A friend of mine that has some IBTC shares asked me if he should sell @ the premium price offered by stanbic bank or hold on to his shares. I want to hear from the gurus in the house why to or not to sell the shares @ the premium.


In case you dont know, IBTC is presently priced @ =N=11 and stanbic is offering =N=16 to any shareholders willing to sell all or part of their shares.


@proshare and others respond

IBTC Update - Sell Option for Investors?
Posted Wednesday, February 28, 2007

A circular received from IBTC this morning recommends that short-term investors sell IBTC shares in their portfolio, while long-term investors should hold on to their shares. I quote:

"ANALYST'S OPINION
While the entry of Standard Bank of South Africa, offers tremendous opportunities to IBTC Chartered Bank Plc, those gains will probably only begin to be realized after a few years. To long term investors, the bank remains an excellent investment opportunity. However, short term investors are probably better off selling their IBTC shares at not less than N11.00.

Although the tender offer price is at N11.74, it might take as long as a quarter for payments to be issued to willing shareholders. What is more, we do not expect the stock's price to rise in excess of N11.74 before the completion of the exercise. It is therefore more advantageous for investors to sell now and use the proceeds to invest in other potentially viable investments guaranteed to appreciate in the interim."

Our source, who had contacted his broker immediately after reading this news, was adviced to hold on to the shares for the long-term. Reason: IBTC shares, post merger, will be scarce on the NSE floor.

OUR PRELIMINARY INSIGHT ON THE STOCK:
It is kind of strange that Standard Bank is offering N11.74. If you remember that in Chukumah Biosah's February 16, 2007 week ended summary we sent out and posted online, it was noted that IBTC at N11.55 was too rich compared to the share prices of other major banks in the industry. It is our informed guess that Standard Bank did their homework and do not want to pay too much.

The comments in the summary is reporduced below:
IBTC
IBTC closed at N11.55 representing a gain of N1.55 (15.5%) for the week. The current price is a 52 week high with no overhead resistance indicating further price appreciation. Although the bank reported a 170% growth in revenue for the 9 months ended 12/31/06, the stock at the current price appears to be too rich compared to banks like Zenith, First Bank, and GTB. See chart below (source NSE Web-site).
Bank EPS PE Ratio
IBTC 0.38 30.39
FBN 1.83 22.90
GTB 1.12 24.25
Zenith 1.91 17.23
UBA 1.05 36

Interested persons can request for details of this paid service by sending us an e-mail at info@proshareng.com
Copyright © 2004 - 2007 ProShare Limited.

@panadol we are reviewing the price of the offer at 16 naira and not 11.74k am in a dillema now as I don't know either to sell my 50 k units or wait, does anyone in da house have reasons to believe this stock will pay me more if I hold on a bit longer without selling my holdings? Response awaited.

@panadol

What is 11.74k again, i thought it is 16.00k they are offering those willing to sell, and how long will it take them to pay. I want you to also explain how it will pay the short term investors who want to sell because they will not be paid instantly because of the delay in payment.

i was planning to post a topic on this when i stumbled on the analysis by panadol. In corporate finance, one of the problems being faced by investors and shareholders is when to sell and at what price to sell. therefore the dilema being faced by the shareholders of ibtc is not surprising. i will onlly attempt to state and express my PERSONAL opinion.

the advances being made by stanbic to ibtc is not a MERGER as being advertised rather an acquisition. the 50.1% shares being targetted is enough to take over the control of ibtc management. when companies make an acquisition proposal and attempt on another company, it could be for any or combination of the following reasons: 1. the targetted company is being undervalued  2. the targetted company is not being efficiently managed  3. the acquirer company has spare fund to invest. for whatever reason(s) the bottomline is stanbic is attempting to improve the wealth or value of it's shareholders. given the assumption that the nigerian stock market is efficient, and the consequent proposal of 16 per share to the ibtc shareholders whose stock sell at 11.54k at the stock market, can it be said that ibtc is overvalued as posited by panadol? i don't think so. else stanbic wont be committing their shareholders fund in the investment.

therefore, could it be that the management of ibtc are not efficient enough? well, maybe but i don't think so. given their pedigree as an investment bank begore the merger, i don't think they are being managed inefficiently. notwithstanding, stanbic could have excess fund and may be looking gor a rosy virgin to screw, of which ibtc has been found worthy; it is expected that due valuation nad analysis of the financial state of ibtc has been done.

considering the high yield being offered to investors that are willing to sell (16-11.54=4.48) equivalent to about 45% higher than market price, investors are in the dilema whether to sell now or later.

MY OPINION
at this price, some shareholders may offer to sell, therefore putting pressure on the force of demand and supply. in essence on attaining the targetted 50.1% ownership in the company, the price of the shares will drop. so for short term shareholders, you can sell your stock now and reinvest in other lucrative stock. you may however repurchase the shares after the conclusion of the share accumulation! by stanbic at that point it will be cheaper than 16 per share.

however, for long term shareholders, your patience may enable you benefit from the synergy associated with the acquisition. by this your share price will fall but pick up after stanbic takes over the management. as more funds especially from south africa will be injected into the bank for more lucrative investment and higher returns.

whatever choice you make, ibtc has not rejected or protested the attempt by stanbic. consult your stock broker or fund manager for more information.

courtesy
remmychess@yahoo.com

i think babaife has done well trying to explain from an objective position. i must however add that those that sell may not have the opportunity to share in the synergy that may accrue to ibtc in time to come. and to compensate them for the opportunity cost, stanbic is offering them value higher than the market value. this is possible when one consider that stanbic is buying into ibtc future earnings.

therefore i will pitch my tent with both babife and panadol that short term investors should sell while long term investors should hold on. you are either a short term or long term investor based on your investment strategy and motive for buying the shares.

cheers
danalyst

Thank you danalyst nad babaife. you have done a good work with oyur analysis. the fact remain that stanbic are looking for opportunity to withdraw the shares from the public in order to pump their money into it. after which the price of the tock will now rise to what they want. If you are not desperate to spend the money more vital than the stock i tink it is better to hold on to it. It's going to appreciate on the long run.

thanks kenny shado for the commendation. nairaland is meant for ideas sharing. i have just done my part on this topic.

the fact that a stock sells for 11naira on the floor doesnt mean its actually sold for 11 naira. there is a difference between the floor price and over the counter. ibtc sells over the counter @ 17-18 naira depending on who is buying so why should i sell for 11/16 naira. at one point it was sold for about 20 naira.
the problem here is that if people dont sell stanbic wouldn,t meet thier targat, but if they meet thier target then the future is rosy for investors.
short term sell if you can over the counter, more profit
long term hold, as it would be profitable whether the acquisition is successful orr not.
the brand ibtc is here to stay. @ babaife please ibtc as always been looking for a foreign investor, if stanbic was looking for a wifr spring bank as well as unity bank would have been good.

my friend has about 10,000 units of ibtc, he said he would sell 5k and keep the balance.

@ibkn,
i appreciate your contribution to my analysis. however, one thing is clear: there is NO boundary or place called OVER THE COUNTER!. it is just an arrangement may be thru the net or telephone that two or more willing buyer(s) and Seller(s) communicate and negotiate their stocks.

the price at OTC is not verifiable, hence could not be picked or used as a basis for stock analysis. my point is the verifiable value of ANY STOCK IS THE MARKET VALUE.

you also commented on spring bank or unity bank as a better "wife" compared to ibtc. well you may have your parameter for such conclusion. however fiven an efficient market, where all investors are risk averse, stanbic may have found ibtc more viable than the other banks else, they would not MAKE ADVANCES where BETTER OPTIONS EXIST.

@ gettolove
the choice to sell belongs SOLELY to your friend based on his/her investment strategy. we have all posited so far, that short term investors should sell while long term investors retain their stocks.

cheers