SEL - S8 Limited

[Nudibranch]

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.

 

[Ken]

sel share price dipped to 4.52.

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

 

[Nudibranch]

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!)

 

[scsl]

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.

 

[Nudibranch]

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..?)

 

[scsl]

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.)

 

[Nudibranch]

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).

 

[scsl]

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).

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.