The spread is wide, and this could be a pretty timely setup.
A controlling shareholder group has proposed taking the company private, and the special committee is working through the offer. The spread sat at modest levels for months, then abruptly widened to a point that implies real doubt about closing. There has been no update on the offer, no deterioration in the business, and no hint that the bidders have cooled. The ongoing review was confirmed last month. In other words, there is no apparent reason to think the bid is off.
The offer grew out of an activist campaign. The activist appears supportive and did not sell when the spread narrowed to minimal levels over the summer, nor when the the shares spiked above the offer price last month. That suggests it likes the odds of the deal getting done, and either sees a real chance of a bump or intends to roll its stake into the private company.
The setup looks attractive, and it reminds me of the Leggett & Platt (LEG) non-binding buyout covered on SSI earlier this year. There too, the spread widened to over 20% for no obvious reason, four months into the special committee’s review, before a binding deal was announced just a few weeks later.
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