Shares digital

Investors in Bulgarian Property Developments (BPD:AIM) have until 3pm tomorrow (Friday 18 January) to decide whether to accept a bid offer from Windsorville Investments, which last week further increased its stake in the company to 25.89%.

Bulgarian Property’s joint chief executive, Ivo Hesmondhalgh, firmly believes that the 64p a share offer significantly undervalues the company and has been keen to urge shareholders to reject it. Hesmondhalgh explains that the Windsorville offer represents a discount to net asset value (NAV) of between 14.7% and 34.7% and, on a cash adjusted NAV basis, a discount of between 21.6% and 45.9% based on conservative property valuations.

As a result, Bulgarian Property believes that Windsorville is taking advantage of current weakness in the property sector, with the offer being lower than the price at which Bulgarian Property’s shares were trading in the first half of 2007. Due to the low value of the offer, as well as difficult market conditions, Bulgarian Property is considering returning cash to shareholders in a bid to maximise shareholder value. The group says that if the offer does not become unconditional, it will hold discussions with its major shareholders to discuss whether to continue with its existing strategy or whether to return some cash to shareholders, before calling a general meeting.

If proposed resolutions to sell certain properties, particularly its Sofia Central Commercial site, and capitalise part of the group’s share premium account, are passed at the meeting, this could lead to a return of 32p per share to investors. This would leave the company with a NAV of around £53 million (49p per share), of which some £24 million would be in cash, meaning the group would still have sufficient funds to continue developing and acquiring properties in Bulgaria, without needing to raise further funds or borrow money.

Hesmondhalgh tells Shares that the group is currently looking at a range of possible acquisitions, and expects to make some purchases in the next few months. In the meantime, he will be awaiting Friday’s result. Shares in Bulgarian Property are currently hovering around the 64.5p mark.

Shares says: Bulgarian Property has a lot of potential with or without the offer. Await developments.