Michael Hill International: "Takeover" Undervalues the Company

The "takeover offer" being made to all shareholders in Micheal Hill International Ltd [MHI.NZX]by the Michael Hill Family Holding Company Durante Holdings Pty Limited (Durante), the holding company for the 47.63 per cent of the total shares in MHI owned by interests associated with Mr Michael Hill, is one that has appeared to get around the takeovers code by offering to buy 5% of current MHI shareholders in the company an offer to buy their shares at 90c each.

Typically any shareholding above 50% automatically kicks off what should be a full takeover for the target company but MHI seems to have found a loophole after abandoning an initial plan back in September after floating the idea initially in August.

Of course any shareholding above 50% gives the owner complete control of the company.

I labelled this a Claytons takeover in August and still consider this a blatant disregard for shareholder rights.

I will not be selling any of my shares for the above reasons and because the offer of 90c per share for effectively full control of the company is not enough premium for full control and undervalues the company and its long term potential.

I possibily risk a potential interview with Michael that I have been trying to organize for 2011 (I have his cell phone number but he doesn't always return his calls) by speaking out like this but I care about shareholders before the business owners.

If you are thinking of selling, please don't. Apart from the shenanigans associated with this power play the company is very well managed and has a great long term future and you would be undervaluing your investment in the company if you sold so cheaply.


Disc I own MHI shares in the Share Investor Portfolio


MHI Takeover

Full list of Related Documents

Michael Hill International @ Share Investor

Share Investor's 2011 Stock Picks
October 2010 Top Stock: Michael Hill International Ltd
Michael Hill International: Is Kim Kardashian the right fit?
Michael Hill International: Tall Tales & Rumours
Hill Family makes Claytons Takeover bid for Michael Hill International
Michael Hill International Ltd: 2010 Full Year Profit Analysis
Long Term View: Michael Hill International Ltd
Michael Hill International: 2010 half year profit commentary
Michael Hill Makeover kicks off
Michael Hill International: 2009 full year profit commentary
Toughen Up: What I have learned from the hard times
Stock of the Week: Michael Hill International
Michael Hill TV3 60 Minutes Interview
Long VS Short: Michael Hill International
Marketwatch: Michael Hill International
Michael Hill's profit shines
Michael Hill takes on the windy city
Why did you buy that stock? [Michael Hill International]
MHI has defined growth strategy
MHI profit sparkles

Discuss MHI @ Share Investor Forum
Download MHI Company Reports

Buy Toughen Up: What I've Learned About Surviving Tough Times



Toughen Up - Fishpond.co.nz


c Share Investor 2010

Hill Family makes Claytons Takeover bid for Michael Hill International

The announcement today that the Hill family, the largest shareholder of the publicly listed Michael Hill International [MHI.NZX] is looking to consolidate and increase its family shareholding in the company from 48% to 50.1% of the company is a significant move by the family and ditto has significance for shareholders, for a number of reasons.

At 50.1 % the family would have majority control as a voting block to look after themselves rather than other shareholders. I am not saying the will put that in practice but majority holding will mean they can if they wish to do so.

The possible move to a 50.1% shareholding would also require an exemption to the Takeovers Act that normally requires offers for additional shares at this shareholding level be made to all shareholders.

This move is also contrary to the move made by the company to split the shares at the end of 2007 to increase liquidity in the trading of the shares on the stockmarket.

You can look at this move in two ways.

Firstly that it is a positive move by the family that they see value in the company at current share prices and are willing to stump up some cash to buy a bigger stake in the company. A good move when the company is under some pressure from a retail slump and the shares are trading at a good discount to the long-term outlook for the company.

Secondly, and a view that I tend to lean towards, is that the move is a rather cynical one because it is going to impact negatively on minority shareholders because the family will have more control over the company without having to make an offer to all shareholders for full control and they are seeking an exemption through the NZX and a vote put to shareholders at the November 5 annual meeting to achieve their purpose.

Michael Hill International has thus far proven a good corporate citizen and has treated MHI shareholders in a fair and balanced manner in terms of business operations and has been a good long-term investment for shareholders.

Should this claytons move to take over the company by the Hill family and its interests be accepted by the NZX and its operations and then voted approval by shareholders (it must be kept in mind that the family already has a 48% voting block and it wont take too many minority shareholders to vote in their favour or opt not to vote at all for their plan to realise gold) without a full offer made to take the company over, then the small shareholder is going to get shafted again.

I will be voting against the Hill's proposal and I urge other MHI shareholders to do the same.


Disc I own MHI shares in the Share Investor Portfolio


Michael Hill International @ Share Investor

Michael Hill International Ltd: 2010 Full Year Profit Analysis
Long Term View: Michael Hill International Ltd
Michael Hill International: 2010 half year profit commentary
Michael Hill Makeover kicks off
Michael Hill International: 2009 full year profit commentary
Toughen Up: What I have learned from the hard times
Stock of the Week: Michael Hill International
Michael Hill TV3 60 Minutes Interview
Long VS Short: Michael Hill International
Marketwatch: Michael Hill International
Michael Hill's profit shines
Michael Hill takes on the windy city
Why did you buy that stock? [Michael Hill International]
MHI has defined growth strategy
MHI profit sparkles

Discuss MHI @ Share Investor Forum

Download MHI Company Reports


Buy Toughen Up: What I've Learned About Surviving Tough Times



Toughen Up - Fishpond.co.nz


c Share Investor 2010