Is a Brookfield takeover is in the works?Just wanted to say thank you to the posters on this thread for sharing their information and insights.
As I stated in an earlier post, I'm interested in taking on SPB as either a core position which means a lot of work for me in advance.
Here is what I think I know so far:
* the Certarus acquistion is probably very good for SPB in the long run and perhaps in the short run if the SPB rhetoric can be beieved (I haven't dug deep enough yet to know for sure)
* The Certarus acquisition is likely going to continue to be a disaster for SPB shareholders in the short to medium run. When the issuance of a huge chunk of shares is part of the acquistion cost for any acquirer, the shareholders of the acquirer are going to take it on the chin for as long as it takes for the shareholders of the acquired company to sell and and move on. Invariably, the shareholders acquired dump most if not all of the shares that it receives in the transacton
* Yahoo Finance shows that the average daily volume for SPB is 686,000 shares per day. When you back out the "back and forth" manouvering of the traders, the real volume (as in people actually adding an investment position as opposed to flipping) is likely 1/10 of that to perhaps as high as 1/4
* If one uses 100,000 shares per day of actual shares moved, we could be looking at about 500 trading days (two years) to work through a 48.5 million share overhang
* In reality, large positions eventually gets moved out in big chunks (especially towards the end of the selling) as opposed to an endless trickle, but it always starts with a seemingly endless drip-drip-drip
* It is almost a certainty that M&B saw the creatiion of the 48.5 million new shares in advance and made the decision to exit. If I was the manager of the SPB asset at M&B, I would have recommended selling their 36 million shares ASAP. The trick is to find an exit withought shooting yourself in the foot.
* It is pretty obvious that the sell order for the M&B position showed up on the morning Block List on the trading desk of ??? (it was suggested here that CIBC Wood Gundy) and the team would create a story and hit the phones. They were very successful as they moved 13 million share position without moving the market is no easy task.
* The interesting aspect for me is: "Who was the buyer". Who has $127 million sitting around that has a long term perspective and interest in SPB?
* It has been suggested here that M&B may have another chunk of SPB to go. That is a very real possibility. If it is true, the games are alreay well under way.
* On the one hand, the seller (M&B) will want to set a limit on how low an offer they will accept. On the other hand, the buyer (???) will know that they are picking up SPB at a good price ($9???) but that there are still are 48 million more shares that are likely to hit the market at some point. While the buyer will know that M&B are sophisticated sellers, they will also know that the holders of the 48 million new SPB shares acquired will likely be much less professional when they sell.
* Both the buyer (???) and the seller (M&B) will know that the SHORTS will be chomping at the bit to drive the SPB share price down the moment that the BIG GUYS have moved out of the way.
* If history repeats itself (which is done when all the pieces have been put in place), I expect that the buyer will encourage the SHORTS to "have at it". To that end, it wouldn't surprise me at all if we start seeing "unbiased" (tongue firmly planted in cheek) articles about potential problems facing SPB as soon as the massive cross has been completed.
* at that point, the share price is likely to get punched in the face which will trigger unsophisticated sellers (those holding the 48 million new SPB shares plus any weak hands of existing SPB sellers) to "get out"
* who do you think will be sitting on the sidelines with a big bag of cash soaking up the shares made available by the panic sellers?
My guess is that M&B knew this was coming well in advance as it is their job to know this stuff.
My guess is that Brookfield also knew what was coming well in advance as well. Brookfield is really good at these games.
Let's put the pieces together.
1) Brookfield has an option to convert their SPB Prefs into 30 million shares of SPB at US$8.67 per share
2) Brookfield privately picks up M&B's 36 million shares (there are lots of ways to circumvent reporting rules) in teh Cdn$9.50 per share range
3) Brookfield lets the SHORTS to crush the SPB share price and is waiting to buy up every share that it can get its hands on at panic selling prices
4) When the panic sellers are done donating their shares to Brookfield, what comes next? My guess is that Brookfield a takeover bid
Does any of this sound familiar? If not, take a few minutes and check out what happened with IPL. Who took over IPL? Brookfield.
M&B figured it out. Can you?