Ann: Change in substantial holding from PRY , page-10

Interesting comments Nat. In my opinion there is no chance of a bid with only a 30% premium to current prices. Why? Two interelated reasons:

1. There is just way to much earnings accretion available, so there is a lot of premium to utilise before PRY gets even close to overpaying; AND

2. PRY has to keep the doctors happy. As many have observed, doctors still own a fair lick of stock and maybe sceptical of a PRY controlled company. The doctors are the business and need to be looked after. By offering only a small premium they already have them offside. In fact it may even prevent a deal from being done. Why would PRY risk compromising the busines to save a few bucks when even with a solid 50% premium they are still generating enormous earnings accretion? No better to pay a decent premium and start on the front foot. IMHO of course.

As for the creep, well at 19.9% now and 3% every 6 months thats going to take a very long time to reach a "control" position dont you think? If this stock is still listed in 2 years and all expected positives fall into place then this will be multiples of the current price, so I wont care if PRY's position is scaring off other potential bidders. The price will simply rise given the removal of insolvency risk, confirmation of business performance and introduction of dividends - no need to rely on a t/o.

On this point I really do think PRY need to make a call soon. We are circa 6 weeks out from the full year report. At that time we should get more clarity on earnings and the debt. Assuming its positive, surely the stock has to trade closer to 50 cents +. A 50% premium on this will make it even more expensive. PRY does own a bit of stock and could potentially try and manipulate (read) cap the price in the interim however I think a lot more buying pressure will come in after the annual report (assuming its good) which will make it all the more difficult.

Other possibility is that report is good, the share price rises and then management undertakes a capital raising. Current chairman of VEI is the also the chairman of FUN that is in a scarily similar position to VEI in terms of capital structure. FUN has just announced a cap raise and stated an intention at the agreement of its bankers to reinstate dividends at a 50% payout ratio. A cap raise is still a strong possibility for VEI. This may force PRYs hand. Then again, it may not but it will remove the insolvency risk pricing which should more than compensate for any dilution. Reinstatement of dividends (if or when) should put a rocket under the share price.

The beauty with this position is what I like to think of the "PRY Put". The recently forshadowed regulatory change may, once finalised, eat a big chunk of earnings, or the business may take a turn for the worse and the share price may tank but PRY will likely come in an make an opportunistic bid in that case. Price may fall 50% forcing PRY to come in and bid 30% premium so somewhat limted downside.

Of course these are my wild speculations and may prove disastorously wrong and optimistic (or pesimistic in the case of a 50% fall) so dont follow me!!!! It would be like taking driving directions from my girlfriend. A big mistake!


Last year I generated a great return by taking a big position for my portfolio in OOH stock. Average buy was 19 cents. 6 months late private equity lobbed (and closed) a bid at 32.5 cents. To me blind freddy could see it would get taken over given some big shareholders on the register and rumblings of corporate action. I met with management and although they didnt say anything I could tell from their body language that it was only a matter of time before someone bought them. I get the same feeling with VEI. To me blind freddy can see a t/o is coming. only a matter of time.

Tick tock ....