Devine Ltd (DVN)

Follow up post to comments on the previous DVN post...

As noted by other people and my follow up comments, the situation with CIMIC smells. And the smell gets worse. A separate, non-binding offer has been made for DVN for 90c, which of course trumps CIMIC's 75c offer. As the takeover would be via Scheme of Arrangement and therefore requires 75% of votes, CIMIC can matter-of-factly block the deal as it owns 50.63%.

So this has truly forced CIMIC to show its hand. CIMIC has responded by saying they are proceeding with their offer, effectively confirming they want to buy DVN for a song. Typically with takeover trades you can justify buying a bit above the bid price in the hope another bidder comes along. That probably won't work in this case given CIMIC's stance. I suspect it would take a much higher bid to dislodge CIMIC and your guess is as good as mine as to whether that might happen.

At 80c it is a tough call. CIMIC can block any other deal and the share price could drop plenty when their offer expires. I've been selling recently, and I'm out completely.

Kristian

Disclosure: no position in the above.  

Devine Ltd (DVN)

Some good news (albeit a bit lucky) from DVN: major shareholder CIMIC has announced an intended takeover for the remaining shares it doesn't own. The offer price is 75c cash and will have minimal conditions. Successful or not, CIMIC is rolling the board and will appointing a new CEO to turn the business around, and as it already owns 50.6%, CIMIC effectively controls the company and can call the shots. 

Good to see a major shareholder taking an active position.  

This leaves the question of what to do with DVN shares. As CIMIC owns such a large stake, it's not likely another bidder will bother coming along. This means CIMIC will end up with all the company (if it gets to 90% it may just move to compulsory acquisition) or end up with somewhere between 50.6% and 90%. 

Given the offer is 50% of book value, you could argue that CIMIC is being opportunistic, but I wouldn't be doing anything different if in their shoes. If you decline the offer and hold your shares, you are taking the view new management will come in and clean the place up, and there is always a possibility CIMIC will come back later with a higher offer to mop up residual shareholdings. That's not an unreasonable bet. 

Kristian