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Civitas Social Housing Bid Update

There has been a change to the timetable for the bid from CK Asset Holdings for Civitas Social Housing, bringing the deadline for acceptances forward from 21st July to 23rd June. This is before the next newsletter, hence our interim update for subscribers here.

The bidder has accelerated the process and has also provided an update on the level of acceptances as the close on 8th June, when the valid acceptances amounted to 0.25% of the share capital. We also learned that the bidder has acquired a 17.05% stake for itself, presumably through the market. We know too that the bidder has been contacting shareholders by telephone to encourage acceptance, seemingly with little effect.

The bid is currently falling far short of the 75% of acceptances needed for success, which is not a great surprise to us. We feel the 80p offer level is opportunistic and is too low compared to the trust’s net asset value of 109.2p per share. As before, our advice to shareholders is to IGNORE the bid for now and to await developments. We do not believe the bid will succeed without a higher offer, and this timetable acceleration is probably just a tactic to move through this phase of the process. We do not have any information on the likelihood of a higher bid, but at the present time we feel it is unlikely the bidder will walk away and allow its own stake to fall in value.

It is often useful to look at the market price as an indicator of what might happen next, but in this case we do not think it yields any clues, trading just below the 80p mark. Investors who are relying on a good outcome here and are extremely nervous about the bidder simply giving up may want to sell some shares in the market at this level, but we think a higher bid remains a more likely outcome on the balance of probability, so we advise PATIENCE while this scenario plays out. Takeovers are not always straightforward and can be quite protracted as the various parties consider their options.

One final thought is that whatever happens here, we don’t see a return to the status quo. Remember, the Civitas Social Housing board recommended this offer, so if shareholders take a different view and reject it, as seems likely, this has to cast doubt on the future of those directors and perhaps the management too. Change seems inevitable here, in one form or another.

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