M.Fools
The board has unanimously recommended the deal which, if approved by shareholders, will be done via scheme of arrangement at a price of $3.96 per share. Part of this may include a special, fully franked dividend, with the board having the discretion to pay out as much as 23.5 cents per share (which would reduce that $3.96 by the amount of the dividend).
There’s still a lot of time left before the dust settles. The scheme booklet is not due to be released until February next year and shareholders won’t have the ability to vote on the deal until March 2018. It’s currently due to be completed on June 30, 2018.
Although the current market price remains at a discount to the quoted takeover offer, we feel there’s little value gained in continuing to Hold (or, certainly, buying now as an arbitrage play). The potential for a 2%-odd premium, generated over an eight-month period, simply isn’t worth it when you consider the risks involved. After all, though the odds may be low, the takeover may still not go ahead — shareholders may not approve, or the ACCC may block the move, for example. If that were to occur, shares would likely sink back to pre-takeover offer levels.
In short, while there may be a tax-effective special dividend and there’s always the chance of a higher offer, the discount to the takeover price is too skinny for us to roll the dice — as well as the time value of waiting for up to 8 months for the deal to be completed.
And while we think you should sell, don’t get caught up in the rush — there’s 8 months to make your trade, so try to use a limit order, or at the very least make sure your price is close to the previous day’s closing price, to maximise your proceeds.
We are checking-out of Mantra by changing our recommendation to Sell.
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