31 October 2011 – recommended transaction

Trading in shares in GVC Holdings has recommenced.

On 14 October 2011 it was announced that East Pioneer Corporation B.V. had conditionally agreed to acquire Sportingbet’s Turkish language website, www.superbahis.com, and associated offshore assets from Longfrie Limited, a wholly-owned subsidiary of Sportingbet.  GVC also announced that GVC Sports had entered into a business-to-business agreement with East Pioneer Corporation B.V. to provide support services to enable it to operate the business.  Details of this arrangement have now been finalised, subject to approval from GVC shareholders at an EGM on 16 November.

This is a somewhat complex deal, which does involve some upfront costs being absorbed by GVC.  Ultimately this should see earnings and dividends being enhanced but we feel that the shares are undoubtedly riskier as a result of the deal and will therefore scrutinise developments closely.  For now we rate the shares as a SPECULATIVE BUY, with a view to taking profits at around the 140p level.