Good morning!

Paul is taking a well-deserved holiday for a couple of days, so it falls to me to keep this show on the road.

Stocks on my radar today include Quarto Inc (LON:QRT), Lookers (LON:LOOK) and Epwin (LON:EPWN). I may also discuss yesterday's results from H & T (LON:HAT) (in which I hold a long position).

Best regards


Quarto Inc (LON:QRT)

  • Share price: 122.5p (-21%)
  • No. of shares: 20.4 million
  • Market cap: £25 million

Termination of Discussions with Potential Bidder

Just over a week ago, this book publisher issued a fairly underwhelming H1 report, offset by the news that an unnamed potential acquirer was sniffing around. Not many details were given,  least of all the potential offer price.

Paul thought it was a rather peculiar announcement, and reckoned that the shares would have fallen off much more sharply without the bid interest.

The bid has evaporated for now, leaving the share price to promptly deflate. Commiserations to holders.

The reason given is as follows:

"...these discussions were not progressing to the satisfaction of the Board. It became clear that the regulatory approvals required by the bidder to complete the proposed acquisition were increasingly less likely to be granted on the timeline first indicated.  Recognising the importance of delivering a strong finish to the year and after carefully considering the interests of all shareholders, the Board was not prepared to prolong discussions further to avoid distraction to management at such a critical time of year for the business."

That actually sounds like a good justification to me - the distraction cost of actual and potential M&A is underrated, in my view. I don't know what the regulatory approvals for the bidder might have been.

Of course, for those shareholders who were looking forward to getting a bid, it is a disappointment, and some of them have headed for the exits today. That is to be expected.

What of the underlying value of the business? It remains an enigma.

There is a fascinating article by user lavinit which deals with a lot of the nitty-gritty, which I recommend reading for those who have the time. It's…

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