Thalassa firms up Local Shopping bid – Thalassa will offer a total of GBP9.0 million in cash and approximately 16,000,000 Thalassa shares in exchange for the 61,484,576 Local Shopping REIT shares it does not already own. The offer will also include a mix and match facility which will allow Local Shopping REIT shareholders to elect to vary the proportion in which they receive cash and Thalassa shares in respect of their Offer Shares. The final mix of consideration will depend on the elections made. However, whatever happens the total amounts of shares and cash won’t change.
Based on the Proforma NAV per Thalassa share of approximately 105.2 pence, the offer implies a proforma NAV value for Local Shopping REIT’s shares of 42.0 pence per share (a premium of about 25.0 per cent. to its audited NAV per share as at 30 September 2018 (33.6 pence per share). Based on the closing price of a Thalassa Share of 70 pence on 5 February 2019, the offer values the LSR shares at about 32.8 pence per share (a premium of approximately 17.1 per cent. to 28 pence LSR price at the close of business on 8 January 2019 – the last business day before Thalassa announced a possible offer for LSR.
Duncan Soukup, executive chairman of Thalassa said: “I believe that the Offer represents excellent value for LSR Shareholders who have seen the NAV per LSR Share decline since 30 September 2008 by approximately 70 per cent. In contrast, in challenging oil and gas markets, the Thalassa Board have increased Thalassa’s NAV per Thalassa Share on a sterling basis by approximately 204 per cent. since 31 December 2008.
As a LSR Shareholder, we too have seen the book value of our investment decline by approximately 28 per cent. since we purchased our initial shareholding in LSR on 9 September 2016. This is to some extent due to a declining property market but also, in the Thalassa Board’s opinion, in large part due to a cost structure which is clearly excessive in comparison to an ever-diminishing revenue stream that has existed within LSR during the past five years. In the Thalassa Board’s opinion, this has only benefitted the various layers of advisers to LSR and achieved little other than the destruction of value for LSR Shareholders.
The LSR Board’s Members’ Voluntary Liquidation (“MVL”) proposal did not appeal to us as an approach that would deliver the value for a LSR Shareholder that I believe can be extracted from LSR’s assets. As LSR’s largest shareholder, we believed it would have cost more and taken longer than expected and resulted in further value erosion.
I am mindful that a number of LSR Shareholders would like to cash-out at this point and therefore cash is put forward as a significant proportion of the overall consideration for a LSR Shareholder. The Offer will also contain a mix and match facility allowing LSR Shareholders the potential opportunity to vary the proportion of cash and Thalassa Consideration Shares that they may receive under the Offer.
With regards to the future, Thalassa is a holding company and seeks to buy participation or control of undervalued businesses and then work with management to enhance that value. Thalassa has a clear strategy for the future and a successful management team with a track record of delivering shareholder value even in the more challenging economic conditions.
We believe this Offer affords all LSR Shareholders the opportunity of a certain exit for their investment in LSR at a compelling valuation and to either receive in return the potential mixture of cash and Thalassa Consideration Shares, and, depending on the level of valid acceptances received, a full cash exit.”
The full terms of the offer will be set out in the Offer Document, the Thalassa Prospectus and the Form of Acceptance.
LSR : Thalassa firms up Local Shopping bid