Australian Investment Blog

ASX:GTY 13/06/2018

Gateway (GTY) takeover – hold or fold?

Stock

Gateway Lifestyle (GTY) $2.10 as at 13/06/2018

Event

The residential park and retirement community developer received a takeover bid from rival Hometown today at $2.10/share – 14.7% premium to yesterday’s close price ($1.83). While the bid is still dependant on a due diligence process, it seems well supported by shareholders with four large holders of Gateway already being courted by Hometown in supporting the bid. Shareholders have had a rough time in GTY which has fallen from a 12-month high of $2.24 in November last year, to a low of $1.68 last month following a series of earnings and outlook downgrades with development settlements lighter than expected. Gateway Lifestyle (GTY) Chart Gateway GTY chart

Market Matters Take/Outlook

There are many things to consider when thinking about a takeover particularly given the risk lying in the Gateway business. Recent downgrades could suggest trouble brewing below the surface and Hometown pulling the bid after reviewing the books remains a possibility. In saying that, the offer could attract others to the party (the bid is at a very slim premium – we think the stock is worth around $2 without a takeover premium) and there is the chance that it creates a bidding war - we think that’s a strong possibility. That said, we’re always cautious in a takeover scenario - the recent weakness in HSO and STO after each received takeover bids which failed provide a clear warning!

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