PointsBet (PBH AU): Betr's "Superior Offer"? In An Alternate Reality

• BETR Entertainment (BBT AU) has now tabled an all scrip off-market offer for PointsBet (PBH AU) - no minimum acceptance condition - which they consider superior to MIXI (2121 JP)'s.

• Really? 3.81 new betr shares is currently equivalent to A$1.143/share versus MIXI's A$1.20/share all-cash Offer. Terms backed out just A$1.086/share at the start of trading last Friday.

• PointsBet quite rightly states the obvious - betr's Offer is materially below MIXI's.

PointsBet is an illiquid stock. If that's not your bag, look away now.

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MIXI's initial Offer is discussed here: PointsBet (PBH AU) Rebuffs BlueBet And Enters Offer With Mixi (2121 JP).

betr's revised Offer and the granting of DD is here, along with takeaways from MIXI's Scheme Booklet: PointsBet (PBH AU)/betr (BBT AU): Mutual Due Diligence Proposed

And MIXI's bump was discussed in PointsBet (PBH AU): MIXI Bumps To A$1.20. betr's DD Continues and MIXI's off-market Offer (if the Scheme fails) is discussed in PointsBet (PBH AU) [Further] Backs MIXI's Offer, Rejects betr's

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The Trade:

• If small, illiquid arbs are your thing - and not already in - get involved below MIXI's terms.

• betr will continue to argue their case. But without a full cash offer at ≥ A$1.20/share, PBH is unlikely to back terms.

• Ratcheting up the scrip ratio will only apply downward pressure on betr's stock.

• Without PBH's Board recommending betr’s Offer, if and when ACCC sign off, betr won’t get 90%; which means minorities get less cash, more scrip.

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The NEW News

• betr's has made an all scrip off-market offer. betr will offer 3.81 new shares for every PBH share.

  • betr reckons this is worth A$1.22/share based on betr's recent subscription price of A$0.32/share, and is therefore superior to MIXI's A$1.20/share Offer, in cash.

  • This is a disingenuous conclusion. betr is currently trading at $0.30/share (worth A$1.143/shares under the scrip terms); but was trading at A$0.285/share at the opening bell last Friday (worth A$1.08585/share).

  • In prior rejection announcement, PBH stated that "Since the announcement of Betr's Offer, its value has varied between $1.04 and $1.14 per PointsBet share as a result of changes to the Betr share price."

  • I'm not sure who betr is trying to convince with this factually incorrect statement.

• The selective buy back. Concurrent with the off-market offer, betr "will provide PointsBet shareholders with the opportunity to receive cash of $1.22 for each PointsBet share (the Buy-Back). The Buy-Back will be conducted after the Offer has closed and will be capped at $80 million, unless betr obtains a relevant interest in at least 90% of the shares in PointsBet and proceeds to compulsory acquisition, in which case betr has secured funding to increase the Buy-Back pool to $200 million".

  • A$80mn divided by A$1.22/share gets you 65.57mn shares, ~20% of shares out, or 25% of shares not held by betr.

    • So arguably betr's terms are 25% cash, 75% scrip, IF betr's Offer falls short of the 90% compulsory acquisition threshold.

  • A$200mn divided by A$1.22/share gets you 164mn shares, ~49% of shares out, or 62% of shares not held by betr.

  • The buyback needs betr shareholder approval. An irrevocable undertaking to vote in favour of the buyback would have been reassuring/welcome.