It’s a little curious for major shareholders to sell down their stake in the middle of a bid situation, but that is what has happened with Bwin.party digital.
The company has fallen 11p to 94p as trustees of two shareholders, Emerald Bay and Stinson Ridge, said they would place up to 50m shares, around 6% of the business. Bwin said it was not party to the placing arrangements, but they were consistent with the trustees’ obligations to sell down their holdings before the end of October, as part of an agreement reached in 2013.
Bwin said the move would not have any impact on discussions it was currently holding. It is at the centre of a takeover battle between rival 888 and a partnership between GVC and Canada’s Amaya. Bwin chairman Philip Yea said:
We welcome today’s news....as it provides clarity for the market regarding a significant block of shares that were due to be sold during 2015. The sale has no bearing on the board’s discussions regarding proposals received from third parties that are continuing.
Analyst Nick Batram at Peel Hunt said:
News of the desire of the trustees of Emerald Bay and Stinson Ridge to sell down their respective holdings does come at a strange time. However, unless a potential suitor has acquired the holding then not much has really changed.
Whilst the timing is consistent with the requirement (under the October 2013 agreement) to sell prior to the end of October 2015, to do it when the group is in active discussions with a number of suitors is curious. Clearly the trustees are not privy to any of the discussions, therefore there could be a number of possible reasons. First, they could have been approached by one of the suitors. Second, it may well be that an (or several) aggressive investors have a positive view on the likely outcome of talks and they approached the trustees. Finally, it could just be that the trustees felt that the risk reward situation was suitably balanced for them to complete the sell down.
Our view remains that a bid is the most likely outcome. Much will depend on the scale of synergies and the execution risk the bidders place on any deal. At the top end, it is possible to see 130p plus but equally a more cautious stance on execution risk suggests limited upside from here. If a bid does not materialise then the stock could head back to the 80p-90p level. On balance our view remains that investors should hang on.
