Mixed shares/cash/CVR offer for Ladbrokes Coral (LCL)

[PinkDalek]

...
I expect that the resulting value for the capital loss attributable to the cash element will be accurate enough to guide my end of year CGT sales. I will then revise my calculations when the official values are available. It does not matter much if I am left with a few pounds of unused CGT allowance, or end up paying tax at 10% on a few pounds over-run. Having to rush my CGT sales on the last day of the financial year would be worse.

I don't think it has been mentioned yet but you anticipate receiving cash in 2017/18 in the region of £700. As this is less than £3,000 (and less than your section 104 pool of about £8,600) you could adopt the small cash disposal option as briefly described here:

https://www.gov.uk/guidance/capital-gai ... s-and-cash

The impact should be that you are treated as making neither a capital gain nor loss in 2017/18, your new holding would have a reduced section 104 pool of about £7,900 and you won't need to worry about last minute disposals/calculations etc should that suit you.

Extract from the link:

Shares and cash

If the company taking over gives you cash and shares you may have to pay Capital Gains Tax on the cash you get.

If you get a small amount of cash

You don’t pay Capital Gains Tax if both of the following apply:

you get less than £3,000 or an amount less than 5% of the value of your shares in the company, valued just before the takeover

the cash you get is less than the cost of your original shares

When you sell or dispose of your new shares and work out your capital gain your allowable cost will be the cost of the original shares less the amount of cash you get. ...

[GeoffF100]

Yes, I had considered that. Currently, I have a capital loss of about £5K. I expect to receive about £700 cash, with a capital loss of about £1K attributed to it. In effect, I have two options:

(1). Add about £1K to this year's CGT allowance, and subtract the same amount from my base cost.

(2). Receive £700 "tax free" and subtract £700 from my base cost.

If I take option (2), my base cost will be £300 more that it would be with option (1), but I lose £1K of "allowance" this year. Overall, I will have washed out £700 less of capital gain. A counter argument is that I do not really need an extra £1K of "allowance" this year, but £300 off my base cost might save me money in a future tax year. Nonetheless, the failure to wash out the additional £700 of capital gain may cost me money in a future tax year too. Option (1) appears to win.

As far as convenience is concerned, I do not think I have a big problem. if I wait until the Effective Date (28 March 2018), I still have plenty of time to do my end of financial year trading. I will look at my account on the morning of the Effective Date. It should show my new share holding, and might even show the CVRs with a price. If all else fails, I can repeat the calculation above with the closing prices of LCL and GVC on the previous day. That should be reasonably accurate, and I can revise my calculations using the official numbers when they arrive.

I have to say that this corporate action is a bit of a pig. It is up there with Vodafone's disposal of Verizon. I do wonder how many private investors manage to cope with it.

[Bouleversee]

Latest update from Investegate re EGM approval:

https://www.investegate.co.uk/gvc-holdi ... LC%20Alert

The s.p. has been going the wrong way so I still haven't sold.

[GeoffF100]

Thank you for that. The price is slightly lower than when I posted on 24th February, but the GVC price has gone up. Taking offer has become more attractive. The CVRs are now worth much less.

[Bouleversee]

You probably saw this announcement about GVC's results:

https://www.investegate.co.uk/gvc-holdi ... LC%20Alert

and also heard about their purchase of a 51% stake in Crystalbet.

It's hard to keep up with all the developments in the takeover activities involving several of my holdings. Another reason for buying ITs.

[GeoffF100]

I must admit that I tend not to follow my shares. GVC has certainly been a growing company, but, as I have said, that does not necessarily mean that they will continue to grow. Nonetheless, I am very happy to hold them.

The relative price movement between GVC and LCL is just a reflection of less optimism about the government's review of Fixed Odds Betting Terminals.

[Bouleversee]

I sold at £1.6891 first thing this morning to avoid being left with a very small in a holding in a company I know nothing about and wouldn't want to add to or at this moment have the ISA capacity to do so. It will free up a bit of cash to add to something I prefer.

[Bouleversee]

I've just read this in ADVFN's morning markets bulletin:

"William Hill and Ladbrokes Coral, it is being reported in the Financial Times, are being investigated by the FCA for creating a false market in their shares by making public findings of review about possible curbs to fixed odds betting terminals. The pair were said to have promoted a doomsday scenario for betting shops if the government presses ahead with curbs on FOBT machines."

I can't quite get my brain round this. Why would they want to do that and isn't it right that shareholders should be aware of the possible curbs? I thought it was out in the open anyway.

[Paultry]

Bouleversee

A doomsday news article appeared in last Saturdays's Telegraph emphasising the job losses at betting shops. I've not seen the article to which you refer but the inference would imply that the share price is being depressed if anything.

I hope a few posters appear who know a lot more than I.

Paul

[Bouleversee]

Paultry -

Yes, but I don't understand why they would want it to be depressed unless to discourage people selling in the market rather than accepting the takeover terms.

[GeoffF100]

Perhaps the FCA thinks that the directors are trying to depress the price of the shares so that they can buy them on the cheap.

[Bouleversee]

Yes, could be that though why would they want to at this stage. I'm not sufficiently devious to understand all these machinations.

[mc2fool]

With the iWeb deadline looming I figured I'd better work out what I'm going to do with my LCL holding. Have I got this right....?

Current prices (Friday's close): LCL 170.45, GVC 955. So, using those figures and ignoring spreads...

a) If I take the simple option and just sell my LCL holding, I'll get 170.45 per LCL share, and that's it (no CVR possibility).

b) If I take Option 1 (Basic Offer), I'll get 32.7 cash + 0.141 of a New GVC share, worth 0.141*955=134.655, for a total value of 167.355 per LCL share.

c) If I take Option 2 (Share Alternative), I'll get 0.178 of a New GVC share, worth 0.178*955=169.99 per LCL share.

d) If I take Option 3 (Cash Alternative), I'll get 155.793 per LCL share.

With b, c & d I also get CVRs worth anything from zero to 42.8 plus time value which will mature in Sep-2019, and c & d are subject to being fully satisfied.

Yes?

[GeoffF100]

Assuming your numbers are correct, if you take the Basic Offer, and the corporate action takes place at those prices, each CVR will be worth 170.45 - 167.355 = 3.095, so the market is currently pessimistic about the result of the government's review.

The current GCV share price is currently higher than 873. Nobody should take the Cash Alternative at that price. However, the GVC share price could still fall below 873. Since the last date for elections for shareholders on the register is later than iWeb’s last date, it is safest to opt for the Basic Offer, which I have done.

[mc2fool]

The current GCV share price is currently higher than 873. Nobody should take the Cash Alternative at that price. However, the GVC share price could still fall below 873. Since the last date for elections for shareholders on the register is later than iWeb’s last date, it is safest to opt for the Basic Offer, which I have done.

Sorry, where does 873 come from?

Safest to me looks like selling the LCL holding in the market....

Edit: ah, ok, 873 is (155.793-32.7)/0.141. Got it.

[GeoffF100]

The other important point is that there is only a fixed amount of GCV shares and cash available, so in order for you to do better than the Basic Offer, someone else has to do worse. Since most of the shareholders will be professionals, you would not be likely to get many more shares, if any, by opting for the Share Alternative. If the GVC price falls you could be lumbered with more GVC shares at a premium price.

There is no stamp duty on GVC shares, so if you have a large holding with no CGT issues, it may be worthwhile to sell LCL and buy GVC, particularly if you think that a CVR will be worth less than 3.095p.

[Paultry]

Geoff100

If I elect for option 2, all GVC shares, but there are insufficient to meet demand, do I automatically revert to option 1? Or do I receive just a few GVC shares and the cash entitlement of option 3?

Is my thinking flawed?

Paul.

[GeoffF100]

Geoff100

If I elect for option 2, all GVC shares, but there are insufficient to meet demand, do I automatically revert to option 1? Or do I receive just a few GVC shares and the cash entitlement of option 3?

Is my thinking flawed?

Paul.

At the current GVC share price, nobody who knows what they are doing will choose the Cash Alternative, because they would be selling their GVC shares at a discount. If nobody opts for the Cash Alternative, the Basic Offer and the Share Alternative will have the same outcome. However, a few private investors might be careless enough to opt for the Cash Offer, in which case you might get one or two GVC shares at a discounted price of 873p. The risk is that the GVC share price will fall below 873p after you have made your election for the Share Offer, but before the deadline for shareholders on the register to make theirs.

[GeoffF100]

However, if you want more GCV shares and are willing to pay 873p for them, you may not care if the price falls and you could have bought them more cheaply later. In my case, it is helpful to know how many shares I am getting to plan my CGT sales, and I am unlikely to get many more anyway.

[GeoffF100]

The limit on the FOBTs may be higher than some had feared:

http://www.bbc.co.uk/news/business-43455480