Smartlink Holdings Limited – Tender Offer

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SUMMARY
POTENTIAL BUYBACK ANNOUNCEMENT
On April 4, 2018, Smartlink Holdings Limited (NSEI:SMARTLINK) announced that it intends to initiate an equity buyback. The Company’s Board of Directors will consider a share repurchase program under which, the company will buyback its own shares.

Share Price = INR 89.15

At the time of potential buyback announcement, the terms of buyback i.e. mode of buyback (tender offer vs. open market repurchase), buyback price and size of buyback are unknown. However, we note that Smartlink Holdings Limited purchased shares through tender offer route 1 time in the past, so likelihood of a tender offer is higher.

TENDER OFFER ANNOUNCEMENT
On April 7, 2018, Smartlink Holdings Limited (NSEI:SMARTLINK) announced a tender offer to buyback 5.60 million shares at a buyback price of INR 120.00 per share. This represents a spread of 15.8% over the market price of INR 103.65 per share, as of the announcement date. The proposed buyback shares represents 24.83% of the total outstanding shares of 22.55 million. Given SEBI’s rule of preference to small shareholders who own less than INR 2 lakh worth of shares of the Company, approximately 0.84 million shares are reserved for small shareholders, which represents 15% of the proposed buyback.

Features – Tender Offer – Fixed Price
Share Price = INR 103.65
Buyback Price = INR 120.00
Spread = 15.8%
Buyback Size = 24.8% or 5.60 million shares

RECORD DATE ANNOUNCEMENT
The Company has fixed the record date of May 18, 2018 for the purpose of determining the entitlement and the names of equity shareholders who are eligible to participate in the buyback.

BUYBACK DATES ANNOUNCEMENT
The Company has not announced the buyback dates yet. Please visit this page again for the announcements made by Smartlink Holdings Limited.

RISK-REWARD ANALYSIS
ANALYSIS AS OF TENDER OFFER ANNOUNCEMENT DATE
Share Price = INR 103.65

Based on our research and analysis, the acceptance rate of this tender offer for small shareholders is expected to fall in the 90%-100% range. At the current price level, this represents an expected return between 14.2% and 15.8%. If the share price drops by 5%, the expected return would be between 13.7% and 15.8%. If the share price increases by 5%, the expected return would be between 14.7% and 15.8%. At 100% acceptance rate, the maximum return would be around 15.8%.
Based on the above risk-reward ratio analysis, Smartlink Holdings Limited tender offer appears to be an attractive low-risk arbitrage opportunity for small shareholders.

CONCLUSION = INVEST

ANALYSIS AS OF 3 DAYS PRIOR TO RECORD DATE
Share Price = INR 108.40

At the current price level and above mentioned acceptance rates, an expected return is between 9.6% and 10.7%. If the share price drops by 5%, the expected return would be between 9.1% and 10.7%. If the share price increases by 5%, the expected return would be between 10.1% and 10.7%. At 100% acceptance rate, the maximum return would be around 10.7%.
Based on the above risk-reward ratio analysis, Smartlink Holdings Limited tender offer continue to appear to be an attractive low-risk arbitrage opportunity for small shareholders.

CONCLUSION = STAY INVESTED

ANALYSIS AS OF BUYBACK OPEN DATE
The Company has not announced the buyback dates yet. Please visit this page again for the announcements made by Smartlink Holdings Limited.

 

 

POST-BUYBACK ANNOUNCEMENT & RESULT
The buyback offer has not closed yet. Please visit this page again for the post-buyback announcements made by Smartlink Holdings Limited.

 

 

REFERENCE LINKS/FILINGS

Tender Offer Announcement
Record Date Announcement

DISCLAIMER & DISCLOSURE
The above post/article should not be considered as a stock recommendation or trading/investing advice in any way. The stock analysis is based on the information publicly available to author, however readers should check the original source of information. Various factors, including personal ownership, may influence or factor into a stock analysis or opinion. At the time of writing this post author may have a financial interest or ownership in the discussed stock or initiate a position anytime in future.