Eight months after the appointment of advisers, a sale of Bwin.party digital entertainment appears to be in the final furlong. However, with the two remaining suitors — 888 Holdings and GVC Holdings — neck and neck, separating the competing offers appears to be proving difficult for the Bwin.party board.
While little detail of their offers has been given, research suggests that they are broadly similar. GVC is thought to be offering about 110p, valuing the online gambling operator at about £900 million. City sources suggest 888’s offer is pitched a shade lower.
The proportion of cash on offer is also similar, with GVC offering 45 per cent in cash and the rest in shares, while 888’s bid is estimated to be about 40 per cent in cash. So the big decision that the Bwin board and its Deutsche Bank advisers must make is the value of each company’s paper and the relative risk involved.
That’s where it gets a bit tricky. The first issue to be weighed is that of synergies — a key point, given that Bwin investors will be getting a decent slug of shares. In the case of GVC, these are estimated at about £100 million. While some analysts reckon 888 could match that, others suggest something closer to £65 million.
Though that appears to be a big tick for GVC, some Bwin investors might not be that keen on taking shares in a company with a much higher proportion of its revenues from unregulated jurisdictions.
The GVC proposal is also much more complex. The deal size means it would reverse into Bwin, so inheriting the latter’s FTSE 250 status. It also would have to tap the equity market for about £150 million to help to fund the deal, whereas 888 has enough cash and bank support to fund the cash portion.
The other complexity is that GVC is working with Amaya Gaming, the Canadian owner of PokerStars, which is likely to acquire some of Bwin’s assets, notably poker, after a takeover. That said, Kenny Alexander, the GVC chief executive, has a track record of making challenging deals work.
GVC appears to have edged ahead, but, whichever wins, Bwin investors tired of the constant disappointments should grab what’s on offer with both hands.
Stakes €2.7bn
Regulated 56%
£906m Value of 110p-a-share GVC bid
MY ADVICE Hold
WHY After five years of disappointment, a takeover now seems inevitable and shareholders should sit tight and take what’s on offer
After more than three decades at Galliford Try, Greg Fitzgerald, who began his career with the housebuilder as a tea boy, is set to hand the chief executive’s reins to Peter Truscott, from Taylor Wimpey, although Mr Fitzgerald will stay on until 2017 as chairman.
He will hand over a company in good shape after some wise moves during the recession, including a rights issue to raise £125 million in 2009 that helped to double the size of its housebuilding business over the next three years.
The fruits of his labours were reflected in yesterday’s trading update. It predicted record results for the year to the end of June, with pre-tax profit at the upper end of analysts’ range of £105.9 million to £113 million, as activity in the housing market gathers pace.
It also announced the sale of a portfolio of shared equity mortgages to Patron Capital as it seeks to focus on development. It recently acquired 11 sites from Shepherd Homes.
It strengthened its construction division when it snapped up Miller Construction last year and now has a strong construction order book of £3.5 billion, compared with £1.4 billion last year.
Net debt £20m
Completions 3,177
MY ADVICE Buy
WHY Housing market activity picking up after election
Charles Rolls conceived the idea of an upmarket tonic after selling Plymouth Gin, which he had run for four years, to Absolut Vodka in 2001. He and Tim Warrillow, his business partner, decided that the “appalling quality” of mass-market mixers had left a huge gap for a tonic made from fresh, natural ingredients.
The remarkable share price performance of Fever-Tree Drinks, the tonic and mixers group they floated in November last year, shows how successfully they have plugged that gap. Yesterday, a strong trading update sent the shares fizzing by almost 10 per cent to 318p, up from 134p at flotation. The group, which has about 50 per cent of the world’s premium mixers market, said that first-half sales would be about £24 million, up 61 per cent year-on-year. It cautioned that June revenues had been flattered by customers stocking up ahead of the key summer season, but predicted that full-year results would still be “materially ahead of expectations”.
Driving the surge is the continuing consumer demand for craft and premium gins. Encouragingly, demand for a posh G&T is growing not only in traditional markets such as Britain and Spain but also in Belgium and Italy. At the same time, a growing taste for the Moscow mule is driving strong exports of ginger beer to America.
Despite last night’s news that LDC, its private equity backer, has sold its remaining 5.2 per cent stake, strong demand in new and existing markets and new products — it has just launched Fever-Tree Cola in Spain — should keep momentum going.
Revenue £24m
Countries 50
MY ADVICE Buy
WHY A quality company with huge untapped potential
And finally…
Scarcely a week goes by without news from Ladbrokes on the latest action by Jim Mullen, the bookmaker’s new chief executive. Since he took the reins in April, he’s launched a restructuring of its loss-making Irish betting shops, announced merger talks with Gala Coral and completed a review of its entire strategy.
His latest move is to call a halt to Ladbrokes’ online operations in Denmark, citing “unsatisfactory” profit levels. All eyes now are on whether the Scot can agree terms with Coral in the next few days.
Follow me on Twitter for updates @walshdominic
