THURSDAY should be a special day for Woodchester Investments' shareholders. It the ongoing takeover talks are successful, it will be their last annual general meeting.

However, the takeover talks are unlikely to be easy. Why? Based on historic figures, the company, at the existing share price, is fully valued at £615 million. That is the figure suitors will be aiming to pay.

But based on its potential, and as a bid candidate, that sort of consideration would be too low. Indeed, institutional shareholders will be pushing for a much fuller price to be paid.

It will now be up to the Woodchester negotiators to convince the suitors that the present share price of 285p, up from 177p a year ago, does not adequately reflect the company's true value. Some of the institutional investors have already stated that for a bid to be successful, an offer would have to rise substantially" above 300p per share.

How valid is such an assertion? The results for 1996 were good. Profits up by 22 per cent to £44.3 million, earnings per share up by 19 per cent to 15.5p and dividends per share up by 15 per cent to 7.9p.

Based on these figures, Woodchester is on an earnings multiple of 18.7 (at 285p per share). Also, the market value is 2.9 times book value. These figures are on the high side. An earnings multiple of around 18, and a book multiple of up to 2.6, for example, would be more normal for instalment credit and leasing groups.

However, these are historic figures and Woodchester is already well into this year. Also, the omens for this year, and beyond, are bright. Profit growth should come from three main areas. First, rationalisation. Second, buoyancy in its main geographical areas of operation. Third, acquisitions.

Woodchester is continuing to benefit from the rationalisation initiated in 1994. Further benefits, in the form of a lower cost income ratio, should flow from its centralisation programme. This, for example, erases the need for four separate back offices.

Woodchester gets 77 per cent of its profits from Ireland and Britain. The Irish operations, accounting for 36 per cent, should benefit from a very buoyant economy over the foreseeable future. The British operations, accounting for 41 per cent, are growing. Its continental operations are also performing strongly.

With takeover talks dominating the group there is always the fear that the senior management team, under executive chairman Mr Craig McKinney, might take its eyes off the central focus and stay clear of outside acquisitions.

However, while admitting that the takeover of the group is a "key priority", Woodchester has insisted that "management will not be distracted from day to day business issues". Indeed, demonstrating this commitment, the group could well announce a further acquisition (outside Ireland and Britain) very shortly.

It seems more than plausible that Woodchester is capable of growing its earnings and book value by at least 15 per cent per annum over the next few years. This would put the prospective earnings multiple at 16.2 for 1997 and 14.1 for 1998. The multiple on the book value would come down to 2.5 for 1997 and to 2.2 for 1998.

Based on these figures there is clearly scope for a bid to be made well ahead of the current share price. The institutions, of course, hold the key. For a suitor to mop up any dissident minority shareholders, acceptances would have to be received from shareholders representing 80 per cent of the value, and 75 per cent of the numbers.

With Credit Lyonnais, the troubled French bank holding 53 per cent, a willing seller, the first requirement might look easy, but the four largest institutional investors hold more than 20 per cent. They could block an outright bid in just one swoop.

The second requirement often proves to be the most difficult. Credit Lyonnais' holdings, for example, would be counted only as one vote, so its influence would be minimal.

The focus for shareholders at Thursday's meeting will be on the state of the takeover talks. However, with the talks at a delicate stage, the shareholders are unlikely to be given any concrete information on the identity of the suitors.

Nevertheless, it should not be long - possibly early next month - before a suitor emerges with a firm bid. Reliable industry sources say there is a strong interest in Woodchester. But for a bid to have any chance of success it will have to be pitched at a level well above Friday's closing price of 285p.