Bwin.Party Digital (BPTY): M&A
Market Cap: £918m; Current Price: 111p
Competing bids
- BPTY is subject to competing bids from rival online gaming businesses. GVC Holdings (GVC.L, NR) and 888 Holdings (888.L, NR) have placed rival bids to acquire BPTY.
- GVC’s 122.5p offer (25p cash and GVC shares) implies a consideration of c. £1bn split into £206m cash and £805m GVC shares. Management also outlined raising an additional £150m to cover restructuring costs. We estimate GVC would therefore issue 226.5m shares at around the current price, and added to the existing 61m shares outstanding we would arrive at c. 287.5m shares post deal. We estimate on a proforma basis, including the minimum cost savings of €135m and also taking POC tax in the UK into account on the Bwin side, the combined business could generate EBTIDA of c. €285m (£204m) or 70p of EBITDA per share with current consensus forecasts at c. 55p per share it implies there is c. 30% upside to profits on a per share basis. We estimate the dividend at c. 75% of this would be c. 53p per share not too dissimilar to the current annualised quarterly dividend. Though a dividend yield of c. 12.5% would be achieved.
- 888’s 104p offer (39.5p cash and 888 shares) implies a consideration of c. £859m, split (£326m cash and £533m shares). The cash consideration to BPTY shareholders is c. 60% higher compared to the GVC revised offer. We estimate 888 would issue 333m new shares at 160p taking the total outstanding shares post deal to 690m shares. We estimate on a proforma basis including cost savings of $70m and also taking into account POC tax in the UK applied to both Bwin and 888 the combined business could produce c. $235m (£152m) of EBITDA or 22p of EBITDA per share. Current consensus forecasts for 888 standalone is c. 12p per share which appears to take POC exposure into account. This points to c. 80% upside on a per share basis.
NORTHLAND CAPITAL PARTNERS VIEW: Taking the two rival bids into account we estimate BPTY shareholders are likely to derive more benefit from a 888 offer compared to the GVC offer from an earnings enhancement point of view. 888’s offer we estimate should derive greater profit per share uplift to BPTY shareholders despite a smaller amount ring fenced for expected cost synergies. Furthermore, we see lower integration and migration risk on the 888 deal despite an impeccable track record from the GVC management team when Sportingbet was acquired and integrated into GVC. GVC offers investors a higher ongoing dividend yield compared to 888 however the risk in our view is higher when compared to 888’s offer.
Clontarf Energy (LON:CLON) - CORP & Petrel Resources (LON:PET) – CORP:
Clontarf Energy: Market Cap: £0.4m; Current Price: 1.8p
Petrel Resources: Market Cap: £2.9m; Current Price: 2.9
Ghana update Pan Andean to reapply for exploration licences
- Pan Andean Resources, 60%-owned by Clontarf Energy and 30%-owned by Petrel, has agreed with the Ghanaian authorities that it will reapply for an exploration licence over 1,500 plus sq km of acreage in the Tano Basin, offshore Ghana. The licence is over revised co-ordinates that were agreed by the parties concerned in October 2014. Pan Andean has been given assurances that the application will be expeditiously processed.
NORTHLAND CAPITAL PARTNERS VIEW: While progress to date has been gradual in resolving the dispute over the Tano 2A licence, should Pan Andean secure the large licence area in the Tano Basin it would have a significant positive impact on both Clontarf and Petrel.
Latham (James) (LON:LTHM) – BUY*: Placing of existing stock
Market Cap: £136m; Current Price: 702p; Target Price: 800p
From yesterday: Placing of existing stock
- International Plywood (Importers) Ltd has disposed of its entire holding of 900,000 ordinary shares, equivalent to 4.6% of the issued share capital, at 660p/share with new and existing investors.
- Northland Capital Partners acts as Nomad and Broker to James Latham.
- No change to forecasts, BUY rating or 800p price target.
Octagonal (LON:OCT) – CORP: Q1 update
Market Cap: £8.4; Current Price: 1.5p
From yesterday: Strong Q1 revenue growth
- Following the Q1 KPI update (07/07/15), management has provided a financial update for Global Investment Strategy UK (GIS), its global settlement and safe custody services subsidiary where it acquired 90% outstanding stake at the end of June. Q1 revenue was £1.34m and net operating profit was £0.5m. There was a 50.3% increase in total settled transactions in Q1 to more than 30,000 and more than 120 new clients were added.
- GIS had FY15 revenue of £3.3m, representing 30% growth, and generated an £0.5m operating profit.
NORTHLAND CAPITAL PARTNERS VIEW: Strong start to FY16 with growth in total settled transactions and the addition of new clients. The majority of GIS’s business is derived from settlement and safe custody services and there is considerable scope to grow both these revenues and its ancillary services.