“Bonus savings account” with Sky Deutschland (ISIN DE000SKYD000) voluntary tender offer
Ruppert Murdoch is reshuffling his empire. Today he announced that BskyB, his British carrier has bought the 21st Century Fox 57% stake in German broadcaster Sky Deutschland.
Under German rules, once you transfer more than 30%, you have to make an offer to all other shareholders as well. This is from the offical web site:
Offer to minority Sky Deutschland shareholders
Following the agreement to acquire 21st Century Fox’s 57.4% stake in Sky Deutschland, BSkyB has announced that it will launch a voluntary cash offer to Sky Deutschland’s minority shareholders at €6.75 per share. There is no minimum acceptance condition as BSkyB believes it can realise the advantages of closer collaboration with Sky Deutschland and support its continued growth and development with the 57.4% stake it is acquiring through this transaction.
Although no details have been published yet, I think the likelihood of this going through is very high. Consequently, the stock now trades at 6,75 EUR.
However I find this quite interesting because if you buy the stock now, you get a free put option, as you will be able to tender the stock into the offer at some point in time. Depending on the time horizon, this option is worth between 4,5-8% (30-90 days). I don’t think that there will be a higher offer or something, but based on the historical volatility there is a good chance that we see slightly higher prices. Effectively it is a 0% savings account (quite attractive these days) with a bonus component.
Of course you cannot sell the option directly, but you can buy the share and make a pretty one sided bet on higher prices until the offer expires. At current prices there is no downside risk. A more sophisticated investor could buy the stock and sell a call in order to monetize the put option.
It is to a certain extent quite similar to the FIAT case but in my opinion with less execution risk.
Just to be on the safe side: I would not buy Sky Deutschland outright, this is a pure “special situation” investment.
For the portfolio, I will allocate a 2,5% position at current prices to this special situation, my return target is 5% within the next 30-90 days.
DISLAIMER: This is not a free lunch, of course there are risks which I haven’t mentioned or though of. But to me it looks like a pretty good risk/return progile.