A few weeks after it rejected a buyout from private equity firm CVC Capital Partners, online betting exchange Betfair is considering taking alternative measures, including a $218 million (£140 million) payout to shareholders as a way to defend itself against CVC’s planned takeover amidst growing uncertainty from Betfair’s shareholders regarding the future of the company.
So what’s the best way to appease those unhappy investors?
Put a smile on their faces by returning, for one-time only, their cash. While that option remains on the table, it’s unlikely that Betfair is going to it as a first resort measure. Instead, it’ll keep it close to it’s vest in the event that CVC turns up the pressure and increases its buyout proposal before the May 13 deadline.
A few weeks ago, CVC presented Betfair with a £912 million ($1.4 billion) offer to takeover the company, a proposal the latter shot down, claiming that it “fundamentally undervalues the company and its attractive prospects, and is highly conditional”. A big consideration that led in the rejection of the offer stemmed from Betfair’s belief that it’s slowly building up momentum and is in the process of improving its overall business performance.
“We have a unique business with a market position, profitability, cash flow and prospects that this proposal fails to recognize, chairman Gerald Corbett told StockMarketWire a few weeks ago. “Our new management team are implementing the strategy announced in December 2012 and it is this that will realize value for shareholders. We will provide an update to the market on 7 May 2013 to set out the good progress we are making in the implementation of our strategy, including cost efficiencies, and our recent trading performance.”
That’s still a tall order considering that Betfair’s shares – it stood at £13 a share when it made its stock market debut in 2010 – has fallen dramatically over the years and now sits at 845p per share as of last Friday. But Betfair isn’t just ready to throw in the towel and give up to its shareholders whims. Expect CVC to come up with a new proposal before the May 13 deadline. But don’t be surprised if Betfair issues its own pre-emptive strike before that, one that’s been valued at $218 million.