How the Aryzta Rights Issue will work

Brendan Burgess

Brendan Burgess

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I am trying to figure this one out.

https://www.aryzta.com/aryzta-today-publishes-the-final-terms-of-the-proposed-ordinary-capital-increase-through-a-discounted-rights-offering-expected-to-raise-approximately-€790-million-gross-proceeds/

It is proposed that the new registered shares will beoffered to existing shareholders of ARYZTA at an offer price of CHF 1.00 per share.

If approved by the AGM, existing shareholders will receive 10 rights to preemptively
subscribe for new registered shares (“Rights”) for each registered share they hold on 6
November 2018 (after market close).

One Right will entitle the holder of such a Right to subscribe to one new registered share subject to certain restrictions under applicable local laws. As from 7 November 2018, registered shares of ARYZTA will trade “ex Rights”.


Expected timetable for the rights offering
1 November 2018: Annual General Meeting

2 November 2018: Publication of prospectus

6 November 2018: After close of trading on SIX Swiss Exchange and Euronext Dublin: cut-off date for determination of existing shareholders for the entitlement of Rights

7 November 2018: Start of rights trading period and start of trading in Rights on SIX Swiss Exchange; start of rights exercise period

13 November 2018: End of trading in Rights on SIX Swiss Exchange; deadline for the holders of CREST depositary interests to exercise their rights via Euroclear

15 November 2018: 12:00 noon CET: end of rights exercise period

19 November 2018: Listing and first day of trading of new registered shares on the SIX Swiss Exchange and on Euronext Dublin; delivery of the new registered shares against payment of the subscription price
 
Updated to correct exchange rate.

So, if I have 1,000 shares today, my options are

1) Subscribe for the Rights Issue
I will get 10,000 new shares for CHF 10,000 which is about €8,800

2) Sell my 1,000 shares today in the market at €6.60 each or €6,600

3) Keep my shares, but sell my rights at whatever price they fetch on 7 November
 
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This confused me too... why so many shares at such a low price in a rights issue? If you don't subscribe you are left with your existing shareholding that will be worth (1 x €6.60 + 10 x €1.15)/11?

So <€2 each?
 
rob oyle said:
why so many shares at such a low price in a rights issue?
Click to expand...
Apart from the financials, because it guarantees strong take-up. The dilutive effect is massive for those who don't.

They probably couldn't get anyone to underwrite it on other terms. If you look back at the HBOS rights issue in 2008, where only 5% was taken up, and the underwriters ended up owning 10% of the bank, they don't want that happening.
 
Updated to correct currency conversion rate

The share price should fall to €1.38 after the Rights Issue

upload_2018-11-3_8-38-17.png
 
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If you don't take up your rights, you should be able to sell them for 50 cents each (€1.38 - €0.88) which will leave you in the following position:

upload_2018-11-3_8-40-24.png
 
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Guys,


I think ye have the exchange rate backwards.


1 Eur = 1.14 CHF

or

1 CHF = 0.87 Euro


Soo your hypothetical 10,000 new shares would cost something like €8,700


Using the closing SP today in Dublin of €6.60, by my calculations the Arytza SP will be about €1.39 after the rights issue


(Pre Rights SP + €8.70) / 11 = Ex Rights SP
(€6.60 + €8.70) / 11 = €1.39



.....and of course this is where the win, lose or draw comes in.

You are actually only going to know on 19th Nov, if the purchase of the Rights was worth it. By re-running the above Calculation again. This time already knowing the Ex Rights SP from the Stock Market that day to tell you if it was wise or not to sell at whatever Pre Rights Price you could have got on or before 7th Nov
 
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Hi Village

Well spotted. I have corrected the tables accordingly and arrive at the same figures as you.

Brendan
 
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RedOnion said:
Apart from the financials, because it guarantees strong take-up. The dilutive effect is massive for those who don't.
Click to expand...

When you are dealing with a small cap speciality that can’t deliver during a recovery, it is all about the financials!
 
Jim2007 said:
When you are dealing with a small cap speciality that can’t deliver during a recovery, it is all about the financials!
Click to expand...
You might enlighten the less informed.
How do the financials explain the original question? Why a 10:1 rights issue, rather than a 2:1 for example?
 
If you wanted to start a new shareholding in arytza , is it not just simpler to wait until after the rights issue and buy those reduced value shares. The gain or loss is going to be marginal anyway in the short term? I agree with other posters why did they dilute their existing shareholders so much, if I was a shareholder I would be very unhappy about that, it's like they are forcing their shareholders to avail of the rights issue.
 
Hi Joe

We don't speculate about share prices, but I think it's worth looking at some of the technical factors here without discussing the underlying value of the company or prospects for the future.

In theory, the rights issue should make no difference as my table shows. You can buy the shares today which would be ex-rights or you can buy the rights or you can wait until the whole thing is through.

In practice, there are technical reasons for a fall in the share price which might be unrelated to the underlying value.

Many people, including myself, did not have the cash to take up our rights. For me to do so, I would have had to sell other shares. On those other shares I would have a capital gain. To use up that capital gain, I would have had to sell Aryzta shares as I have losses on them.

So there may be a lot more sellers than buyers.

Some academic must have researched the impact on prices of rights issues and the subsequent return vs. the market.

Brendan
 
I will be out of the country when this rights issue needs to be progressed.
Does anyone know if it’s as simple as paying for such rights via a SEPA payment to Euroclear?
 
RedOnion said:
Apart from the financials, because it guarantees strong take-up. The dilutive effect is massive for those who don't.

They probably couldn't get anyone to underwrite it on other terms. If you look back at the HBOS rights issue in 2008, where only 5% was taken up, and the underwriters ended up owning 10% of the bank, they don't want that happening.
Click to expand...

Just did the maths for the shares I hold... the rights issue means investing more in the company now that the existing shareholding is worth (i.e. the capital being raised is worth more than the company itself).

I've seen rights issues before where capital was raised on shares offered at a discounted rate to market and (say) 1 share for every 4 shares held, but never where the existing investors were asked to (more than) double down on what they hold (albeit most are probably carrying a significant loss on their investment already). Has this been successfully done before?
 
Well, if the alternative is for the company to go into liquidation and for the existing shareholders to get nothing, I suppose it's the best of a bad lot. Presumably the current board and management will take a hit on salaries and pensions for having brought the company to this state?
 
OK, so it fell to €1.35 after the new shares came on the market.

upload_2018-11-8_17-10-27.png



But it's been very volatile since.

It was up significantly yesterday and down again today.

upload_2018-11-8_17-9-10.png


Brendan
 

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I have 180 shares in aryzta held in trust by link corporate trustees after iaws merged to form aryzta .I receive dividend every year but have got no communication about the rights issue.I would like to participate but is time running out
 
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