After 18 months of disappointments, it’s nice to get a positive announcement from RCU. Yesterday the trust announced the sale of RSA Bedford Woods for a 6% discount to book value. That mightn’t sound great – it is RCU’s best asset – but when you’re trading at less than half book, a 6% discount is seriously good news.
The proceeds enable it to repay US$87.4m of debt and add a little to the cash balance. RCU will be left with two unencumbered assets (US$0.39 of book value), US$0.39 of net assets in the Saban joint venture (a portfolio of government leased properties), US$0.14 of cash and two highly leveraged assets that could be worthless. With no pressing debt to be refinanced and cash in the bank, RCU is no longer distressed.
The manager also announced the receipt of an indicative non-binding bid for all of RCU’s assets from joint venture partner Saban Group. This is further good news. The details announced today – $US61.2m for all of the assets – suggest a price that is not appealing. If you subtract the US$14m cash from both sides of the equation, Saban would be buying US$84m of property assets for just US$47m. Not even I, after 18 months of trauma, am that desperate.
But, given it already owns 65% of the government properties joint venture, Saban is the logical owner of the assets. And the initial bid was made before the sale of RSA Bedford Woods and presumably incorporated a discount on that asset larger than the 6% it has been sold for. Given a logical buyer and willing sellers, we’re hopeful something sensible can be worked out over the next few weeks.
Accordingly, we have withdrawn our requisition for a meeting while this process runs its course. If we get offered an acceptable price, we’ll vote in favour and go our separate ways. If not, we’ll revisit the process of instituting an appropriate structure and management arrangement down the track. With a rock solid balance sheet and cash in the bank, time is finally on our side.
28 thoughts on “Good News (Finally) At RCU”
It’s like the black knight – this story keeps giving and giving. Did anyone ever think we were going to get anything other than a low ball bid from Saban. RCU is a distressed asset in their eyes.
How long before Woolley can relaunch a bid ? Are there restrictions because of his previous bid?
His 46c bid lapsed on 9 July, so I would think he’s got to wait 6 mths from then, but hopefully someone out there in blogworld will know the exact answer….
Hi there everyone,
I was just wondering if anyone had the answer to the above question from Naomi (what the bidding restrictions might be on Woolley)?
I am also keen to get some thoughts, from those of you following the stock, regarding your impressions of the way that the board and the current shareholders are going to respond to the current low-ball offer from Saban – and a likely, albeit slightly higher, low-ball bid again from Woolley? Clearly Woolley didn’t get the response he was after last time he tried to buy people out so that is promising to those of us that thing that there is a lot more value to be unlocked given a fair bit of time (and some decent management wouldn’t hurt either) – but I was wondering what other people’s feelings were as things start to drag on and people become impatient whether the current share holders are likely to compromise too early?
Thanks all in advance.
Hi guys, it’s all a bit confusing isn’t it and not particularly promising I’d must say. Why can’t he bid again whenever he wants? Why are there any prohibitions on him bidding now?
Despite everyone saying for so so long that there is value here, no one seems to be recognizing it and the share price is actually going down. There appears no imminent way of it being recognized. I see a time pretty soon, when some just say ‘we can do better elsewhere’ and move on., avoiding the risk of ongoing losses, which seem very possible.
Clearly we’ve been let down by hopeless hopeless self serving management, as everyone says and what appear to be a pathetic board – even worse than the last one, if that’s possible.
I wonder whether wooley has resigned because he’s just had enough? Why would he want to bid again? Money seems to being frittered away, Sabah is a bad partner in our biggest asset and our main properties keep being valued down and dont seem worth much anymore, especially with such bad management….
I did a google search on wooley – he seems to have plenty of money, some very rich friends and partners and is clearly not in need of opportunities. I reckon if he loses interest and starts dumping shares it means we’re in trouble.
Thoughts? Steve J, I’m sure you’ve got a clever plan, which no one would expect you tell us, but is there any reason you’ve been so quiet lately on this?
Steve J surely you have some thoughts after todays announcement?
There usually are time prohibitions following bids but not clear here – 6 months is what comes to mind but there are regional differences.
Value can take a long time to align with price – I assumed that everyone left in RCU knows that so it is surprising to read that “Katina”. The hopeless self serving management is part of the reason the gap to NTA exists. There is a great Keynsian quote about this but I would destroy it
He will most likely bid again – value persists, especially in light of recent US macro trends. I can’t see him walking away – I wonder if his ego would even let him.
Try to approach this dispassionately. Ignore the recent prices – these are mostly low volume transactions and don’t reflect either NTA or a real “market” price.
The clever thing to do is to sit tight and wait
I think your suspicions are correct re dragging on and patience. At a smaller discount to NTA volume might increase a lot – not sure where exactly.
And now that we are out of a trading halt and Saban’s low ball proposal is being pushed by the Directors? Any thoughts?
This seems like an excellent way to resolve the company’s future, and provide an exit route for unhappy unitholders. It will force Woolley to bid up or exit the company.
Woolley owns 33% and can only add 3% every 6 mths in the absence of another bid. Acorn, Intell Investor and Regal own 37% between them and have stated they intend to accept the wind-up plan. Since the vote will require only a 50%+ outcome in favour, Woolley is unlikely to defeat the proposal even if he buys that extra 3% because the rest of the unitholders (30% of the units) will most likely vote in favour too (or at least those who vote) – I know my 0.5% will be!
That then leaves Woolley to make a bid higher than what’s offered under this wind-up proposal if he wants to defeat it – and that means he’ll have to pay 60c+.
Either way, I think it moves us all a lot closer to an exit from this sorry business. It seems clear to me that the property “valuations” cant be relied upon in this market, and the prospect of an imminent cash realsation of the assets is an excellent outcome even though it is somewhat lower than what we had all believed under the previous “valuations”.
Hi Simon, I posted some thoughts this morning http://www.iifunds.com.au/bristlemouth/biting-bullet-rcu
Perhaps re-post your comment there and I’ll approve it so others can read it.