Current Price – $53
Tender Price – $50 – $56
Upside – 6% or $300
Expiration Date – 23rd of May 2018
No proration for odd lot holders
This is a rather standard dutch tender with odd-lot provision. Shares currently trade in the middle of the pricing range.
CIT is is offering to purchase $500m worth of stock or 7%-8% of the outstanding.
The company carried out far larger tender offer last spring – which ended up being priced at the upper limit. However, this tender was for $2.75bn (5.5x larger) and pricing range was lower at $43-$48. The offer was slightly oversubscribed at the upper limit.
For what is worth, financial performance of the company has also improved over the last year (in terms of revenue and operating income) mostly driven by industry wide tailwinds – all financial companies on average delivered good results over the last year.
Also, after the tender expires, CIT will still have $175m of buyback authorization to be completed by the end of the quarter. Also recent open market buybacks have been carried out at $52-$53/share. From the recent earnings call:
“When added to the $100 million remaining at the end of 2017, we had up to $900 million of capital that can be returned to shareholders through June 2018. In the first quarter we bought back $195 million or 3.7 million shares at an average price of $53.16 per share.
In the second quarter through Friday April 20th, we have repurchased an additional one 1.4 million shares at an average price of $51.86 per share. We intend to return the remaining capital of up to $635 million, inclusive of $25 million originally to be repurchased associated with employee stock plans by the end of June and we’ll continue to review options to return the capital as efficiently and as prudently as possible.”
All in all it is hard to assess (meaning its a pure guess) the likelihood of upper limit pricing, but keeping in mind the info outlined above purchasing odd-lot amount at $53/share and tendering seems more likely to end up in profits than losses.
2 thoughts on “CIT Group (CIT) – Odd Lot Tender Offer – 6% or $300 Potential Upside”
Thanks for this. It also looks like you would collect the quarterly dividend as well since ex date is 5/10.
Tender results released – $54.75 per share with 86.4% proration. I realized $175 gain on this one, albeit selling right before expiration instead of tendering would have resulted in larger gains.