What happened to Gateway Lifestyle share price?
In early May, investors in Gateway Lifestyle [ASX:GTY] were reeling from a downgrade. Well, not so much a downgrade — more of a deferral.
Gateway operates around 60 residential parks around Australia. It sells manufactured homes to those retiring and/or looking to downsize. While the tenant owns the house, they lease the site in the park from Gateway, typically on a long-term deal.
Due to bad weather delaying construction, and longer settlement times, some houses due to settle in the 2017 financial year, will carry over into the 2018 financial year.
What is happening now?
News of the downgrade saw Gateway’s shares fall from around $2 down to under $1.70, before recovering to $1.80.
Despite the fall, it is now apparent that others have been running the ruler over Gateway’s business. Not just one, but two international investors are fighting to take control of the business.
While residential parks have been around for some time, it is only in the last decade or so that operators have started aggregating them together. With the industry still made up of multiple small operators, further consolidation is now on the cards for the industry.
What will happen next to Gateway Lifestyle?
US based Hometown initially came in with a low-ball $2.10 bid. However, Canadian giant Brookfield came in over the top, bidding $2.30 to take control.
Hometown has now matched that offer, and unlike Brookfield, its bid is not reliant on due diligence. Given that four shareholders control around 17.5% of Gateway shares, they could ultimately decide which company wins control.
With Gateway trading slightly above the latest bid, investors looking to exit could choose to sell their shares on market. That’s if they are confident that no higher bid will emerge. If not, they can sit back and wait to see which bid is successful.
For Money Morning
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