with shares issued by Jagran Prakash. The ratio proposed under the scheme of arrangement is 2 shares of Jagran Prakash for every 7 shares of Midday.
The residual Midday will consist of the radio business which did a topline of about 30 crores and a loss of 15 crores last year. Clearly this business is in its investment phase of building up the franchise in terms of radio property.
I have been tracking the deal for sometime and have been registering the price of the residual shares of Midday at every milestone in the life of the transaction. Considering the nature of the radio business and the timelines involved, I had refrained from building a position the stock and the intent was to do it very close to the actual record date.
I took up a small position on the 3rd of Jan at Rs 38.2 once the announcement had got made for the board meeting for deciding the record date. The reason for the small position was more a combination of having a learning process coupled with not too much comfort in terms of underlying valuations for the radio business. I would value the radio business on the outside at Rs 10 per share.