Forterra Trust (formerly: Treasury China Trust)

[GreedandFear]

all discussions about GO is mainly in reference $2.98 price paid and will NF pay $2.98 for our Forterra shares.

All NF has to do is to make a voluntary GO AFTER 6 months of deal completion. Can pay any lower price after 6 months.
6 months is not a long wait. Besides the HQ (虹桥城）only TOP in 2014. Not urgent.

They can....but then they risk that the share price keeps creeping up as we get nearer to TOP and as the pre-rental commitments increase. I believe the completion of HQ extension and renovation is slated for end of Q1 2014. If the purchase of the 29% closes end of July, then the earliest a GO can be is end of January 2014 which is close to end of Q1 2014. The best time for a GO (if indeed that is their intention) would be now when the share price is still very depressed compared to the NAV and they can be seen to offer a "generous" premium to entice holders to sell whilst still buying the shares at a good discount (eg 25% if they offer $2.98 a share).

[freedom]

If NF is not interested in the assets, why would it make any GO no matter what the price is?

Will you buy anything you don't want and need with any price?

From their announcements and action, it is clear that NF wants the platform, not the assets.

[KopiKat]

all discussions about GO is mainly in reference $2.98 price paid and will NF pay $2.98 for our Forterra shares.

All NF has to do is to make a voluntary GO AFTER 6 months of deal completion. Can pay any lower price after 6 months.
6 months is not a long wait. Besides the HQ (虹桥城）only TOP in 2014. Not urgent.

They can....but then they risk that the share price keeps creeping up as we get nearer to TOP and as the pre-rental commitments increase. I believe the completion of HQ extension and renovation is slated for end of Q1 2014. If the purchase of the 29% closes end of July, then the earliest a GO can be is end of January 2014 which is close to end of Q1 2014. The best time for a GO (if indeed that is their intention) would be now when the share price is still very depressed compared to the NAV and they can be seen to offer a "generous" premium to entice holders to sell whilst still buying the shares at a good discount (eg 25% if they offer $2.98 a share).

From the earlier SGX Annc,

Conditions Precedent to Settlement

(a)
.
(b)
.
Certain other conditions must also be satisfied, including: FRE remaining in place as trustee-manager of the Trust; there being no events arising which would likely prevent FRE from remaining in place as trustee-manager of the Trust; New Precise being entitled to exercise more than 25% of the votes exercisable by Unit holders at meetings of the Trust following completion (on a fully diluted basis); there being no insolvency in respect of any of the selling parties to the transaction documents; Nan Fung not being required to make a mandatory offer for the remaining units; delivery of documents ancillary to the court orders such as deeds of release concerning certain security interests over the securities being sold; Option Units being placed in escrow on terms satisfactory to New Precise; and other customary closing conditions for transactions of this nature.

[opmi]

The 'no MGO' condition for this DEAL is for unintended trigger of a GO due to unexpected factors.

The GO we are referring to is when NF ever cross 30% AFTER the DEAL is completed.

Stating the obvious, in case.

[KopiKat]

To summarise my understanding, if the deal goes thro',

1) Under the Unit Purchase Agreement (UPA), 26.9%
2) Under Put/Call Option Agreement, 3.08%, exercisable @ $2.98 from 2 to 31-Jan-14.
3) (1) + (2) = 29.98% [they control the voting rights to (2) during the Option Agreement period], but note the exercise period and price. Unlikely to be exercised if Forterra Share Price is below $2.98 during Jan-14
4) Under UPA, UOS (Unit Option Scheme), 1.2%, exercisable @ $2.98 - $0.34816 till 30-Jun-15
5) (4) will unlikely get exercised if Forterra Share Price < $2.98 . But, in the event it's higher, together with (2), total = 31.18%
6) I suppose there could be also a case of (1) + (4) = 28.1% if Forterra Share Price >$2.98 before Jan-14? Have to read the UOS in detail to confirm. But, not so important as they control voting rights to (2) anyway.

[opmi]

KK, good digging of the facts.

IF NF want to avoid paying $2.98 in an MGO,

-- Another scenario, is they EXERCISED (2) to get close to 29.98%. NO NEED TO MAKE OFFER.
-- THEN AFTER 6 MONTHS (no more 'highest price bought'), trigger an MGO by buying more than 0.2% from Market at then mkt price (lower than $2.98.).
-- Make an MGO at then mkt price (lower than $2.98).

After MGO period closed, progressively exercise the Options in (4) over rolling 12 months period to avoid triggering 'creeping rule' GO.

In this scenario, NF no need to offer $2.98 IF the market stay below $2.98 for the first 6 months after the deal completion.
$2.98 is not 'must-do' GO price. Can be avoided if NF dont want to pay $2.98 and mkt price stay below $2.98.

In a takeover scenario, people will exercise the Options EVEN if it is out-of-money just to achieve strategic objectives (e.g. Natsteel-Oei-Ong saga).

[Boon]

From the earlier SGX Annc,

As a result of the above, on completion of the UPA, the Unit Sellers will have disposed of 100% of their respective interests in Forterra, except for TAIL which will retain 1,439,056 units (the "Residual Units"), representing 0.57% of the units in issue as at the date of this announcement, which falls below the 5.0% substantial unit holder threshold. TAIL has further confirmed that it will be disposing of the Residual Units on the open market within 6 months of the completion of the UPA.

Conditions Precedent to Settlement
(a)
(b)
Certain other conditions must also be satisfied, including: FRE remaining in place as trustee-manager of the Trust; there being no events arising which would likely prevent FRE from remaining in place as trustee-manager of the Trust; New Precise being entitled to exercise more than 25% of the votes exercisable by Unit holders at meetings of the Trust following completion (on a fully diluted basis); there being no insolvency in respect of any of the selling parties to the transaction documents; Nan Fung not being required to make a mandatory offer for the remaining units; delivery of documents ancillary to the court orders such as deeds of release concerning certain security interests over the securities being sold; Option Units being placed in escrow on terms satisfactory to New Precise; and other customary closing conditions for transactions of this nature.

Comments:
1) Correct me if I am wrong, I think there is no precedent yet where a SGX listed Business Trust has been taken private. Under the Singapore Business Trust Act, the Trustee Manager can be removed only if 75% of unit holders vote in favor. Therefore, it seems logical that if one were to make a GO on a Business Trust (BT), the first step would be to get control of the “Trustee Manager” first, without triggering a MGO. Otherwise, one may end up being a majority shareholder without the “controlling power”.
2) Under the revised Singapore Code on Takeovers and Mergers (April 2012), for the purpose of determining thresholds in MGO, options are counted as acquired shares
http://www.wongpartnership.com/files/download/126
3) Total number of shares deemed acquired by Nanfung：
68,268,322 (UPA) + 7,815,057 (put/call option) + 3,050,000 (UOS) = 79,133,379 = 29.90%
Enlarged share base = 253,794,717 (existing) + 7,815,057 + 3,050,000 = 264,659,774
4) If the 1,439,056 “residual units” would have been included, it would have triggered a GO - which they were trying to avoid.
5) Would there be a GO after Completion ? Keep guessing !

(Vested)

[KopiKat]

2) Under the revised Singapore Code on Takeovers and Mergers (April 2012), for the purpose of determining thresholds in MGO, options are counted as acquired shares
http://www.wongpartnership.com/files/download/126
3) Total number of shares deemed acquired by Nanfung：
68,268,322 (UPA) + 7,815,057 (put/call option) + 3,050,000 (UOS) = 79,133,379 = 29.90%
Enlarged share base = 253,794,717 (existing) + 7,815,057 + 3,050,000 = 264,659,774

The Put/Call Option is granted by Mr John Ronan. I don't think it'll add to the share base ie. ought to be existing units?

Still, perhaps due to (2), the UOS units will cause the total to hit 30.81% and that's why Nan Fung had added in the additional condition that they need not do a G.O.?

IMO, the key attraction of Forterra, if the deal goes through, is not a potential G.O. at $2.98. Rather, it's Nan Fung.... and that's why I have been reading up on their background to try to confirm my opinion...

[Boon]

2) Under the revised Singapore Code on Takeovers and Mergers (April 2012), for the purpose of determining thresholds in MGO, options are counted as acquired shares
http://www.wongpartnership.com/files/download/126
3) Total number of shares deemed acquired by Nanfung：
68,268,322 (UPA) + 7,815,057 (put/call option) + 3,050,000 (UOS) = 79,133,379 = 29.90%
Enlarged share base = 253,794,717 (existing) + 7,815,057 + 3,050,000 = 264,659,774

The Put/Call Option is granted by Mr John Ronan. I don't think it'll add to the share base ie. ought to be existing units?

Still, perhaps due to (2), the UOS units will cause the total to hit 30.81% and that's why Nan Fung had added in the additional condition that they need not do a G.O.?

IMO, the key attraction of Forterra, if the deal goes through, is not a potential G.O. at $2.98. Rather, it's Nan Fung.... and that's why I have been reading up on their background to try to confirm my opinion...

“A put and call option agreement (the "Put/Call Option Agreement") has been granted by Mr John Ronan in favour of New Precise over 7,815,057 units (the "Option Units") equivalent to 3.08% of the units in issue as at the date of this announcement. The exercise price is S$2.98 per unit for a total consideration of approximately S$23,288,870. Should the Put/Call Option Agreement be exercised, the completion of the purchase of the Option Units will occur no earlier than 2 January 2014 and no later than 31 January 2014. During the term of the Put/Call Option Agreement, New Precise shall control all voting rights in respect of the Option Units.”

To me, the put/call option seems a bit “confusing and inconsistent”. It is a “side bet” between Ronan and “New Precise” in which no new shares would be “created”. If the "settlement type" were to be "cash", it would be meaningless to talk about “voting rights”. If the "settlement type" were to be "physical delivery", how would Ronan “enforce” that “During the term of the Put/Call Option Agreement, New Precise shall control all voting rights in respect of the Option Units.”? - unless Ronan still owns 7,815,057 units of Forterra Trust.

How did you get the 30.81%?

Excluding the “put/call option”, the % "deemed acquired shares" would be even lower

68,268,322 (UPA) + 3,050,000 (UOS) = 71,318,322 = 27.77%
Enlarged share based = 253,794,717 (existing) + 3,050,000 = 256,844,717

I don’t put a high hope on GO, I would treat it as a bonus if it happens – as I could live with its current fundamentals which have improved significantly over last year.

(Vested)

[KopiKat]

2) Under the revised Singapore Code on Takeovers and Mergers (April 2012), for the purpose of determining thresholds in MGO, options are counted as acquired shares
http://www.wongpartnership.com/files/download/126
3) Total number of shares deemed acquired by Nanfung：
68,268,322 (UPA) + 7,815,057 (put/call option) + 3,050,000 (UOS) = 79,133,379 = 29.90%
Enlarged share base = 253,794,717 (existing) + 7,815,057 + 3,050,000 = 264,659,774

The Put/Call Option is granted by Mr John Ronan. I don't think it'll add to the share base ie. ought to be existing units?

Still, perhaps due to (2), the UOS units will cause the total to hit 30.81% and that's why Nan Fung had added in the additional condition that they need not do a G.O.?

IMO, the key attraction of Forterra, if the deal goes through, is not a potential G.O. at $2.98. Rather, it's Nan Fung.... and that's why I have been reading up on their background to try to confirm my opinion...

“A put and call option agreement (the "Put/Call Option Agreement") has been granted by Mr John Ronan in favour of New Precise over 7,815,057 units (the "Option Units") equivalent to 3.08% of the units in issue as at the date of this announcement. The exercise price is S$2.98 per unit for a total consideration of approximately S$23,288,870. Should the Put/Call Option Agreement be exercised, the completion of the purchase of the Option Units will occur no earlier than 2 January 2014 and no later than 31 January 2014. During the term of the Put/Call Option Agreement, New Precise shall control all voting rights in respect of the Option Units.”

To me, the put/call option seems a bit “confusing and inconsistent”. It is a “side bet” between Ronan and “New Precise” in which no new shares would be “created”. If the "settlement type" were to be "cash", it would be meaningless to talk about “voting rights”. If the "settlement type" were to be "physical delivery", how would Ronan “enforce” that “During the term of the Put/Call Option Agreement, New Precise shall control all voting rights in respect of the Option Units.”? - unless Ronan still owns 7,815,057 units of Forterra Trust.

How did you get the 30.81%?

Excluding the “put/call option”, the % "deemed acquired shares" would be even lower

68,268,322 (UPA) + 3,050,000 (UOS) = 71,318,322 = 27.77%
Enlarged share based = 253,794,717 (existing) + 3,050,000 = 256,844,717

I don’t put a high hope on GO, I would treat it as a bonus if it happens – as I could live with its current fundamentals which have improved significantly over last year.

(Vested)

From AR2012, John Ronan has deemed interest for 31,320,945 units. From the UPA,

Lanaree Ltd 12,000,000 John Ronan
John Ronan 5,505,888 John Ronan
Harrowgate Developments Ltd 6,000,000 John Ronan

If we do a subtraction, we get 7,815,057 units, which is the same nos. in the Call/Put Option. So, those are existing units held by John Ronan.

If you add that to the numerator (since the options carries voting rights), you'd get 30.81%.