How the Aryzta Rights Issue will work

Discussion in 'Investments' started by Brendan Burgess, 2 Nov 2018.

  1. Brendan Burgess

    Brendan Burgess Founder

    Posts:
    36,336
    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
     
  2. Brendan Burgess

    Brendan Burgess Founder

    Posts:
    36,336
    Last edited: 3 Nov 2018
    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
     
    Last edited: 3 Nov 2018
  3. rob oyle

    rob oyle Frequent Poster

    Posts:
    551
    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?
     
  4. Boru38

    Boru38 Registered User

    Posts:
    8
    If shares are bought via Degiro platform how does this work ?
     
  5. Jim2007

    Jim2007 Frequent Poster

    Posts:
    2,028
    Did you look at the financials???
     
  6. RedOnion

    RedOnion Frequent Poster

    Posts:
    2,061
    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.
     
    rob oyle likes this.
  7. Brendan Burgess

    Brendan Burgess Founder

    Posts:
    36,336
    Last edited: 3 Nov 2018
    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
     
    Last edited: 3 Nov 2018
  8. Brendan Burgess

    Brendan Burgess Founder

    Posts:
    36,336
    Last edited: 3 Nov 2018
    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
     
    Last edited: 3 Nov 2018
    rob oyle likes this.
  9. Brendan Burgess

    Brendan Burgess Founder

    Posts:
    36,336

    Attached Files:

    Last edited: 10 Nov 2018
  10. Littlevillage

    Littlevillage New Member

    Posts:
    1
    Last edited: 2 Nov 2018
    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
     
    Last edited: 2 Nov 2018
  11. Brendan Burgess

    Brendan Burgess Founder

    Posts:
    36,336
    Last edited: 3 Nov 2018
    Hi Village

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

    Brendan
     
    Last edited: 3 Nov 2018
  12. Jim2007

    Jim2007 Frequent Poster

    Posts:
    2,028
    When you are dealing with a small cap speciality that can’t deliver during a recovery, it is all about the financials!
     
  13. RedOnion

    RedOnion Frequent Poster

    Posts:
    2,061
    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?
     
  14. joe sod

    joe sod Frequent Poster

    Posts:
    585
    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.
     
  15. Brendan Burgess

    Brendan Burgess Founder

    Posts:
    36,336
    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
     
  16. Deiseblue

    Deiseblue Frequent Poster

    Posts:
    726
    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?
     
  17. rob oyle

    rob oyle Frequent Poster

    Posts:
    551
    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?
     
  18. jpd

    jpd Frequent Poster

    Posts:
    1,507
    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?
     
  19. Brendan Burgess

    Brendan Burgess Founder

    Posts:
    36,336
    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
     

    Attached Files:

  20. wheeler dealer

    wheeler dealer Registered User

    Posts:
    13
    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