Buyout disappoints Street

Jan 17, 2006 4:54 AM

There was a loud groan from the investment community last week when its was announced that GTECH Holdings Inc. (GTK) was being acquired by an Italian company for $4.8 billion.

The offer worked out to $35 per share, a 5% premium over the previous day’s trading range. Investors had been looking for a share buyout of somewhere between $38 and $40 per share.

Cause of concern among some investors was the explanation of the takeover.

"It looked to be a direct takeover, and not a management takeover as had been expected since the announcement that management was working with the investment firm of Goldman Sachs to effect a buyout," said one analyst.

"Then we found out that the top GTECH insiders, Bruce Turner, the CEO, and Jaymin Patel, the CFO, would be staying on in the top positions with the combined companies," he added.

Instead of rising in share price following the announcement, the GTK stock fell into a trading range barely higher than $33.

"To sum it up," added the analyst, "we are disappointed with the takeover premium."

Longtime holders of GTECH shares have been quick to point out that when Turner took over leadership of the company some four years ago, the shares were selling in the high teens.

And, since the buyout rumors began last March, the share price has risen from somewhere around $23 to the $33 available today.

Lottomatica, the Italian lottery operator, is a subsidiary of De Agostini.