We recommend buying A2B Australia Ltd (A2B). The company is the operator of 13cabs, Silver Service, and Cabcharge.
On 20th Dec last year, A2B received a takeover offer from ComfortDelGro, a Singapore-based company. ComfortDelGro is one of the world’s largest transport groups and already has a 9.25 stake in A2B.
Even before the takeover was announced, A2B was finalising the sale of its property assets for $105 million and intended to return the proceeds to shareholders as a fully franked dividend. The subsequent takeover means we can collect the dividend and franking credits and cash out of the remaing part of the business for a nice overall profit. It effectively de-risks the entire position.
The takeover has the customary conditions of regulatory approval (should not be a problem with all the competition in the space from the likes of Uber), court approval (no problem here), and shareholder approval. Shareholder approval is where takeovers can sometimes run into problems. But this does not look to be a problem with Sandon Capital, with an 8.4% stake saying they will vote in favor and a recommendation from the board for shareholders to accept the offer.
How do the numbers stack up
Buy A2B shares at the current market price of $2.12. Ex-dividend $0.60 with $0.257 franking on 12th Jan with a payment date of 30th Jan. The remaining capital amount of the takeover, $1.45, is paid in mid-April. The table below better explains the outcome. We can make an 8.83% return on funds invested in about three months if the company takeover is finalised as per the timetable published by the company.
The trade table is based on trading 5,000 shares but you might consider buying more shares than this.
TRADE ACTION
Number of shares: 5,000
Entry: Buy up to $2.12
Stop Loss: No stop loss
Target: No target price