DaVita (DVA) – Odd Lot Tender Offer – 5% Upside

Current price: $58.7

Tender Price: $53.5 - $61.5

Upside: 5% or $280 (if priced at the upper limit)

Expiration Date: 16 of August, 2019

Tender Announcement

 

DaVita launched dutch tender offer with odd-lot provision and currently trades in the upper part of the range ($53.5 - $61.5). The offer is for 12% - 14% of the outstanding shares.

Davita is $10bn market cap company providing dialysis services across United States. It is 25% owned by Berkshire. Management owns 0.7% of the stock and indicated that they will not participate in the offer.

The tender was announced simultaneously with preliminary Q2 results and increased guidance as well as $2bn share repurchase authorization, which will leave another $800m for buybacks after this tender offer. Thus it is not clear if the unaffected price of $56/share still holds (might be higher due to positive events above).

The stock has been volatile lately trading in the range of $43-$60/share following announcement of Q1 results as well as step down of CEO.

Altogether, I do not have strong arguments in favor of upper limit pricing and know even less about DaVita business (which is very exposed to healthcare regulations). Large size of the tender offer (14%), positive Q2 results and remaining buying authorization seem supportive, however recent events and volatility in the stock price might encourage larger shareholders to use the opportunity to exit the position.

1 COMMENT

  1. Terence

    Tender results out early this morning, price on expiry day 8-16 about $58, 22m shares tendered, ALL shares taken at $56.50, coincidentally about the max amount that the company was planning to buy. So no shares will be returned. Although DVA’s tender is also priced about 2%+ below last trading prices like ADS, a key difference is all shares are taken, in ADS it was nearly 3x oversubscribed.

    Premarket and regular trading around this 57. I don’t expect this to drop later like ADS did.

    https://finance.yahoo.com/news/davita-announces-preliminary-results-self-103000158.html

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