Stock Update
Corporate Actions
Australia

Event Trade: GBST Holdings (GBT:ASX)

8 Oct 2019
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The GBT Event trade was first recommended as a buy on 29 July 2019. Below are each of the updates related to this trade in chronological order.

Current advice: This trade is now over.

Update – 24 October 2019, 10:47am

GBT has now ceased trading and the deal has been approved by the Federal Court. This effectively brings to a close the investment in GBT, and members will be paid on 5 November. Members will be paid $3.50 in cash as well as a $0.35 fully franked special dividend, so total gross proceeds will be $4.00 which equates to a small 2.8% return including franking credits on our entry price. We didn’t ultimately see the bidding war we were hoping for but the arbitrage worked out to be worthwhile in an environment of low interest rates so the stock worked out to be a decent parking spot considering things didn’t go as well as hoped.

Update – 16 October 2019, 11:01am

GBT held its Scheme Meeting on Monday and shareholders voted the deal with FNZ for $3.85 in an almost unanimous manner. Federal Court approval is scheduled for this Friday at which time the stock will cease trading. Assuming these final steps go through without a hitch, members will be paid $3.50 in capital as well as a $0.35 fully franked special dividend. This dividend will come with $0.15 in franking credits, so while we didn’t see the bidding war, we hoped for members will return a gross profit of 2.8% in roughly three months.

Members will be paid the $3.85 on 5 November.

Update – 24 September 2019, 11:33am

Members should receive the GBT Scheme Booklet sometime this week which means it is now time to respond. As this deal will be completed by scheme of arrangement – as opposed to a takeover bid that requires acceptances – shareholders will be required to vote for the deal and if more than 75% of shares voted support the deal then all of the shares will be sold. That actually leaves shareholders in the position that inaction shouldn’t really matter, but there is no harm in getting in our votes anyway.

The Scheme Meeting is due to be held on 14 October with votes due in by 12 October. You can vote by returning proxy forms to the registry, or you can visit the registry by clicking here and voting online. To do so you will need your HIN (which is on your proxy form). After following the prompts, we recommend members vote ‘FOR’ the proposed resolutions.

Assuming the deal is voted for, shares will cease trading on 18 October and payment will be made on 5 November.

Update – 11 September 2019, 10:13am

Things have gone quiet on the GBT front which doesn’t bode well for the chances of seeing another bid emerge. The scheme booklet is due to be released any day now and the current timeline is for the current $3.85 deal to conclude in early October. The stock has dipped to close at $3.82 yesterday (down around 1.8% on our entry price) and at that price we think the arbitrage on offer is too good to resist.

The GBT offer of $3.85 comes with $0.15 in franking credits, so at the current price of $3.82 there is an arbitrage of 4.7% if you can take advantage of the franking credits. The 45-day rule – one needs to hold a stock for 45 days ‘at risk’ to be eligible to receive franking credits – needs to be adhered to, and with the scheme booklet a little behind schedule buying over the next week should be fine. Still, to be conservative we are going to leave our buy recommendation on GBT only for today and reiterate to members able to use the franking credits that GBT is a buy at current levels for a short-term arbitrage for today only.

Original Recommendation – 29 July 2019, 10:15am

It has taken over $1.00 in gains and approaches from three different suitors, but GBT has finally announced a binding deal has been signed this morning which will now give shareholders an element of certainty. It is this increased certainty that we have been waiting for before being willing to buy the stock, and while there’s been a lot of upside left behind while the bidders have been strategizing, the fact is that there is still a chance we may see further action and our downside has become a known quantity which has improved the risk/reward equation we apply to every event strategy recommendation.

After a weekend of negotiations, GBT has signed a deal with FNZ which will see shareholders paid $3.85 per share. Additionally, shareholders will receive a special dividend of up to $0.35 per share which will come off the consideration but add as much as $0.15 in franking credits to the offer. Importantly, the offer comes with limited conditionality and should, in the absence of further bids, go through without a hitch.

This is an exciting position for GBT shareholders to be in because GBT was in exclusive negotiations with US-based SS&C Technologies which had offered $3.60 pending due diligence and is the clear potential counter-bidder now that a binding deal has been signed with FNZ. SS&C has had a look at GBT’s books and is well-placed to make a move. There is some speculation that it could look at legal action as it had signed an exclusivity agreement with GBT but ultimately, it’s unlikely GBT shareholders will vote for a deal below what FNZ has now proposed, so the best bet for SS&C would be a new offer. Bravura (BVS) was the company that started this process so there is always a chance that BVS plays a role but it is a minnow compared to FNZ and SS&C so this is unlikely. Additionally, FNZ offered GBT $4.00 last week before coming down in its offer to $3.85 so there is clearly more in the kitty if it needs to pay up.

As SS&C is still in the picture, it’s likely we will have to pay a little above the bid price of $3.85. As we have up to $4.00 in total value, that’s a position we’re comfortable with and GBT is clearly being looked at as a strategic entry point into the Australian market for both FNZ and SS&C so while the price seems high strategic assets often achieve the highest premiums in a bidding war. Additionally, action should be swift so we’d like to get set in the next couple of days.

We are therefore recommending members buy GBT at up to $3.89 (1% above the cash value of the offer but still 3% below the total gross value of the offer) for a low-risk, short-term investment opportunity.

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