14. MBB SEE: Odd lot opportunity
Odd lot arbitrage opportunity due to tender offer for 10% outstanding shares buyback
I first learned of MBB SE from Michael Gielkens of Tresor Capital a year or so ago when he mentioned it to me as a quid pro quo on an idea I suggested to him (fintwit is a beautiful space). Tresor Capital owns some shares of MBB SE, and one can find detailed information on MBB history and valuation on their website (an analysis of MBB is not the subject of this note). I own none, however. Not because anything is wrong with the company, but because I still can’t quantify the management goals and make a meaningful estimate of their value. My gut tells me that I am making a potential error of omission here, but my process still does not allow me to invest into a holding company based on the sum of the parts’ analysis, when there is no substantial track record of underlying shareholder creation. Simply put, MBB is not Berkshire or Brookfield.
But what I can quantify is that come middle of March, MBB SE will pay EUR 96 per share for those shareholders choosing to part with their common stock.
Tender offer
On January 31, 2024, MBB announced the following buyback:
Share buyback 2024
On 31 January 2024, the board of MBB SE resolved to make use of the authorization granted by the Annual General Meeting on 12 June 2023 to acquire treasury shares in accordance with Section 71 (1) No. 8 AktG and to offer shareholders the buyback of up to 571,639 treasury shares (approx. 10% of the share capital) as part of a voluntary public buyback offer addressed to all shareholders.
The share buyback will take place at an offer price of € 96.00 per share. The period for acceptance of the offer begins on 05 February 2024 and ends on 04 March 2024.
MBB is no stranger to buybacks. According to the information they provide on their investor relations page, buybacks were executed in:
January 2012–144,201 shares for an average price of EUR 6.93 (2.18% of outstanding shares) though the open market.
March 2015–13,225 shares for an average price of EUR 23.55 (0.2% of outstanding shares) through the open market.
April 2019–646,024 shares for a price of EUR 96 (9.79% of outstanding shares) through a tender offer up to 646,775 shares. Shareholders tendered 5,792,584 shares in total. Initial price offered was EUR 89, while tender offer was later changed to EUR 96. Below are the most important definitions of this tender offer.
March 2020 (when world was collapsing)–8,499 shares for an average price of EUR 49.91 though the open market.
June 2021–85,416 shares for an average price of EUR 132.56 through the open market.
February 2022–42,640 shares for an average price of EUR 121.65 through the open market.
February 2023–87,805 shares for an average price of EUR 79.74 through the open market.
Current, February 2024 buyback, resembles April 2019 tender offer with one important difference. While the April 2019 offer defined proportional rounding to the nearest round number in case of oversubscription and exclusion of fractional shares, language in the current offer is different.
As in 2019 offer, proportionality is defined as a rule of precedence in case of oversubscription (likely scenario in my opinion).
However, the section highlighted above defines additional rules for tender execution.
The mentioned authorization of the Annual General Meeting specifies the option to have preferential acceptance of small quantities of up to 100 shares, which has now been elected in the 2024 tender offer.
What this should mean is that in case one tenders his odd lot through one broker, in case of oversubscription his whole odd lot will be repurchased at EUR 96. MBB currently (February 03, 2024) trades at EUR 94.1, promising 2% over the month and a half holding period, or just above 16% on annualized level.
Personally, I will be picking up some shares through my several brokerage accounts. More importantly, I will be digging through MBB SE again.
Deadlines
The period for acceptance of the Offer begins on Monday, February 05, 2024 and ends on Monday, March 04, 2024, 24:00 CET. By Wednesday, March 6, 2024, 18:00 CET at the latest, the transfers of the MBB Shares tendered for repurchase will be executed. Settlement is expected to occur on the eight working day after this date (March 04, 2024).
Disclaimer and kind request
Before you take any actions based on this article, remember, you are trusting an experimental analysis of an anonymous person. However, if you like it, and you think it makes sense, feel free to suport my writing which I do in my spare time, while working a full time job. If anything you pick up from my substack or Twitter account results in you earning a reasonable profit, keep the karma going. Subscribe, even for a month.
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Best of luck to all of us! 🍀
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"MBB SE announces buyback of 393,522 shares or 6.9% of the share capital
Berlin, 07 March 2024 - MBB SE (ISIN DE000A0ETBQ4) received tenders for 393,522 shares as part of
its voluntary public share buyback offer by the end of the acceptance period. The shares will be
repurchased in full at a price of €96.00 per share. This corresponds to around 6.9% of the share capital
and a total purchase price excluding acquisition costs of €37.8 million. The settlement and thus the
purchase price payment to the custodian banks is expected to take place on 13 March 2024.
The offer comprised the repurchase of up to 571,639 treasury shares or 10% of the share capital, with
the offer period ending on 4 March 2024. Next to free float shareholders, one of MBB's two major
shareholders, Gert-Maria Freimuth, also tendered a significant number of shares. Major shareholder and
Executive Chairman of MBB, Dr. Christof Nesemeier did not participate in the buyback.
Against the background of the extraordinary substance and the high cash flow in the Group, MBB is
aiming to increase the value per share with the buyback and still has sufficient financial resources for
organic growth and growth through acquisitions."
Link to announcement: https://www.mbb.com/fileadmin/templates/downloads/news/240307-MBB-Share-Buyback-Offer-2024-Result_EN.pdf