Centrebet International
While the race is far from won, our punt on Centrebet (see Ideas Lab punts on Centrebet of 13 May 11) is off to a flying start, with the share price up 9% in two weeks. Sportingbet plc has now signed an official scheme implementation agreement to acquire all outstanding shares of Centrebet for $2.00 each. The scheme remains subject to conditions—including funding and approval from both Centrebet and Sportingbet shareholders. But the funding obstacle looks set to be cleared soon.
For our band of punters, a firm offer was an important hurdle to clear. Board members intend to unanimously recommend this transaction in the absence of a superior proposal and subject to a favourable independent expert’s report. Importantly, as discussed in the Ideas Lab, the transaction includes an agreement to pay 90% of the net proceeds of any successful GST litigation to current Centrebet shareholders. This could be worth nothing but, if successful, could be worth more than 50 cents per share—paid ‘over an extended period of time’ as Sportingbet uses up the corresponding tax deduction.
If not for that litigation right, we’d probably sell out at today’s price of $1.95. The chance of a higher bid materialising is fairly low, and the promise of a further 2.6% appreciation doesn’t excite, especially given the deal isn’t scheduled to close for four months. But the possibility of a further substantial payout from litigation—and the free health benefits likely to accrue from getting one back on the tax man—are enough to justify holding on for now. NO VIEW.