This morning (8/12/2015), CentralNic Group announced the acquisition of Australian company Instra Group. Total cost is AU$33 million payable in cash and shares which will be supported by a mixture of debt and the issuance of new shares in a placing. Overall the new shares to be issued to the sellers and to institutional investors will represent 31% of the new overall equity so there is substantial dilution of existing investors taking place.
But what is likely to annoy private investors is that the new shares are being issued in the placing at 40p which is a discount of about 30% to the recent market trading price. Only institutional investors will be able to participate as is quite common with such placings – there is no “open offer” in this case.
Both CentralNic and the company they are acquiring (which is profitable) sell internet domain names. There is no doubt business logic in this combination and the price being paid does not seem unreasonable. Placings which exclude private investors are annoying even if they are necessary to conclude a deal quickly. But those done at a hefty discount are particularly objectionable.
Shareholders who wish to complain could go along to the General Meeting required to approve this deal. But as it is scheduled for the 29th December, not many investors are likely to turn up.
The writer is a holder of shares in CentralNic.