Punting types may be attracted to one of the more interesting merger arbitrage opportunities centred on the offer for Centrebet from the London-listed Sportingbet.
Sportingbet has offered $2 a share for Centrebet, valuing it at about $183 million. The deal looks likely to proceed. Its major shareholder, the Kafataris family, with 60 per cent, have given the deal their blessing.
Still, Centrebet is trading below the offer price, closing yesterday at $1.97. While that couple of cents might not be worth everyone's effort, the disclosure documents make an interesting point about a cherry that may yet come on top. Advertisement: Story continues below
''In addition to the cash consideration, Centrebet securityholders will receive a litigation claim right and a litigation claim unit which will entitle them to 90 per cent of the potential net proceeds of the company's proposed GST litigation claim if successful. It is expected that any such proceeds would be realised and paid over an extended period of time.'' In other words, there is the upside of up to about $90 million associated with the GST litigation.
Some observers say the company has done a questionable job explaining that upside when it goes on to explain in a footnote: ''If successful, the value is assessed taking into account a number of matters including the time it may take to realise any benefit and litigation risk at 6.9? to 10? per Centrebet Security as at 31 March 2011.''
Onlookers suggest the wording ''if successful'' appears to imply one of two scenarios - that if they are not successful the answer is zero, and if successful it is worth 6.9? to 10?. In fact, the range is thought to be a weighting of both of those scenarios. So it looks like the market is not pricing in any probability for the litigation being successful. And then there's the chance of the actual distribution cherry.
Not yet disclosed is the probability the independent valuer Lonergan Edwards has placed on the litigation succeeding. But as part of the deal to sell, word is the Kafataris family was keen to retain access to the tax litigation distributions, so we suspect that having agreed to the deal they are confident of a positive result. There is still a big ''if'' involved given the legal action, but with the stock trading below the offer price it's in effect a no-cost option.
CIL Price at posting:
$1.97 Sentiment: None Disclosure: Held
