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You'd imagine the SBM guys were pretty bewildered initially, but I bet they are probably sniggering a bit now!!

When SBM launched their takeover bid for CAH it effectively valued CAH at just under $350 million, yet the CAH board said in their "Response to Scheme of Arrangement Proposal" on 13th May 2011 that SBM had; "taken the opportunity to make this unsolicited proposal public at a time when the Catalpa share price has underperformed its peers." This "underperformance" was put down to short term operational issues.

The CAH board went on to say that; "in the coming months the successful resolution of these operational issues would have been reflected in an improved share price performance relative to Catalpa's peers".

Ok, so as at 13th May 2011 these two statements seemed to suggest that the CAH board believed that;

a/ CAH is worth more than $350 million (which equates to about $1.92 per share); and,

b/ that in the next few months they expect the CAH share price to improve - presumably to a level higher than $1.92?

So, what bewilders me, and no doubt bewilders the SBM team as well, is that less than 40 days after SBM's opportunistic $350 million bid, the CAH board told their shareholders that a massively dilutionary merger deal (with CQT) that is valuing CAH at $330 million (or $1.705 per share) is a better proposal than the SBM bid!!!

Moving forward by another month (and this is where the SBM team will probably be sniggering), we now see the CAH share price valued by the market at $1.38!!! Meanwhile the SBM bid, if in fact it is still "live", is theoretically sitting at $1.85!! It seems to me that the market is suggesting they DO NOT like the crazy, complex CQT merger deal at all.

Meanwhile, if SBM are still interested, you don't need to be rocket surgeon or brain scientist to work out that there is a massive arbitrage opportunity developing which will loot money from disgruntled CAH shareholders, and effectively hand control to SBM anyway - and probably without SBM having to lift their initial bid - indeed, SBM could drop their bid price citing market conditions, and still look like a White Knight sent to save CAH shareholders from their own board!! Nice work CAH board - don't forget to pay yourselves a bonus this year - especially before the White knight arrives!! lol

To take that train of thought one step further, if the CAH board genuinely believed what they said on 13th May 2011 (and I'm sure they did) about the $350 million bid being too low, and that the coming months would deliver an "improved share price performance", then have they not contradicted themselves by recommending a deal just over a month later that values CAH at $330 million???

Why didn't they wait for the "improved share price performance" to drive a better deal for CAH shareholders in the merger deal? Indeed, it seems to me that if the SBM bid had not been made public, then CAH would have been striking the merger deal at way less than $330 million anyway, because the only thing that "improved share price performance" into 15th June 2011 was in fact the very bid from the SBM board labelled as opportunistic!

Is it just me, or is this all a bit weird?

Whatever the case, it warms the cockles of my heart to think that the CAH board and management are taking salaries in return for their deft maneuvering at the helm, because can you imagine how bad things would be for CAH shareholders if you had unpaid rank amateurs at the helm??? ;)

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