Current Price – A$0.96
Merger Consideration - A$1.00
Upside – 4%
Expiration Date – April 9, 2018 (expected)
This idea was shared by Matt.
This merger arbitrage presents an opportunity to make ~4% upside in less than a month or potentially only a couple weeks if you wait until closer to the shareholder vote date. The transaction is well progressed, the buyer is logical, knows the business well and the transaction has the support of the Board and 39% of shareholders eligible to vote.
Key data points:
- Boardriders (previously known as Quicksilver and controlled by Oaktree Capital Management) to buy the 80.7% of Billabong (ASX:BBG) it doesn't already own for A$1.00 cash.
- Independent Expert (i.e. fairness opinion) said the offer price is fair and reasonable.
- Board of directors unanimously recommends the deal.
- Centrebridge Partners and Gordan Merchant (ASX:BBG founder) who combined own 39% of the shares eligible to vote agree to vote in favour of the deal.
- Oaktree owns an additional 19% of ASX:BBG but these votes will be excluded from the shareholder vote.
- The transaction is subject to limited conditions and not subject to due diligence or financing.
- In the absence of the transaction, the company will likely have to do a large equity raising to reduce debt (Oaktree is a major lender) so there is a strong incentive to vote in favour.
- The shareholder vote to approve the deal 28 March.
- Effective Date of the transaction (i.e. last day traded) 9 April.
- A detailed overview of the transaction, pro's/con's and risks is in the Scheme Bookle
Why The Opportunity Exists?
- I think the main reason is ASX:BBG will be removed from the ASX300 index from March 19 and index funds are forced, sellers. Prior to this announcement ASX:BBG traded closer to the A$1 offer price.
- In late Jan/early Feb 2018, Pierre Agnes, the CEO of Boardriders went missing after he went fishing in the Atlantic and was declared dead. Subsequently, Boardriders has now announced a transformation of its management team and reaffirmed its commitment to complete the acquisition of Billabong International Ltd. as previously announced. The share price did not react negatively to this news so I think mostly forced selling is driving the upside opportunity.