Fenner up 25% on recommended takeover bid

[MDW1954]

Some here will hold Fenner (I do). Up 25% today after its board recommended a takeover bid from Michelin. A handy capital gain, so a good job it's in an ISA. No longer strictly a HYP share, of course, but very much one when I bought it.

I know that TJH often advocates selling in the market in such cicrumstances, rather than waiting for the cash, but I'm minded to see if a higher bid comes along.

What are others doing?

MDW1954

[Lootman]

Probably depends on whether you hold it in a taxable account. If you do then maybe wait until the new tax year before selling - it's only a couple of weeks away now. Mine is in my ISA so will just ignore this.

I'm sure TJH has his reasons for selling takeover targets early. But I generally wait things out and see what happens. That certainly worked well for Sky TV.

The exception would be where a corporate action will leave me holding some other share that I maybe don't want. So for instance when RPC made a bid for British Polythene I sold before the event because I already held RPC and didn't want more. I also sold Vodafone before the action because I didn't want Verizon shares.

[OLTB]

Hi MDW1954

I hold SKY and if I had sold when the Fox merger was announced and reinvested elsewhere, I would have benefitted from continuing to receive dividends (hopefully my choice wouldn't have been Carillion!). My last dividend from SKY was received on the 28th October 2016, nothing through 2017, however, I have just been paid a small compensation dividend on the 9th February 2018 with a further special due on 23rd April 2018 (the delay being mainly due to progressing past the CMA).

From a capital perspective, had I sold at the time of the announced bid from Fox, the shares would have been traded at roughly the bidding price from Fox (£10.75). Now that there is a late potential challenger to Fox/Disney from Comcast, the current share price of SKY is £13.15 which is just over 22% more than the £10.75 I would have sold for. Currently, the capital appreciation is more than the dividends I have foregone.

I'm the first to admit I don't know what the final outcome will be, but I'm happy to be ignorant on this and let the market do the trading for me. For better or worse...

Cheers, OLTB.

[tjh290633]

I'm sure TJH has his reasons for selling takeover targets early. But I generally wait things out and see what happens. That certainly worked well for Sky TV.

Two reasons, really. One is that near the end date there is little likelihood of a second bid. The other is that I get my hands on the cash a lot earlier, so can reinvest it that much sooner. If there is a final dividend to be paid by the victim share, then I would wait until after it has gone XD.

Sometimes the offer lapses, because of regulatory interference or failure to agree. Then the price may well drop back to the pre-bid price. I think that happened with Blue Circle, and I regretted not having sold in advance, but they received another offer from Laporte, so I got my money after all. They had previously made a tender offer for some shares in June 2000, and then had a special dividend at the end of December 2000, with capital reorganisation, and I finally exited in July 2001. A bit of a switchback ride over the two years I held them.

TJH

[kempiejon]

Two reasons, really. One is that near the end date there is little likelihood of a second bid. The other is that I get my hands on the cash a lot earlier, so can reinvest it that much sooner. If there is a final dividend to be paid by the victim share, then I would wait until after it has gone XD.

Sometimes the offer lapses, because of regulatory interference or failure to agree. Then the price may well drop back to the pre-bid price.

There is a small savings to made by hanging on, you avoid any spread and fees associated with selling, usually though, if I've decided I don't want any takeover shares, have harvested all relevant dividends and can redeploy and know where it's going I am of a mind to sell and get on with it. One can occasionally opportunely collect another dividend. I sold Sky for the unsheltered capital gains but I've kept the balance in my ISA and see the price has gone up since my sale. So I was unlucky that time but I'd guess 2nd bids or talks falling though come out in the wash broadly equal.

[Bouleversee]

There is to be a dividend of 2.1p to be declared at the end of April, according to an article in The Times. Current s.p. would include that. Haven't heard anything from my broker about the offer so don't know what the various relevant dates are and whether there is likely to be time for any higher bid..

[Charlottesquare]

That is a bit of nostalgia for me (though I do not hold). The first ever audits I ever worked on were the JH Fenner pension schemes (administered by Alexander Stenhouse in Glasgow) as a very raw trainee in 1985, there were back then six defined benefit schemes we waded through.

A somewhat cushy introduction to auditing, getting to work in a boardroom in the AS premises with the others on the team (3 of us) compared with the paint stores, workshops and freezing offices I got sent to during the remainder of my apprenticeship.

[Lootman]

A somewhat cushy introduction to auditing, getting to work in a boardroom in the AS premises with the others on the team (3 of us) compared with the paint stores, workshops and freezing offices I got sent to during the remainder of my apprenticeship.

Happy days. I recall having the auditors coming into one place i worked, and was annoyed that they laid claim to nice office space. Then one of them asked for a printer. I consulted with my boss who told me to stall. I did. Eventually he brought in his own.

Then he insisted on reconciling our records. Fair point. I produced two sets of records, both derived from the same file. The poor fool spent two days reconciling them and then, surprise, surprise, they both reconciled. So everyone was happy.

[Charlottesquare]

A somewhat cushy introduction to auditing, getting to work in a boardroom in the AS premises with the others on the team (3 of us) compared with the paint stores, workshops and freezing offices I got sent to during the remainder of my apprenticeship.

Happy days. I recall having the auditors coming into one place i worked, and was annoyed that they laid claim to nice office space. Then one of them asked for a printer. I consulted with my boss who told me to stall. I did. Eventually he brought in his own.

Then he insisted on reconciling our records. Fair point. I produced two sets of records, both derived from the same file. The poor fool spent two days reconciling them and then, surprise, surprise, they both reconciled. So everyone was happy.

Well these days not sure audit firms actually audit. Up to the changes in audit threshold my employers used to need an audit, as a former auditor I was staggered how little they actually checked (given they came to me re what they wanted I had a pretty fair idea what they looked at)

They seemed to spend all their time playing with my accounts figures on their laptop (and I gave them reconciliations for virtually all accounts in an audit file at the outset with the accounts I had prepared), looked at a few purchase invoices, and checked a few receipts to rental invoices (we let property) and then presented their £5-£6k fee. The days of working through fairly large samples re compliance and substantive tests are certainly over.

[Bouleversee]

An article in today's Times suggests that the announcement of the agreed bid could flush out a counter bidder.

The offer is at such a large premium to last week's s.p. one cannot help wondering why Fenner was so undervalued by the market when it was clearly on a good recovery trajectory and had a huge increase in eps last year. I am quite surprised the board agreed to it.

[Davidsb]

I sold my FENR shares in mid-Jan, having reached a 400%+ gain and a dividend which was distinctly non-HYP.

Maybe inaction would have been sensible in the circumstances.....

[Bouleversee]

I sold my FENR shares in mid-Jan, having reached a 400%+ gain and a dividend which was distinctly non-HYP.

Maybe inaction would have been sensible in the circumstances.....

That's a phenomenal gain and you know what they say: leave a bit for someone else. When did you buy? I bought my first holding in Apr. 2010 but added at higher prices later so not as high a percentage gain as yours.

[Davidsb]

When did you buy?

In the early days, my record-keeping on purchases was not as diligent as it could have been, as the formalisation into an HYP did not happen until 2008/09, and my data-recording systems have been evolving ever since (I started investing in shares in the early seventies, mainly in GARP and special situations). However, I have managed to dig out the following information:-

My earliest purchase of FENR was in June 2003, at 78.7p/share including costs. Some more were bought in July 2007 at 229p/share, and more again in April 2009 at 150.7p/share.l I then acquired another tranche in mid-2009 (I know this as the first dividend from these shares was received on 7th September that year) at 42.5p/share including costs. Further purchases were made in Jan 2015 (217.5p), Feb 2015 (191.4p/share) and finally in Jan 2016 at 136.1p/share.

The shares were sold on 12th January for just over £5 per share.

[Bouleversee]

Thanks for the history. I hope you had accrued a good number of shares by the time you sold. Did you have any other reason for selling than to achieve a higher dividend? What did you invest the proceeds into?

[Davidsb]

Sadly, it wasn't an enormous number of shares, as I have been trying (only sometimes successfully) to maintain a relationship between market cap and the value of my holdings. As FENR has a lower market cap than some HYPers would even consider holding, thus my holding was also comparatively small. The sale generated a decent lump sum, but nothing life-changing.

There was no reason for the decision to sell other than a desire to ratchet up my overall dividend income - I have a few other shares where share price growth has left the forward yield looking anaemic, although FENR was the stand-out on that score.

The FENR proceeds (plus some accumulated dividends) were spread between a top-up of Kier (KIE) and new holdings in Babcock (BAB) and Petrofac (PFC) - the blended yield of the shares purchased was about 5%.

[dspp]

Fenner nicely balances my Carillion and Centrica losses. When I selected Fenner the odd thing about it was the very small market cap given the screens I ran and that did concern me, but I picked it both because I had experience of its product range over the years, and because HYP-Fools had discussed it quite thoughtfully as a candidate. Thank you all.

Bought FENR at 172p, now 612p. The other two went in the other direction. Not all diversification is diworsification. I'm blowed if I know in advance which is which though.

Once again thank you to all those who chewed over Fenner as a HYP candidate.

regards, dspp

[Bouleversee]

My Fenner gain goes nowhere near compensating for my CLLN and Centrica losses and that is largely because I topped up both after they had gone down a lot, which is not always a good idea and requires careful thought and honest and competent directors and we don't know whether we have them or not at the critical time.

[james51]

Has anyone received their cash from this takeover yet? I believe it should arrive 14th June latest.

[Bouleversee]

Funny you should ask about that as I noticed that all but the book cost had been wiped from the Fenner entry on my IWeb ISA and I could see no sign of any cash so rang to enquire. I was told it would be credited on l4 June. Which broker are you with and what is currently showing on your portfolio list for Fenner? As no value is shown for Fenner, it distorts the p/f total value somewhat.

[james51]

I'm with Halifax share dealing, and similarly the entry is still there, but with no values. Probably the cash will not arrive before the deadline.