It seems Betfair fancies the odds of a better deal, as it has turned down a £912m takeover offer from a consortium led by CVC Capital Partners (which owns Formula One). It’s arguably an odd decision given Betfair’s current share price, however.
CVC’s offer values each Betfair share at 880 pence, which consitutes a 9% premium on its actual share price last thing on Friday, as well as being a massive 25% higher than when CVC last week expressed an interest in making the acqusition.
Furthermore, the rejection will come as a surprise to some given the troubled period Betfair has gone through recently. The future of the company is uncertain because several years of regulatory headache since its 2010 IPO have made international expansion difficult.
In the last 12 months alone it has pulled out of Germany and Greece, and there is talk of it leaving Cyprus and Russia too, which would reduce its revenues by about a quarter. Its share price has lost about half of its value since the flotation.
Betfair has been a troublesome position for anybody who bought shares when it first floated back in 2010. Its share price never returned to the £13 at which it began, and the promise of the firm being gambling's answer to Facebook has never really materialised. Why? Well it was a clever idea (stripping out the bookmaker and allowing customers to bet directly against each other), but now it has morphed into being a bookmaker too, in an already crowded market with long-established incumbents.
It’s worth pointing out that with a much broader and established international footprint of assets, CVC might have been able to pull some strings and make the expansion happen a bit faster. Nevertheless, in a statement, Betfair’s board said that CVC’s proposal ‘fundamentally undervalues the company and its prospects, and is highly conditional’.
Chairman Gerald Corbett added: ‘We will provide an update to the market on 7th May 2013 to set out the good progress we are making in the implementation of our strategy, including cost efficiences and our recent trading performance.’
No doubt many investors will see a CVC acquisition as a good opportunity to cash in, and given the rough ride in the last couple of years, they could take some persuading otherwise…