At the 2015 AGM of PaperlinX, now known as Spicers, the chairman stated the company was seeking an agreement between equity holders and step-up preference unit (SPS) holders. SPS holders had been attempting to enforce what they see as their right to conversion into ordinary shares at a ratio which would add over 7 billion additional shares to the 665 million already on issue – a massive ten times increase. The issue of so many new ordinary shares would dilute existing shareholders and thus met with huge resistance from the board.
This week the company made a compromise proposal, one which would lead to SPS holders controlling 70% of the company if it were accepted. SPS holders would exchange each of their units for 545 newly-issued ordinary shares in a deal with is similar to a debt-for–equity arrangement. At a price of 2.5 cents per ordinary share, the offer equates to $13.625 per SPS, well up on the previous closing price but a long way from the $100 worth of shares to which some SPS holders said they were entitled.
Prior to the proposal, the last sale price was $9.00 and the units have been trading at between $6 and $16 from some years now. The market has not placed a high probability of conversion at $100 and, although the units immediately jumped to a price of $13.45 (11 October) upon the ASX announcement, the large discount to $100 still indicates such an outcome is not given much weighting.
SPS units were issued from the PaperlinX SPS Trust. Perpetual is the responsible entity for the SPS Trust and it has advised holders to do nothing until it has properly considered the proposal. Perpetual said an independent expert review and a vote of unit holders will be required.
source: 2007 PaperlinX Step-up Preference Share product disclosure statement