Corbett’s right not to capitulate

David Hellier
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Gerald Corbett, former chairman of anything from Railtrack to Woolworths, as well as the condoms maker SSL, is a man well used to being at the centre of a storm. So it is perhaps no surprise that his tenure at Betfair, the gaming company, has coincided with an unwelcome takeover approach, putting him in the limelight again.

Yesterday Corbett and his board roundly rejected an 880p possible offer from the private equity group behind Formula 1, CVC, on the grounds that it undervalues the group.

Those who have been shareholders in Betfair, which specialises in peer-to- peer betting, have endured a bumpy ride since it floated in October 2010 and might have expected the board to roll over at the first sniff of an offer.

After floating at 1300p, the shares briefly rose before falling alarmingly. At one point they traded below 600p.

CVC argues that its bid, which is conditional on board approval, due diligence and financing, is pitched at a 26 per cent premium to the pre-leak trading price of Betfair shares. It also says its 880p level represents a 29 times earnings multiple.

So should shareholders be clamouring to take up this offer? Probably not. There’s enough evidence to suggest the new management team, led by former Paddy Power executive Breon Corcoran, has enough up its sleeve to push the shares further forward even if CVC’s interest wanes on the back of the rejection.

Corcoran is promising an update on his strategy on 7 May, at which he will be expected to detail further cost cuts as well as revenue generating opportunities.

Peel Hunt’s analyst Nick Batram says we shouldn’t rule out rival bid interest and suggests investors could even get close to 1100p in the end.