Shares Outstanding: 41.1 million
Market Cap: $1.25 billion
Tender Type: Modified Dutch Auction
Tender Range: $29.50 – $33.00
Tender Amount: $75 million
Twin River Worldwide Holdings, Inc. (TRWH) merged with Dover
Downs Gaming & Entertainment, Inc. on March 26th, 2019. Dover
Downs shareholders received ~.08 shares in the combined company for every share
held of Dover. Twin River operates casinos and racetracks in Rhode Island, Colorado,
and Mississippi. Dover Downs, a wholly owned subsidiary of Twin River, owns a casino,
hotel & conference center, and a raceway in Dover, DE.
On June 25th, Twin River announced a proposed modified
Dutch auction tender offer for their shares with an odd lot priority provision.
They plan on using $75 million to purchase shares at a price no less than
$29.50, but no greater than $33.00 per share. The offer is set to expire at 5:00
P.M. on July 24th, unless the offer is extended or terminated.
In a modified Dutch auction, investors elect a price at
which they will tender their shares within the range given by the company. From
these prices, the company determines the tender purchase price and tenders those
shares that were tendered at or below this price. The risk here is that if you
offer too high a price, your shares will not be tendered. This is also true for
the odd lot priority provision. Holders of 99 shares and less will
automatically be tendered if they elect to tender their shares at or below the
purchase price, or if they elect to tender shares without specifying a purchase
Executive officers and directors do not plan on tendering
their shares. They hold ~2.8% of shares. Standard General, an event-driven
limited partnership, owns ~31.8% of total shares outstanding. They have not
stated whether or not they plan on tendering shares. However, they plan on informing
shareholders about their decision no later than 6 business days prior to the expiration
of the offer (July 18th).
It is worth noting that two other large holders of the
company have been selling their shares. This can give us some insight as to
what price they may elect to tender their shares at. Chatham Asset management
holds 13.4% (5,496,003 shares) of the company. They have sold 438,085 since June
20th at an average price of $30.55. Their lowest sale price was
$30.25. They also sold 50,000 shares in April at $33.00. Solus Ltd. Holds 7.50%
(3,118,225) of the company. They sold 144,183 shares in early April at an
average price of $31.01. Their lowest sale price was $31.00.
Of course, due to the nature of a modified Dutch auction,
the purchase price isn’t determined by the largest shareholders, but rather
those shareholders who offer the lowest price to the company. If the minimum
price of $29.50 is determined to be the purchase price, they will purchase 6.2%
of total shares outstanding. If the maximum price of $33.00 is determined to be
the purchase price, they will purchase 5.5% shares outstanding. Had this been a
larger tender, then the large holders of the stock would surely have more power.
Regardless, it is still useful to see the price where certain large holders
value the company at.
TRWH currently trades at $30.48. Given the small size of the
tender relative to the total amount of shares outstanding (5.5 – 6.2%), it is
likely that the share price won’t be pegged to the tender range. As a smaller
shareholder, this is a good thing, as your shares will not be prorated if you
own less than 100. Unfortunately, there are no options on TRWH to use as
reference for implied volatility up to the expiration date. The implied forward
volatility would be useful in determining the probability of getting in at a
It’s hard to say what the purchase price will be, so I am therefore keeping this on my watch list. This tender offer is also risky in that it can be terminated at any time before expiration if certain circumstances occur (e.g., a 10% drop in market averages, suspension of trading… etc.), so it is probably most prudent to just sit and watch to see if Mr. Market gives you a fat pitch.
Disclosure: No position in any of the securities mentioned in the above article.