Investors are disappointed at the news that packaging and laminate foils group API (API:AIM) is no longer up for sale, but it seems the market had already guessed this outcome. After a rally in the latter part of 2012, the shares have spent much of this year in steady decline. Today's announcement (13 Feb), together with a mild profits warning, knocks a further 20% off the share price, taking it to a nine-month low of 55p.

Anyone monitoring the share price should have seen the warning signs. It has spent the past three weeks in freefall. The key trigger for the downward trend was a trading update from API on 25 January when it said indicative proposals received so far were below the previous day's 90p trading level (24 Jan). The key question on investors' lips was how much lower than 90p were the proposals?

Takeover deals are rarely kept private, despite the preventative efforts of lawyers and advisers. It appears that someone knew that any indicative bids wouldn't be accepted. Either that, or API's announcement on 25 January was scary enough to trigger mass profit taking in the stock.

API - Comparison Line Chart (Rebased to first)

Prior to this announcement, market speculators seemed convinced API would be taken out for more than 100p. Some people even suggested a price up to 140p, excited by the fact that the company had 'hidden value'. This was stirred by comments from 9% shareholder Crystal Amber (CRS) in its full-year results statement (11 Sep '12), highlighting that API owned 20 acres of property in New Jersey 'within the Manhattan commuter belt' which could be worth a significant part of its market cap. Crystal Amber reckoned that API's reorganisation, investment and marketing initiatives made it worth 'well in excess of 100p'.

A year ago, API's two largest shareholders, Steel Partners and Wynnefield Capital, said the packaging group should be sold via auction. API wasn't averse to the proposal, merely asking for time to increase volumes at its laminates business (off the back of a large contract win) and then review the proposal once more in the third quarter of 2012.

API announced on 26 September that it would indeed put itself up for sale and for interested parties to make indicative proposals by 31 October. The market was excited about the potential take-out price, sending the shares from 64p on the eve of the formal sales process to a peak of 92p on 23 January.

Today it says that proposals didn't reflect the underlying value of the business or deliver best value to shareholders. But this is not the end of the matter. API says that it will seek to keep an open dialogue with investors about how to maximise shareholder value. So perhaps a sale of the US property could be one option, if it is worth a lot of money?

Interestingly, Crystal Amber has been buying more shares as recently as 25 January, the day API hinted that bid proposals weren't as generous as investors had expected. It clearly sees potential for the packaging group to realise value one way or another.

Issue Date: 13 Feb 2013