- All-cash recommended offer at 412.5p per share
- Offer price represents 33% premium to prior close
- Bidco has secured 39.51% shareholder support
It feels increasingly like UK mid-caps are sitting ducks just waiting to be snapped up by opportunistic private equity groups so news that ten-pin bowling and entertainment group Ten Entertainment (TEG) has agreed a cash offer from Trive Capital is not a big surprise.
The shares jumped 32% to 408p taking the year’s gain to 66% while larger quoted peer Hollywood Bowl (BOWL) saw its shares add 3% to 278p, closing in on all-time highs around 300p.
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If the proposed offer gets the green light it will leave Hollywood Bowl as the only listed company in the space.
The all-cash offer of 412.5p per share equates to a 33% premium to the prior closing price and is 23.3% higher than the all-time high of 334.5p reached in 2020 just before the start of the pandemic.
The offer values Ten at approximately £287 million which implies a multiple of 7.3 times the company’s adjusted trailing earnings before interest, tax, depreciation, and amortisation after rental costs.
Directors of Ten are unanimously recommending the offer and Trive has secured the support of roughly 39.51% of existing shareholders.
These include the largest shareholders Harwood Capital, Slater Investments and Gresham House which own 15.5%, 12.3% and 11% respectively.
The premium offered is in line with the average paid between since 2017 of 35% according to law firm Ashurst.
However, it is well shy of the 60% premium paid on average this year.
WHY IS THE COMPANY SELLING?
In essence management are frustrated with the persistent valuation discount the shares have traded at relative to core peers in the public markets.
In addition, the directors point out that the shares are relatively illiquid making it ‘challenging’ for shareholders to monetise their holdings.
The directors believe the offer ‘presents an opportunity for TEG shareholders to accelerate the crystallisation of a certain value from their investment at an attractive premium, de-risks the return of value and allows full liquidity of their investment in TEG.’
WHAT DO THE EXPERTS THINK?
Investment director Russ Mould at AJ Bell commented: ‘Ten Entertainment is a classic example of stock that has traded on a cheap valuation and delivered decent results yet has remained under the radar of many investors.
‘Given the market hasn’t recognised its true value, it’s no surprise that a private equity-backed vehicle has come along and tabled an offer which looks too good to refuse, hence why the board has recommended.
‘Assuming the takeover completes, it will be yet another loss to the UK stock market which still isn’t replenishing the pot with new IPOs (Initial public offerings).’
Numis said: ‘While clearly a striking premium to close price, these valuation multiples do not look stretched in our view.’
This is the second time TEG has been taken private in 8 years. Having listed on AIM in 2009, Essenden (as it was then called) was taken private in 2015 and two years later it relisted as Ten Entertainment.
Disclaimer: Financial services company AJ Bell referenced in the article owns Shares magazine. The author of the article (Martin Gamble) and the editor of the article (Steven Frazer) own shares in AJ Bell.
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