The information on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it and as such is considered to be a marketing communication.
The background of the story was that Wilmar and First Pacific had bid 70 cents a share for GFF. The company accepted this offer, resulting in the due diligence process commencing in May. During the time, GFF shares never actually traded at 70 cents, suggesting investors were never patient enough to wait for the deal to go through, nor for a better offer.
GFF will write-down around $300-$400 million which is worth around 25% of its net assets. This is not too big of a surprise given the significant challenges the business has been facing over the past few years. This resulted in the suitors lowering their bid to 67.5 cents a share, effectively a 3.6% discount to the initial offer. GFF will also pay a one cent dividend after being given permission by its suitors. Predictably the stock dropped below the offer price today, with investors rushing to get out of the stock as it returned from a trading halt.
From an investment perspective, there is just no real upside in holding on to the stock, which probably explains why the stock dropped 3% today. However, around 65 cents is probably where it’ll find support as it gives some value to scalpers.