My wife and I own about 300 shares of Compass Bank stock (cbss). She
participated in a DRP while she worked for the company long before we
This morning their pending buy-out was announced. Coincidentally, I
was going to sell this position next month to help with the
downpayment on a new house.
The buyer, BVA, announced that it would offer $71.82/shr in cash OR
trade 1:2.8 of their comapny stock. We are taking the cash option.
Does anyone have any experience with this? I am wondering how the deal
is executed and what time frame I can expect.
This is the only pure stock position we own, so I have never dealt
with a buy-out. If its going to be 6 months before we can get the
cash, I'll obviously have to sell via brokerage at market price.
I worked for a company called SDRC in 1997. EDS bought us out for
cash 2-3 years later.
SDRC stock traded $8-$16 a share (usually closer to $8). The buyout
was for $25/share. Within minutes of the announcement, the stock
jumped from $wherever it was ($12?) to $24.99. Once the transaction
completed, my stock position in my 401k was sold at $24.99 (maybe it
was $25) and reallocated to my other choices. It was all automatic.
I had sold all my provate shares of SDRC stock prior to this... not
sure how people settled taxable accounts. If no better answers come,
I can ask a co-worker.
side note- EDS paid $500M for SDRC. EDS sold us about a year later to
3 investment companies for $1 B, then Siemens just bought the entity
for $3.5 B last week.
Thanks jIM. The price on CBSS has also jumped up to near the offer
price, but it is still about a $1.50 short. I as just trying to
squeeze my dollar for all its worth.
If the cash process becomes arduous (sp?) I will simply sell the stock
through my broker and be happy with what I got!
In article ,
That may mean that the market is factoring in a $1.50 as risk
that the sale will not go through. If that is the case, you
have a choice to make, take the sure thing now at $1.50 under
the buyout offer, or risk having the sale fall through, and
the price going back down (perhaps well under its previous
Short answer: mergers don't usually close in a month.
Long answer: when a merger is announced the target's share price jumps
to within some percentage of the acquistion price. If the merger is
posed as a cash merger, the price will be discounted by the short-term
interest rate between "today" and the day the deal will close. If it's a
stock-for-stock merger the two prices move in tandem, based on the
conversion ratio, but there's still that discount.
That's if it's truly a "done deal" and you know the closing date. If
there's any uncertainty in the deal, the price will be discounted for
that. The uncertainty could be an unknown closing date, and/or a
possibility the deal won't make it through the required approvals**.
I don't follow CBSS but you'll want to find out the terms of the deal to
see when it'll close. If the closing date is relatively close, such that
the discount is greater than you'd earn by investing an equivalent
amount in a money-market fund until the closing date, it suggests
there's still some risk in the deal. If it's unknown then the current
discount reflects the market's guess about when & if it will close.
Let's say the closing date is June 1 2007. You would be cashed out on
that date, the shares would disappear from your account and cash put in
its place (it sounds like you'd need to make an election to do that). An
example of this, this past week, was APCC -- the deal was announced last
Incidentally "merger arbitrage" is trading around that spread, making
bets either for or against the deal going through on the terms the
Occasionally another acquirer can come in and make an offer as well. In
that case the price could jump above the first acquirer's offer price. I
think this happened with a few of the REIT deals recently. In that case
selling early would make you miss out on those subsequent gains.
** some combination of board approval, shareholder approval, "Hart Scott
Rodino" antitrust approval...with a bank there's probably also
regulatory approval at the state & federal level, by banking authorities.
Thanks guys. I finally tracked down the transfer company. Merger has
been accepted by both companies boards, but not by the necessary gov't
bodies. So there's some risk there. Also the cash out is not expected
until 4th quarter '07. So there is a discount for time.
$1.50 per share is best you can do waiting for merger to close... I
know where my risk would be (sell now!)... but if you are sitting on
1000-2000 shares, then that $1.50 looks slightly more enticing. Still
not worth it (if you can get the amount you need, sell now).
Yep, its already sold. Even if it was 100000s, its still only a 2%
increase over current market AND it carries risk premium and a 7 month
Thanks for the quick and concise help today guys.