Mota-Engil Africa tender offer/delisting arbitrage

Last year I did a small post on Mota-Engil Africa when it debuted on the Dutch stock exchange. While I never had any intention of investing in the stock I thought it was interesting because it is a good comparable to Conduril, (still) one of my biggest positions. Since getting a listing less than a year ago the stock price of Mota-Engil Africa has languished, hitting a low of €3.40 compared to an IPO opening price of €11.50.

logo2The company has therefore decided that the listing in Amsterdam is a failed experiment and is offering to repurchase all shares at €6.1235. Mota-Engil SGPS SA (MESGPS), the largest shareholder slash parent company of Mota-Engil Africa is not going to tender their shares. With Mota-Engil Africa currently trading at €5.82 you can make a 5.2% absolute return when the transaction closes. The company will hold a shareholder meeting on 23 November and intends to complete the tender before the end of the year.

The €6.1235 offer is significantly above the €3.77 price the shares traded at the day before it was made public, and because MESGPS owns 82% of Mota-Engil Africa shareholder approval shouldn’t be a problem. In addition to this the deal is also supported by the second large shareholder with a 13% stake. This shareholder is going to exchange its stake for newly issued shares in MESGPS, so what remains is a float of just 5% that needs to be bought out. Effectively it’s a very small deal that shouldn’t hit any obstacles. The reason for the relative big spread is most likely the result of the low liquidity of Mota-Engil Africa. But who cares about liquidity when you can tender your shares in roughly two months time? I don’t.

Disclosure

Author is long Mota-Engil Africa

15 thoughts on “Mota-Engil Africa tender offer/delisting arbitrage

  1. Clint Edgington

    Hi! Thanks for this information. Can you help me find the source documents? I’m not familiar with these exchanges- thanks!

    Reply
  2. Ben

    Interesting idea. Any sense for whether there is likely to be withholding tax? Some people have claimed that this can happen with some foreign tenders, but I’m not at all sure how common it is.

    Reply
  3. Brett Kronewitter

    Hi Alpha Vulture, thanks for this great idea. I have tried to locate the ticker- is it EGL? I have been trying to find it at my broker interactive and the symbol EGL seems to be correct although the last price 2.29Eur doesen´t seem to be right.

    Reply
  4. RHS

    As a Mota-engil shareholder at the time, I got ME-Africa shares for free. Like the parent company, I believe ME-Africa shares are worth more than 6 €. If I don’t sell them now and they are delisted from the exchange, can I sell them next year or so? How, where?
    Thanks

    Reply
      1. RHS

        Thanks. This was confirmed by their Investor Relations Department:
        >Delisting will take place on December 10th. The situation you mention is probably not possible since we will use squeezing out mechanisms if needed.
        No idea how that works, but it’s the results that count 🙁
        RHS

        Reply
  5. Martin

    If you are squeezed out instead of having tendered shares, you can then go to court in most countries and challenge the price you are paid for your shares. I don’t know the aplicable Dutch laws.

    But what if you are not squeezed out and the shares get delisted? You then cannot sell easily but must locate a party willing to buy your shares. This is not desirable in my opinion.

    Reply

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