Current Price – $7.42
Tender Price – $7.24 – $7.94
Upside – 7% (if priced at the upper limit)
Expiration Date – November 6th, 2018
No proration for odd lot holders
This is rather standard Dutch tender offer with odd-lot provision – 7% upside (at upper limit) and 2.5% downside (at lower limit). Due to recent market sell-off shares have somewhat declined from the after announcement levels and now trade closer to the lower limit.
Few more positives on this tender:
- It is quite large – $50m or c. 15% of the outstanding shares.
- After the tender expires the company will still have $26.3m in buyback authorization (another 8% of the outstanding shares).
- Company has already repurchased substantial amounts of stock over the recent years ($9m in 2016, $26m in 2017 and $8m in H1 2018)
- Management and directors own 7% of the shares and do not intend to tender.
- Four largest investors own 49% of the shares and might not be interested in tendering at the range where GCAP shares traded over the last year.
- Company sits on material pile of excess cash (almost 40% of market cap), is undervalued relative to peers and presents an interesting investment from longer term perspective (for further details see this VIC write-up from April).
Taking the above into account I believe there is significant chance that the offer will be priced at the upper limit or even end up under-subscribed, in which case those not participating in the tender will benefit the most.
For odd-lots beware of the recent BLBD fiasco.