THE takeover manoeuvres around Burswood have raised expectations that Publishing and Broadcasting Limited will be forced to lift its initial offer of $1.40 per share.
THE takeover manoeuvres around Burswood have raised expectations that Publishing and Broadcasting Limited will be forced to lift its initial offer of $1.40 per share.
A price of $1.50 is firming as a likely revised offer and the challenge for Burswood’s directors is to try and get an even higher price.
Last week Burswood’s directors recommended shareholders reject the initial offer, which values the company at $686 million.
They said the offer did not reflect Burswood’s current performance or future prospects, did not contain an adequate premium for control and did not attribute sufficient value to Burswood’s land and other assets.
The directors also released an independent expert’s report by Sydney firm Lonergan Edwards & Associates that valued Burswood at between $1.52 and $1.68 per share.
The directors did not nominate an acceptable price but the implication is that Lonergan Edwards’ mid point of $1.60 would be considered fair value.
There are three reasons for expecting PBL, which has disputed Lonergan Edwards valuation, will not go that high.
First, the market is valuing Burswood shares at around $1.47, a level they have held since PBL’s takeover offer was first announced.
Second, broking analysts are starting to agree on the likely outcome.
Deutsche Bank’s David Leslie said “we believe an offer of $1.50 would be sufficient to ensure a successful takeover”.
Smith Barney said “PBL may be prepared to tough it out, but we think the news from Burswood is only getting better. PBL may consider lifting its bid to the low end of the assessed range”.
Credit Suisse First Boston’s Jolanta Masojada concludes an offer at the bottom end of the independent expert’s valuation “could be acceptable to both parties”.
Shaw Stockbroking agrees there is room to move on the offer price “towards the low end of the valuation range” since the takeover is expected to boost PBL’s earnings per share, even without synergy benefits.
A third factor to consider is last week’s resolution of Australia’s other big gaming takeover.
Sydney-based Tab had spent months fending off takeover suitor Tabcorp and, like Burswood, it commissioned Lonergan Edwards to prepare an independent valuation.
Lonergan Edwards concluded Tab was worth between $4.84 and $5.09.
Last week Tab’s directors accepted a sweetened offer worth $4.77 per share, in other words below the valuation they commissioned.
If this provides any precedent, Burswood’s directors could end up recommending shareholders accept a sweetened offer of around $1.50 a share.
