Jagran Prakashan Limited – Tender Offer

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SUMMARY
POTENTIAL BUYBACK ANNOUNCEMENT
On April 17, 2018, Jagran Prakashan Limited (BSE:532705) announced that it intends to initiate an equity buyback on April 27, 2018. The Company’s Board of Directors will consider a share repurchase program under which, the company will buyback its own shares.

Share Price = INR 156.35

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 Jagran Prakashan Limited purchased shares through tender offer route 2 times in the past, so likelihood of a tender offer is higher.

TENDER OFFER ANNOUNCEMENT
On April 27, 2018, Jagran Prakashan Limited (BSE:532705) announced a tender offer to buyback 15.00 million shares at a buyback price of ₹ 195.00 per share. This represents a spread of 17.9% over the market price of ₹ 165.35 per share, as of the announcement date. The proposed buyback shares represents 4.82% of the total outstanding shares of 311.41 million. Given SEBI’s rule of preference to small shareholders who own less than ₹ 0.2 million worth of shares of the Company, approximately 2.25 million shares are reserved for small shareholders, which represents 15% of the proposed buyback.

Features – Tender Offer – Fixed Price
Share Price = INR 165.35
Buyback Price = INR 195.00
Spread = 17.9%
Buyback Size = 4.8% or 15.00 million shares

RECORD DATE ANNOUNCEMENT
The Company has fixed the record date of June 15, 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 announced the buyback open and close dates to participate in this tender offer. The buyback window for putting instructions opens on July 10, 2018 and closes on July 23, 2018.

RISK-REWARD ANALYSIS
ANALYSIS AS OF TENDER OFFER ANNOUNCEMENT DATE
Share Price = INR 165.35

Based on our research and analysis, the acceptance rate of this tender offer for small shareholders is expected to fall in the 65%-100% range. At the current price level, this represents an expected return between 11.7% and 17.9%. If the share price drops by 5%, the expected return would be between 9.9% and 17.9%. If the share price increases by 5%, the expected return would be between 13.4% and 17.9%. At 100% acceptance rate, the maximum return would be around 17.9%.
Based on the above risk-reward ratio analysis, Jagran Prakashan 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 159.55

At the current price level and above mentioned acceptance rates, an expected return is between 14.4% and 22.2%. If the share price drops by 5%, the expected return would be between 12.7% and 22.2%. If the share price increases by 5%, the expected return would be between 16.2% and 22.2%. At 100% acceptance rate, the maximum return would be around 22.2%.
Based on the above risk-reward ratio analysis, Jagran Prakashan 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
Share Price = INR 131.90

At the current price level and above mentioned acceptance rates, an expected return is between 31.1% and 47.8%. If the share price drops by 5%, the expected return would be between 29.3% and 47.8%. If the share price increases by 5%, the expected return would be between 32.8% and 47.8%.
Based on the above risk-reward ratio analysis, Jagran Prakashan Limited tender offer continue to appear to be an attractive low-risk arbitrage opportunity for small shareholders.

CONCLUSION = PARTICIPATE

POST-BUYBACK ANNOUNCEMENT & RESULT
On July 23, 2018, Jagran Prakashan Limited (BSE:532705) announced the final results of the buyback. A total of 7.13 million shares were tendered by small shareholders, out of which 2.25 million shares were accepted. Therefore, the actual acceptance rate for small shareholders turned out to be approximately 32%. The share price decreased by 19.9% since the tender offer announcement, which includes 10.3% decrease between the tender offer announcement and record date, and 9.6% decrease between the record date and closing date.

Share Price = INR 132.45

Given we decided to INVEST at the time of tender offer announcement, decided to STAY INVESTED at the time of record date and decided to PARTICIPATE at the time of buyback open date, the net realized return was -8.0% over a span of 87 days, which is equivalent to an annualized return of -29.4%.

RESULT = LOSS
RETURN = -8.0%
DURATION = 87 days
ANNUALIZED IRR = -29.4%

REFERENCE LINKS/FILINGS
Potential Buyback Announcement
Tender Offer Announcement
Record Date Announcement
Buyback Dates Announcement
Post Buyback 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.