Takeover windfall for shareholders

Published in the Daily Telegraph, March 2015 by Dale Gillham

When news surfaces that a share you hold in your portfolio is to be taken over and your shares have risen by more than 45 per cent in a day, it’s cause to celebrate.

This is what Toll Holdings shareholders were doing recently when the company announced Japan Post had made an offer.

Even the most seasoned trader would get excited about this kind of windfall as it doesn’t happen every day.

If you are a professional trader, you have a plan in place for how a takeover will be handled.

However, without the training or experience in the market, you probably hadn’t given this a thought, let alone had a plan to help you make the right decision.

Firstly, a takeover of a listed company is referred to as a corporate action, and is the purchase of one company by another.

If the company you own is to be taken over you may either be offered cash for your shares, and/or shares in the other company doing the takeover. In the case of Toll, the offer is $9.04 per share plus a 13c fully franked dividend.

Remember that not every takeover is the same, so do your research and read the information sent to you.

If you haven’t received anything you can look up company announcements on your broker’s website or visit the ASX at www.asx.com.au, select Prices and Research from the navigation, enter the company name/stock code in the
box and look for announcements.

If there is something you don’t understand, you could contact Toll’s investor centre, details of which are on the Toll Holdings website, or call the registry that provides Toll’s shareholder administration services.

You will find contact details on the shareholder statement you received.

To be entitled to the Toll dividend, you need to be holding the shares as at March 4, however, the ex-dividend date is on March 2. Typically, when a share paying a fully franked dividend goes ex-dividend the share price will
fall by 1.5 times the dividend amount.

This means that from then until when shareholders are likely to vote on the takeover in May, Toll shares could fall by this amount or more.

As a trader you have three options: sell to lock in profit; wait for a competitor bid, which means you may get more if this occurs (however, given the premium that Japan Post has offered for TOL, this doesn’t seem highly likely), or, if the takeover meets all approval requirements, allow your shares to be taken up automatically by the bidder, which means no brokerage costs.

However, this cost is negligible selling now with an online broker.

The takeover is conditional on a shareholder vote which is likely to pass, but the takeover must meet foreign investment rules.

If the takeover is approved, then what happens to the share price between now and then is not a concern, as you will receive the full offer amount. However, if it doesn’t proceed, the shares may fall back to the price traded before the offer.