NEX GROUP PLC ORD (NXG)

[ZipserSir]

From the London Stock Exchange news feed on Friday "NEX Group, up 33%. The financial technology company late Thursday confirmed it has received a preliminary takeover approach by US derivatives exchange operator CME Group. NEX said discussions are at an early stage and there can be no certainty that an offer for NEX will be made, nor as to the terms of any offer, if made. The announcement was made with the consent of CME, NEX said. Societe Generale raised the stock to Buy from Hold."

There does not seem to have been any discussion of this one, though I think many of us hold NXG. I'm thinking of taking profits - anyone else have any thoughts?

I note funduffer sold out at the end of February, which is the last NXG post on the board, I believe. Would be interested to know funduffer's thinking at that time (apologies for bringing this up, but hopefully your thoughts will be instructive).

[SuperCally]

I took the opportunity to trim (or ‘top-slice’ if you prefer!) and top up BP.
Did similar with Sky, following the Comcast boost.

Probably wrong, but they can’t touch you for it.

[monabri]

Article in The Telegraph might be of interest to holders.

https://www.telegraph.co.uk/business/20 ... giant-nex/

From what I can glean looking at SwS and Digital Look (please DYOR)

The analysis in Simply Wall Street (SwS) indicates

- current divi cover less than 1 (reported at 0.6 in Digital Look as a second source)
- P/E value is over 37
- it's already overvalued based on estimates of free cash flow over the next 3 years (£3.38 versus £8.74)
- dividends are expected to halve to ~1.8% (also reported in Digital Look at ~1.8% increasing to 2.4% and then 2.9% in subsequent years)

If I held I would see what the bidding increases to and then take the money and run.

I stress I don't know much about NXG but it seems a good opportunity to "cash out". I wonder why there is a potential bidding war?


p.s. I don't hold.

[monabri]

p.s

A share price increase of 30% in a single day (Friday) would equate to 10 years or more of dividends at ~3% ....

I note that there was a dividend cut in March 18 so the current yield in "dividend data" will only reflect the latest interim dividend reduction (thus it is very likely to be overstating the forward yield at 4.5% as it still includes last years relatively large "final" dividend).

The dividend history is "interesting" - 5 years of a constant annual 22p, then a substantial increase to 33.6p last year followed by a big cut this year.

Hmmm! - I would be watching the bid activity closely with a view to maximising the exit point.

All very non-HYP I know but it was a stable 22p for 5 years then increased and then cut the divi - so it was a HYP candidate but no longer is.

[ZipserSir]

Hmmm! - I would be watching the bid activity closely with a view to maximising the exit point.

I'd love to know what this means in practice! How does one maximise the exit point by watching the bid activity?

[Gengulphus]

Hmmm! - I would be watching the bid activity closely with a view to maximising the exit point.

I'd love to know what this means in practice! How does one maximise the exit point by watching the bid activity?

One doesn't necessarily, any more than in the absence of a bid one necessarily maximises a selling exit point by watching market activity. In both cases, one can certainly attempt to maximise the exit point by watching the activity, but succeeding in doing so is another question...

Gengulphus

[monabri]

Without getting drawn into a semantics debate - my suggestion is simply to keep an eye on the share price and then bail out when one judges best.

Of course, it's all a guess! Alternatively, let it ride and do nothing.

[Itsallaguess]

Of course, it's all a guess!

Of course!

Itsallaguess

[funduffer]

From the London Stock Exchange news feed on Friday "NEX Group, up 33%. The financial technology company late Thursday confirmed it has received a preliminary takeover approach by US derivatives exchange operator CME Group. NEX said discussions are at an early stage and there can be no certainty that an offer for NEX will be made, nor as to the terms of any offer, if made. The announcement was made with the consent of CME, NEX said. Societe Generale raised the stock to Buy from Hold."

There does not seem to have been any discussion of this one, though I think many of us hold NXG. I'm thinking of taking profits - anyone else have any thoughts?

I note funduffer sold out at the end of February, which is the last NXG post on the board, I believe. Would be interested to know funduffer's thinking at that time (apologies for bringing this up, but hopefully your thoughts will be instructive).

ZipserSir,

I sold out of NXG because it was low yielding (forecast yield was 2.7%), and was one share that I needed to Bed & ISA before the end of this tax year.

So I sold out of my share dealing account, and purchased WPP (forecast yield 4.7%) in my ISA account.

If I had known about a takeover at the time, I might have hung on to see what transpired, and Bed & ISA'd it next tax year!

FD

[ReformedCharacter]

Having been rather busy I missed this discussion and only read about the NEX takeover just now. An update in the DT here:

https://www.telegraph.co.uk/business/20 ... cme-group/

RC

[Instep]

Having been rather busy I missed this discussion and only read about the NEX takeover just now. An update in the DT here:

https://www.telegraph.co.uk/business/20 ... cme-group/

RC

The offer has now been recommended by the NEX board

Under the terms of the Acquisition, NEX Shareholders will be entitled to receive:
for each NEX Share 500 pence in cash
and
0.0444 New CME Shares
· Based on CME's closing share price of US$158.84 at 5.00 p.m. (Eastern Daylight time) and the exchange rate of US$1.4101:£1, at 4.00 p.m. (London time) on 28 March 2018 (being the last practicable date prior to this Announcement):

· the terms of the Acquisition value each NEX Share at 1,000 pence per share and NEX's entire issued and to be issued share capital at approximately £3.9 billion ($5.4 billion); and

and

· In addition, the boards of CME and NEX have agreed that NEX Shareholders will be entitled to receive a final dividend for NEX in respect of the year ending 31 March 2018, such dividend not to exceed an amount of 7.65 pence per NEX Share (the "NEX Final Dividend").

Trading at about 970p. I can't see much reason for a Hypster to hang on any longer.
Instep
Conference call later, but I'm too busy to listen.

[torata]

The offer has now been recommended by the NEX board

Under the terms of the Acquisition, NEX Shareholders will be entitled to receive:
for each NEX Share 500 pence in cash
and
0.0444 New CME Shares
· Based on CME's closing share price of US$158.84 at 5.00 p.m. (Eastern Daylight time) and the exchange rate of US$1.4101:£1, at 4.00 p.m. (London time) on 28 March 2018 (being the last practicable date prior to this Announcement):

· the terms of the Acquisition value each NEX Share at 1,000 pence per share and NEX's entire issued and to be issued share capital at approximately £3.9 billion ($5.4 billion); and

and

· In addition, the boards of CME and NEX have agreed that NEX Shareholders will be entitled to receive a final dividend for NEX in respect of the year ending 31 March 2018, such dividend not to exceed an amount of 7.65 pence per NEX Share (the "NEX Final Dividend").

Trading at about 970p. I can't see much reason for a Hypster to hang on any longer.
Instep

I've just noticed the "0.0444 New CME Shares" part of this.

From NEX detailed press release:

NEX shareholders will be entitled to receive, for each NEX share: 500 pence in cash and 0.0444
shares of CME Group Class A common stock.

Presumably one will be forced to sell in the market or else end up with US shares, similar to Vodafone/Verison.

torata

[Gengulphus]

Nobody seems to have posted a link to the actual RNS announcing the offer yet, so here it is:

https://www.investegate.co.uk/cme-group ... 00423375J/

Gengulphus

[absolutezero]

Think I will wait for the 7.65p dividend and then sell in the market.
I don't want foreign listed shares. Just a hassle.

Any idea when the dividend will be paid?

[Instep]

Nobody seems to have posted a link to the actual RNS announcing the offer yet, so here it is:

https://www.investegate.co.uk/cme-group ... 00423375J/

Gengulphus

Thanks G
The link was in my original draft of the post above. Sorry for the shoddy editing.

Think I will wait for the 7.65p dividend and then sell in the market.
I don't want foreign listed shares. Just a hassle.

Any idea when the dividend will be paid?

The 7.65p is probably already in the NEX price. As my holding is in an ISA, I may not wait too long.
Instep

[kempiejon]

Nobody seems to have posted a link to the actual RNS announcing the offer yet, so here it is:

https://www.investegate.co.uk/cme-group ... 00423375J/

Gengulphus

Thanks G
The link was in my original draft of the post above. Sorry for the shoddy editing.

Think I will wait for the 7.65p dividend and then sell in the market.
I don't want foreign listed shares. Just a hassle.

Any idea when the dividend will be paid?

The 7.65p is probably already in the NEX price. As my holding is in an ISA, I may not wait too long.
Instep

I couldn't find a qualifying date for the final dividend so has it already passed with the announcement? If the date has passed then there is no reason not to sell at your convenience.

[Gengulphus]

Any idea when the dividend will be paid?

If it's a final dividend, it would presumably be roughly according to the established timetable documented in https://www.nex.com/investors/sharehold ... nformation - i.e. payment in mid-to-late July, ex-dividend in late June or possibly very early July. Note that it's actually the ex-dividend date that determines whether you receive the dividend, not the payment date. E.g. if you had sold the shares on or after June 30th last year (and had bought them before June 30th), you would have been paid the final dividend on July 21st - even though you might not have owned any shares for up to 3 weeks by that time.

The "If" at the start of that last paragraph is important, because the announcement also says that if the scheme becomes effective before the final dividend can be approved by shareholders at NXG's AGM, the NXG directors are allowed to instead declare it as a second interim dividend. Furthermore, it says that they intend to do so, and their general duty as directors to look after the collective interests of their shareholders would in any case more-or-less oblige them to do so. I don't know how likely the scheme is to become effective early enough for that to apply (the expected timetable will only become available in the Scheme Document, which is expected to be published by late April), but it might well mean that the dividend goes ex-dividend significantly earlier than the established timetable suggests.

I should add that I've said the above in order to answer your question, not because I think it's important. I most definitely think it's unimportant, because what you can sell the shares for can be expected to fall by the amount of the dividend when it goes ex-dividend. So it's basically a question of receiving X+7.65p per share from a sale before the ex-dividend date, or X per share from a later sale and a dividend of 7.65p per share - which basically makes no difference for shares held in an ISA or other tax shelter, and an investor-dependent tax difference that depends on the tax circumstances of the investor otherwise. That difference could be anything from 38.1% tax vs 0% tax in favour of selling cum-dividend for an additional-rate taxpayer who is within their CGT allowance but outside their dividend allowance, to 20% tax vs 0% tax in favour of selling ex-dividend for a higher- or additional-rate taxpayer who is within their dividend allowance but outside their CGT allowance. But those are percentages of the 7.65p/share amount, so at most just over 2.9p/share, and I would expect the extreme cases to be quite rare: more typical cases for unsheltered holdings would be 10% vs 7.5% in favour of selling ex-dividend for a basic-rate taxpayer (0.19125p/share) or 32.5% vs 20% in favour of selling cum-dividend for a higher-rate taxpayer (0.95625p/share). These really are very small differences in the context of a sale price in the region of 1000p/share - pay attention to them if you like, but remember that they're likely to be small compared with other effects on the share price. In particular, I would expect price fluctuations of the CME shares and the market's mood about the chances of the takeover failing to go through or of a higher bid emerging to be bigger factors. And even brokers' cheap dealing days might be a bigger factor - e.g. Halifax's monthly cheap dealing offers with a commission of £3.95 rather than £11.95 would make a bigger difference than the more-typical-basic-rate-shareholder case above for up to 4000-odd shares...

Gengulphus

[absolutezero]

So is this a done deal?
Is it possible a higher bidder could appear?
I can imagine selling only to find another bid pushes up the share price!

[Gengulphus]

So is this a done deal?
Is it possible a higher bidder could appear?
I can imagine selling only to find another bid pushes up the share price!

Too early to tell whether it's a done deal IMHO, and yes, it's possible that a higher bidder could appear. It's also possible that this deal could collapse in some way. I've no real idea of the chances of either of those happening (*), so I'll have to leave you to decide for yourself what you rate those chances to be - all I can do is recommend that you assess both of them, not purely focus on one of them.

(*) No "real idea" in the sense that I do believe such chances are never actually zero until the deal actually completes, nor at this early stage in the process ever negligible. That's what lies behind my belief, expressed towards the end of my last post, that the financial differences between selling cum-dividend and ex-dividend are much more minor issues in any selling decision now than either of the two issues of a possible collapse and a possible higher bid.

Gengulphus

[Vikingdon1]

Has anybody any views regarding selling this share prior to the cash and share takeover?

Regards

Vikingdon1