Why Gamma's Stock Trades Above Its Agreed Takeover Price

The most useful thing to read about Gamma Communications this week is not a headline. It is a two-page form, filed every morning, with the throat-clearing title "Form 8.5 (EPT/RI)." The version dated August 28, filed by Investec — Gamma's own joint broker — shows the firm bought 115,628 shares of Gamma and sold 115,628 shares of Gamma, all of them priced between 1,151 and 1,160 pence.

Bought exactly what it sold, in equal amounts, at prices above the agreed takeover price. That is weird. And once you see it for what it is, it tells you almost everything about where this situation stands.

The offer, and the gap

On September 1, Gamma agreed to be taken over by Epiris, a London private-equity firm, through a newly created vehicle, Bradbury Bidco. Shareholders would get 1,120 pence in cash for each share — about £1,015 million for the equity, or £1,079 million once debt is counted, a premium of roughly 53% over Gamma's undisturbed closing price of 732 pence on April 7, the day before the offer period began. The board unanimously recommended it, directors holding about 0.13% of the shares signed irrevocable undertakings to vote for it, and it is being done as a court-sanctioned scheme of arrangement, with completion targeted for the first half of 2027.

Now the puzzle: the offer is 1,120 pence, but the stock is trading above it — around 1,180 pence on September 7. That should not happen in a clean, done deal. In a finished cash takeover, shares trade a hair below the offer price, because you are waiting months for your money and hoping regulators approve.

It is not a done deal. It is a round in an auction. On September 7, The Sunday Times reported that Dutch private-equity firm Waterland is preparing its own offer at a price above Epiris's £1.08 billion valuation, and Gamma's shares rose 2.1% to 1,180 pence on the news. The company has also suspended its share buyback and dividend to keep the table clean while bidders circle.

So the basic point is this: the headline offer price is not what you would be paid, and it is not a cap on the stock. The market price sits above 1,120 pence because investors collectively believe a higher bid is coming, and the size of that gap is a rough vote on how much richer the final price will be, net of the risk that the whole thing collapses.

Why the boring form is the interesting document

Now back to the form. During a takeover offer period, the UK Takeover Code makes every "exempt principal trader" — the jargon for a bank or broker that acts as a market maker in the shares — publicly disclose all of its daily dealings in the target. The reason is a conflict-of-interest problem that is built into the situation: a broker that advises the target, or funds a bidder, also sits in the middle of the trading in the stock, and it knows things. The cleanest possible rule is also the simplest: if you make a market in these shares, publish everything you did, every single day.

That is what keeps a market in Gamma open and liquid during the fight. A retail holder can still sell, and everyone can see whether a broker is quietly dumping shares or hoarding them on the back of information it should not be trading on. The form is the transparency plumbing that lets a contested takeover run in public rather than behind closed doors.

The perfectly balanced buy-and-sell in Investec's August 28 filing — 115,628 in each direction — is the signature of a genuine market maker rather than a position-taker. It is not Investec betting the stock rises; it is a bank buying from one client and selling to another, skimming a spread and refusing to hold the risk overnight. That may sound like trivia, but it is the market's quiet confirmation that Gamma shares are still trading normally, with real liquidity, in the middle of a takeover war.

What the gap is telling you, and the risk embedded in it

For an ordinary investor, the practical lesson is straightforward, and it cuts against the instinct to chase a hot takeover. Buy Gamma at 1,180 pence today and the bidding war stalls, and the 1,120 pence offer that completes pays you 1,120 pence — a loss of about 5%. The premium you were sure was coming only shows up if someone actually bids it.

There is also a clock. Completion is not until the first half of 2027 — months away — and in between the scheme needs the approval of at least 75% in value of the shareholders who vote, antitrust clearance in Germany and Austria, and foreign-investment approvals in five countries including the UK. Each of those is a chance for the price to move, or for the deal to die. If it dies, you are left holding Gamma as a standalone business.

On that point the fundamental picture does some work. Gamma is one of Europe's larger providers of business communications — the cloud telephony, SIP trunking, and other plumbing that carries corporate phone traffic — and its numbers are respectable: £330.0 million of revenue in the first half of 2026, up 4%, with gross profit of £178.1 million and strong cash conversion. Ares is providing the debt funding for the buyers, and the 53% premium is what a private-equity bidder decided the recurring contracts and cash flow were worth once it no longer had to share them with public-market volatility.

The machine, in short, is a cash auction wearing the clothes of a done deal. The agreed offer is a floor for the current round, not a cap on what a determined rival will pay; the disclosure forms are how you get to watch market makers see it in real time; and the real question for anyone tempted to buy above the offered price is whether the ever-promised higher bid actually arrives before the 2027 finish line. It very well might. That is the whole reason the stock trades at 1,180 pence. But a "might" priced into the stock is not the same as cash in your account, and the difference is exactly the 5% you are risking.