Twin River Worldwide (TRWH) – Odd Lot Tender Offer – $35+ Upside

Current price: $29.13

Tender Price: $29.5 - $33

Upside: 1% - 13%

Expiration Date: 24 of July, 2019

Tender Announcement

 

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).

17 COMMENTS

  1. iFindValue

    Down 4% so far today, now the trade is at a 7% to 19% spread for odd-lots which equates to $180sh to $500sh if you invest fully under odd lot provisions.

  2. nuggy5

    Given the price movement downwards – do you think there is a risk of cancellation?

  3. Random Deals

    TRWH went down almost 5% today. Why?
    At $27.37 / share, tendering at the minimum of $29.5 would generate an almost guaranteed 8% gain. Too good to be true?

  4. dt

    I think shares dropped in response to the announced acquisition of two casinos from Eldorado Resorts and market got scared that acquisition will be done instead of the tender offer.

    https://investors.twinriverwwholdings.com/news/news-details/2019/Twin-River-Worldwide-Holdings-Signs-Definitive-Agreement-To-Acquire-Two-Casinos-From-Eldorado-Resorts/default.aspx

    Company has ample liquidity ($360m cash + $250 undrawn revolver) to carry out the tender offer ($75m in cash) and acquisition ($230m). So I think market’s worries are misplaced.

    Also yesterday afterhours company issued another press release names ‘Twin River Publishes Q&A Regarding Self Tender Offer’ which kind of confirms that tender is still on the table.

    https://investors.twinriverwwholdings.com/news/news-details/2019/Twin-River-Publishes-QA-Regarding-Self-Tender-Offer/default.aspx

    So in my opinion this is a fantastic entry point for odd lot holders.

  5. nuggy5

    I haven’t seen a tender (with an odd lot) fall this far below the range in recent history. If you were able to enter below 27.50 that’s a real steal (I didn’t).

    1. Austin

      Blue Bird’s tender offer last year would be a recent example.

      1. nuggy5

        That was only after they cancelled the odd lot provision though

  6. Dan T

    there was a news article on SA saying the tender was canceled but it looks like they took it down.. good news

  7. dt

    BLBD case is definitely a concern here. But for TRWH the spread to the lower limit widened only for one day – so I do not think there will be so many ‘new’ odd-lot accounts, that the company would even consider eliminating odd lot provision.

    BLBL traded $2-$3 spread to the tender price for almost a month, which prompted high number of ‘new’ odd lot accounts (aiming for $200-$300 upside). So situation seems to be different this time.

    https://www.specialsituationinvestments.com/2018/09/blue-bird-blbd-odd-lot-tender-200-upside/

    1. yak

      It seems that the tender offer is for $75M, not 2.5, but that is likely the cause for the price drop. But, it definitely doesn’t guarantee a price of $29.5 as Standard is tendering at Price Determined so they won’t directly affect the tender price. I’m not experienced with dutch tender offers but I can imagine shareholders will keep their prices low considering this news, to make sure they don’t completely miss the tender.

    1. Dan T

      just published,

      “Twin River expects to accept for payment and pay for an aggregate of approximately 2,542,373 Shares at a Purchase Price of $29.50 per Share.”

  8. Terence

    36m tendered, out of 41m total shares. So most are paying attention, but not all! Maybe some are restricted or management shares. As expected, price dropped this morning, but not much, maybe since the tender results are all expected. So far, traded at a narrow range around 27, down 3%.

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