Current price: $29.13
Tender Price: $29.5 - $33
Upside: 1% - 13%
Expiration Date: 24 of July, 2019
Straight forward odd-lot tender with small upside.
Recently listed east coast casino owner TRWH has launched dutch tender offer to buy c. 6% of shares at $29.5-$33. The stock currently trades below the lower limit. Tender offer is likely to be oversubscribed, however odd-lot holders will not be prorated - so it's a risk free $35 or potentially more if tender gets priced above the lower limit.
Unaffected price stands at $29.17 (at current levels), so it might be tempting to play this with larger amounts. However, there are two caveats:
- Chatham Asset Management (owns 11%) has been liquidating the position in the open market on a daily basis. It seems Chatham is using the liquidity and price support created by the tender announcement to exit/reduce exposure to TRWH. On Friday (5th of July) shares dropped to $28.18 before bouncing back to current levels - there have not been any news, so I am guessing the drop was driven by Chatham continuing to liquidate its position.
- Standard General (owns 32%) has recently filed for a secondary offering to sell a quarter of its holdings only to cancel it a week later without providing any explanation. Tender docs indicate that Standard General still has not decided whether it will participate in the offering and will provide its answer at least 6 days before the expiration.
Due to above I am expecting the offer to be significantly oversubscribed. After the expiration TRWH shares are quite likely to trade below the unaffected price due to overhang created by the willing-to-exit shareholders.
Otherwise there does not seem to be any risks for the tender not to go through. Twin River recently carried out refinancing transaction and after repaying its previous debt still had $360m in cash and $250m in undrawn revolver. Current tender offer forms part of $250 capital return program announced in mid-June (simultaneously with Standard General secondary).