The company is now in play, and downside is protected.
The company has received a non-binding privatization offer from CEO/chairman. The bid came at only 10% premium to pre-announcement levels, resembling the familiar playbook of management led buyouts: open with a low bid, and then bump it during negotiations. The board has formed committee of independent directors to evaluate this offer and also to explore “any other strategic alternatives that may be available”. The announcement of the offer sounded more like ‘the company is for sale, any bidders out there?’ rather than a more neutral ‘we have received a bid and are currently evaluating it’. The company went overboard to stress that the CEO is ready to consider other offers.
So it seems that the company is now in play, with a stalking horse bid already on the table.
On top of the spread to the current offer price, investors get a free option on the possibility that the CEO’s offer will be raised or that a competing bid will emerge. Even if there is no deal, downside should be very limited as (1) the stock already trades near the pre-announcement levels, and (2) the company recently reported very strong earnings that beat guidance.
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