Current Price – $18.65
Offer Price – TBD
Upside – TBD
Expiration Date – TBD
This is the follow-up on the GHL tender offer that I posted couple weeks ago. I think that a new type of special situation has presented itself and therefore I am flagging it as a separate post.
GHL has launched recapitalization program whereby it wanted to replace expensive equity with cheaper debt. The financing was arrange for $285m of stock repurchases. Out of this $207m were for the 12m shares tender offer (40% of all outstanding) that ended up significantly undersubscribed – only 3.5m shares tendered at $17.25. For possible reasons why the tender ended-up undersubscribed please browse through my previous post.
So now we are in the situation where management wants to recapitalize the company and still have $225m to do that (compared to market cap of $490). I do not think management will simply abandon this plan as it was presented as the key in company’s turnaround. One of the potential outcomes is that another tender offer at a higher price will be launched – share price rally after the tender result announcement seems to indicate that market is expecting this. If a new tender is announced it is likely to be at a premium to the current share price.
At the moment this is just a speculation, but I would expect management to announce something shortly, potentially after the final results of the tender (currently only the preliminary ones are available).
Also for anyone interested in this speculation, I would strongly suggest to read through this bearish thesis on GHL (was just published yesterday). I agree with the arguments author makes and would not be comfortable holding GHL for anything but a short term trade.
No position at the moment.