Quick Pitch: TriNet Group (TNET)

Odd-Lot Tender Offer – $270 Upside

 

TriNet Group is a $6.2bn market cap human resource services provider to SMEs. The company has recently launched a tender for $640m worth of its stock (10% of outstanding) at $107/share. Shares currently trade slightly below the tender offer price, at $104.29/share. The tender offer is likely to be oversubscribed, but odd lot accounts (<100) will be accepted on a priority basis. At current prices, odd lots can pocket a basically ‘risk free’ upside of $270 in about one month. The tender expires on August 28. Concurrently with the tender, TNET has also entered into a separate agreement to repurchase $360m worth of stock from its major shareholder PE firm Atairos Group (owns 36%). So in essence, you could say TNET is repurchasing $1bn worth of its stock (16% outstanding) and Atairos is tendering pro-rata. However, the major shareholder has also agreed to sell additional shares if the tender ends up undersubscribed. Directors own just over 1% and intend to participate pro-rata as well. TNET will partially finance the tender with the just announced senior notes offering of $400m.

23 Comments

23 thoughts on “Quick Pitch: TriNet Group (TNET)”

  1. $106 premarket at 9am now. Started at $105.28 around 5:30am, range $105.28 to $106.33 so far.

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    • Bought some at 104.9 today. Put an order early in the day and be patient. Took me three days.

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  2. I’m used to dealing with corporate actions and proxies when they’re issued when I’m already a shareholder but not when I acquire after the announcement. Can anyone give a little guidance on the mechanical process (especially as relates to Fidelity) to tender an odd lot? Bought shares just now. Will something show up under a subheading under Documents after some time for them to realize that there’s an outstanding action? Thanks!

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    • Do not know what is the process on Fidelity, you should contact them and check. On IB, you will usually receive a notification in the message center regarding a particular corporate action. Additionally, on IB, there is a corporate actions manager where the choice selections can also be made.

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    • My two cents. I have done many tenders over many years and there are two occasions the tender offer did not go as planned, both in Questrade, a Canadian broker. The first one is an US company, in which case a large percentage of the proceeds, a lot larger than the spread, was withheld for tax reasons. I was really scared at that time but after filling out some forms, the funds were released eventually. The second hiccup happened when I bought into a Canadian tender offer and found out it was treated as a dividend and the part of proceeds were withheld and never seen again.

      I easily forget details so cannot provide more colors. A rule of thumb is that the bigger and more famous companies like JNJ and Lockheed will not bother to trap small shareholders but be careful when the tender is run for example by a PE shop.

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      • Why would it be in a PE shop’s interest to “trap” a shareholder with withholding? Tax goes to the IRS, not the PE shop.

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  3. Fidelity is still manual, unlike other brokers, so you have to call to tender your shares.

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    • Thanks, maverick. I bought on 8/7 and the notice appeared in Messages today. Yes, I’ll need to call them to tender.

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  4. What’s the paid-up capital here? Or is that not the correct terminology for US stocks?

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    • Yes, US tenders do not have such withholding tax dynamics, which exists in Canada for foreign investors. You simply pay the capital gain tax on the tender proceeds.

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      • Paid-up capital is also relevant for Canadian investors, as it determines how much of the tender proceeds is deemed a dividend (and thus counted as dividend income).

        As a Canadian, for this tender do I have to worry about the tender proceeds being treated as a foreign dividend, and thus subject to 15% withholding tax? Trying to figure out which account to do this in.

  5. Having difficulty researching an answer to this question, so I’ll try asking again:

    If a Canadian tax resident participates in this tender from a Canadian brokerage, will the gains be treated as capital gains? Or does something nasty happen that completely kills this trade, like a foreign dividend withholding tax on the proceeds?

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    • You should consult with your tax advisor / broker for specific situations related to your circumstances. From what I understand, this is a standard tender offer (of which there have been many), and shares accepted in the tender will be treated as ‘Sale’ and taxed on capital gains.

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  6. Does anyone know if this deal is treated as a dividend under Section 302 of the U.S. Internal Revenue Code and would thus make the proceeds liable for withholding tax as an international investor?

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  7. Hello all – hoping for a bit of help. At Etrade I have my own personal account and I also have Coverdell investment accounts for my children (Coverdells are Education Savings Accounts). Does anyone know if purchase 99 in each of those Etrade accounts, will ETrade aggregate them so I’ll be over the 99 or will they be treated separately and each receive the odd lot proration exemption. Many thanks for any help you can provide.

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    • Not sure about the particulars of Coverdells. But I believe you can tender once per person per broker. So you could tender under two accounts held by the same person at two different brokers, or two accounts held by two different people at the same broker (even if you have power of attorney over both).

      So I guess the question is whose name or tax id are the Coverdell accounts under?

      Not professional advice obviously.

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  8. almost 111 now

    Can I have my tendered shares back ?

    Very strange it traded so ‘poorly’ pre deal and now its a ripper.

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