# SEL - S8 Limited



## professor_frink (1 June 2006)

Recently had a friend asking me about this one.

Real estate co. that's bought harvey world travel and a few other travel agencies. They seem to be expanding the business pretty well at the moment, but being a fan of charts and the like I couldn't give my friend any sort of opinion of the business in general. Any of the fundies on the forum know anything about them and have an opinion?


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## robert toms (6 June 2006)

I have watched this company for a couple of years.They made a failed hostile takeover bid for Breakfree about three years ago.Both were in the same holiday rental and management of apartment type businesses.S8  bided its time and bought into travel agents...and of late there has been a rapid trail of acquistions.S8 is nothing if not ambitious.
If they can get their synergies right and manage their new purchases well they may well be on the way to bigger things.Who knows?
They have been a successful company in the past and paid a useful dividend.


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## Ken (18 September 2006)

does MFS have to reach 4.25 to take over SEL?  what will this mean for SEL shareholders?


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## scsl (19 September 2006)

Ken said:
			
		

> does MFS have to reach 4.25 to take over SEL?  what will this mean for SEL shareholders?



Ken, the $4.25 relates to the volume weighted average price of MFS. The S8 board will only be obliged to recommend the bid in the event the VWAP of the MFS share offered for each S8 share exceeds $4.25. 

Although currently the VWAP may be less than $4.25, I have a strong feeling that the S8 board are working closely and positively with MFS and are keen to see the merger proceed. They have even signed up for a break fee and an agreement to not 'shop around' for a better deal.

Do you own any SEL or MFS shares?


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## Ken (24 September 2006)

i bought SEL shares at 3.53 and they got eaten up for sale at 4.79 in that initial jump when the news came of the mfs takeover.

I bought in again at 4.20.


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## Ken (29 September 2006)

sel has gone up to 4.28.  So i am guessing the merger is taking place.

Anyone know when?

Theres been no announcements i read somewhere it was happening at end of the month.


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## Ken (3 October 2006)

hit 4.50 today


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## smoothsatin (3 October 2006)

Looks like most of the bears are out of the stock now, hopefully it should continue to float upwards now. This thing will go through in one form or another, i think i have said this on another thread, but ultimately it is unambiguously beneficial for both parties and management are committed to the deal, thus it will get up eventually. Whoops just had a thought, was today the deadline? hmmbetter check that....


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## scsl (4 October 2006)

Ken said:
			
		

> hit 4.50 today



Yeah and MFS closed just off its high of $4.10. MFS hasn't closed above $4 for about three weeks.


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## Ken (4 October 2006)

how high will SEL go? there seems to be a direct link between the SEL share price and the MFS share price at the moment.


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## Nudibranch (5 October 2006)

I read in the terms of the merger that SEL stock-holders would be granted 1.15 times as many shares in MFS in the case that the merger is successful.  At present, SEL is trading at $4.49 and MFS is trading at $4.15.

Assuming (as many people are doing, with these particular circumstances) that the merger does go ahead smoothly, then SEL shares should be worth 1.15 times $4.15 (the current MFS share-price).  That is $4.77 and represents a 6% premium on the current SEL price.

This 6% premium looks like easy pickings for investors.  Have I missed something?  I speculate that perhaps the SEL price has not yet reflected the "merger-value" because profit-takers have been selling out of the company and there may also be some uncertainty in the marketplace.  Should we expect the SEL share price to approach 1.15 times that of the MFS share price as details and timing of the merger become clearer to the market?


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## Ken (6 October 2006)

i am going to hold, as i believe MFS are going places


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## michael_selway (6 October 2006)

Ken said:
			
		

> i am going to hold, as i believe MFS are going places




is MFS better or SEL at curent prices u think?

thx

MS


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## scsl (7 October 2006)

michael_selway said:
			
		

> is MFS better or SEL at curent prices u think?
> 
> thx
> 
> MS



MFS is undervalued at its last price of $4.20, but I am biased as I own shares. 

SEL's sp has had a very good week, and looking ahead, it could be an interesting short term trade, but that is all it will be. MFS will eventually succeed in this merger and its sp rise this week illustrates the confidence both retail and institutional investors have in the company. 

The travel sector has longed lagged in consolidation and this merger of two well-known and successful travel companies will not only increase productivity and cost savings, but will also enable MFS to have greater buying power. Integration will not be an easy task but the MFS management have a lot of experience and would not have announced such a deal had they thought it would have been too difficult and thus a risk to shareholders.


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## Ken (11 October 2006)

S8 now 4.72


what would people recommend. continue to hold.  i bought in at 4.20 say am tempted to take the profit.  however how many more legs does it have.

is  MFS  potentially a $10+ stock if it continues to make takeovers.

i would like to hold for the MFS deal but  am i better off selling SEL now and then waiting for MFS to drop down, or is MFS just going to continue its rise gradually, rapidly, on its merry way.....

peoples thoughts.

once the takeover takes place, what will happen to MFS share price. will it dip as SEL shareholders sell off and take profits???


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## Nudibranch (11 October 2006)

*Factor of 1.15*

SEL was up almost 5% today and closed at $4.72.  Of course MFS also moved upwards today by almost 2% and closed at $4.30.  Thus the SEL sp is now 1.10 times that of the MFS sp.

I said on Thursday last week:


> Assuming (as many people are doing, with these particular circumstances) that the merger does go ahead smoothly, then SEL shares should be worth 1.15 times $4.15 (the current MFS share-price). That is $4.77 and represents a 6% premium on the current SEL price.



Now it is the case that (again, assuming that the merger goes ahead smoothly) the SEL shares are still undervalued with regard to the amount of MFS shares that they are likely to be worth after the merger.  With the MFS sp at $4.30, SEL ought to be equivalent to 1.15 times that value; ~$4.95.  That gain still represents almost a 5% premium on the current SEL sp.  Is it easy pickings?  I think so.  Last week I said:


> Should we expect the SEL share price to approach 1.15 times that of the MFS share price as details and timing of the merger become clearer to the market?



And I am still waiting to be notified of a hole in my logic.  My feeling has been bolstered by the narrowing of that potential profit margin on the SEL sp from 6% last week to 5% today.  As it was noted earlier by Ken:


> there seems to be a direct link between the SEL share price and the MFS share price at the moment.



I certainly agree, though the diffence in sp's fits only crudely with the system that I have described and is outlined in the terms of the potential merger.
Ken mentioned today that he is considering selling his SEL stock today after its substantial rise:


> what would people recommend. continue to hold.  i bought in at 4.20 say am tempted to take the profit.  however how many more legs does it have.



Certainly, I recommend holding the stock, or further investing in SEL, because if nothing much happens there is still an easy 5% to be reaped.  Beyond that advice, I have to be more speculative.  MFS does appear to have momentum of its own and even appears to be pulling SEL up further with it.  As for MFS becoming a $10+ stock - that is far too speculative for me.  A lull in the MFS sp after the merger?  I see stagnation for up to a week, but no more because MFS propensity for acquisitions and acumen for growth has established an appreciable momentum (for now).


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## Nudibranch (18 October 2006)

A week later and the SEL sp has declined slightly to $4.70 after briefly reaching $4.80 on Friday last week (from $4.72 this time last week).  I would speculate that investors are eager to hear information regarding the potential (and likely) merger with MFS.

The MFS sp closed today at $4.34 and represented a modest rise from its price last week at $4.30.

A pretty quiet news week for these companies.  MFS is now listed in the ASX200...


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## Ken (20 October 2006)

i really wanted to keep SEL, as i think they are a real winner, and i wanted to hold MFS.  

However i jumped out at 4.78, as i felt RIO Tinto were buidling some momentum.

I guess the move has payed off thus far as rio have risen $7.00.

once my margin loan is linked i will be watching these two closely.  

i will be looking for another opportunity, but i doubt it will come in.


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## Ken (27 October 2006)

$4.64  chance vto make 50 cents a share.

the drop in mfs share price would be an indication that they think they are paying to much for sel.

Quesiton.

is the final price payed to SEL shareholders 1.15 ontop of the final closing price. or is it 5.10-5.15 as stated in the announcement.

It pretty obvious SEL shareholders would take the offer up, would be silly not too.


I think i would take the cash over, if MFS share price isn't around $4.25


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## dubiousinfo (27 October 2006)

Ken said:
			
		

> $4.64  chance vto make 50 cents a share.
> 
> the drop in mfs share price would be an indication that they think they are paying to much for sel.
> 
> ...




There isn't a full cash offer for the shares. The offer is a choice of either
1. 1 MFS share for each S8 share plus 70c, or
2. 1.15 MFS shares for each S8 share

In addition to both of the above options, you will recieve 15c as a special dividend for each S8 share


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## Nudibranch (2 November 2006)

Ken said:
			
		

> I think i would take the cash over, if MFS share price isn't around $4.25



I don't know about you, Ken...  To work out whether to take the cash or not, you simply need to calculate whether 15% of the MFS share price is greater or less than $0.70.

To put it another way, if the MFS share price is $4.67, you could take the full share option (value = 1.15 * $4.67 = $5.37) or you could take the part cash option (value = $4.67 + $0.70 = $5.37).  So, if the MFS share price is $4.67, then it doesn't really matter much which option you select.

However, if the share price is less than $4.67, then 15% of that value is less than $0.70 and you'd be better of taking the cash.  On the other hand, if the MFS share price is greater than $4.67, then you would be better off accepting the full stock option.

So, $4.67 is the tipping point in this situation.  (It is not, as you imply, $4.25).

By the way, the last traded price for shares in MFS was $4.19.  In this case it would be advisable to accept the part cash option for the merger.  (Value = $4.19 + $0.70 = $4.89).  Ah, but here is a nice surprise.  SEL is paying a special dividend along with the merger of $0.15.  So the total value of a share in SEL is now $5.04, (assuming, of course, a value of $4.19 for MFS).

The post-merger value for SEL shares ($5.04) represents a 7.9% premium on the last traded price ($4.67).  It is just about enough motivation for me to set up a margin loan.


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## Ken (17 November 2006)

sel share price dipped to 4.52.

are they getting the wobbles on the merger!  me thinks buy sel...


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## Nudibranch (29 November 2006)

MFS announced today that they control over 50% of SEL stock.  The merger is clinched.  MFS stock is currently valued at $4.13.  If you elected, as I did, to accept the offer of 1 MFS stock for each SEL stock held, plus 70c per share bonus dividend, then SEL stock is thus valued at $4.83.  (And this is a significant premium over the current SEL stock price of $4.40 - almost 10% to be made, even at this late stage!)


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## scsl (29 November 2006)

Nudibranch said:
			
		

> MFS announced today that they control over 50% of SEL stock.  *The merger is clinched*.  MFS stock is currently valued at $4.13.  If you elected, as I did, to accept the offer of 1 MFS stock for each SEL stock held, plus 70c per share bonus dividend, then SEL stock is thus valued at $4.83.  (And this is a significant premium over the current SEL stock price of $4.40 - *almost 10% to be made, even at this late stage!*)



I agree, should now be a matter of time before the transaction goes through. 

I'm surprised why throughout the offer period and even now, arbitrageurs have not bid up S8 shares so that there is not so much of a premium? I can understand that they may have had doubts about the merger being successful, but surely a 10% premium is quite considerable.


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## Nudibranch (29 November 2006)

Thankyou for responding SCSL, I am glad to hear from you.  It is re-assuring to hear from another investor who is surprised by the continuing discrepency between the current SEL stock price and its corresponding "post-merger" value.

Newbies would be well advised to read about how an arbitrageur  tries to make money in the market.  Then, perhaps, take a look at the situation here with SEL and MFS and think about exploiting it.  (After I have bought a little more SEL, perhaps..?)


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## scsl (6 December 2006)

Nudibranch said:
			
		

> The merger is clinched.
> 
> (And this is a significant premium over the current SEL stock price of $4.40 - almost 10% to be made, even at this late stage!)



It's now well and truly clinched - acceptance by Challenger today to hand over its 50.1% holding of convertible notes should see remaining offers for S8 shares, options and convertible notes promptly accepted. 

It would have sure been a quickfire profit had I decided to have a go at arbitrage. In just 6 trading days, 15% could have been made if I had bought S8 shares. (In the same period, a profit of over 10% could have been made on MFS.) 'could' being the key word   
(I hold MFS for the long run, but don't mind opportunities to trade a quick profit using MFS CFDs.)


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## Nudibranch (6 December 2006)

Arbitrageurs have closed the gap between the current SEL sp and its "post-merger" value.

The "post-merger" value, for those unlike SCSL - who has been following developments here closely with me, is at this instant 1.15 X the MFS sp.  (ie. $4.98).  SEL last traded at $4.99.

As well, there is a 15c special dividend on the way too, though this represents just a 3% bonus for holders of SEL stock.

Reflecting, arbitrageurs appear to have been quite slow, or cautious, to move in on this merger deal.  (Even though it is a merger that was recommended by the SEL board).  Perhaps, SCSL, we ought to look for more tidbits on the market like this..?  What has your experience been like in situations such as this?  (Feel free to PM me).


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## scsl (6 December 2006)

Nudibranch said:
			
		

> Arbitrageurs have closed the gap between the current SEL sp and its "post-merger" value.
> 
> The "post-merger" value, for those unlike SCSL - who has been following developments here closely with me, is at this instant 1.15 X the MFS sp.  (ie. $4.98).  SEL last traded at $4.99.
> 
> ...



Yes, opportunities like this don't come up very often. I'm sure there will be traders out there who were able to make a profit out of SEL shares in the period since the takeover was announced, especially the past week. I guess it all came down to the uncertainty that surrounded the takeover. And now, seeing as it's a done deal, the SEL sp is looking more 'normal' - i.e. where it should be.


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