I hate to say I told you so on Family Dollar (NYSE: FDO), but it looks like I told you so.
After Nelson Peltz announced his intention to “potentially takeover” Family Dollar, the stock shot up some 30% and everyone was happy.
There were lines in his letter to the board that troubled me and now the stock is well off the numbers talked about, which were $55-$60 per share in cash.
“The Trian Group also advised Mr. Levine that it proposed that the Trian Group or one of its affiliates acquire the Issuer at a price in the range of $55 to $60 per Share in cash. Any such transaction would be subject to customary conditions, including completion of a satisfactory due diligence review, execution and delivery of definitive documentation, approval of the Board of Directors of the Issuer, receipt of financing and receipt of regulatory and third-party approvals, including expiration or termination of the Hart-Scott-Rodino waiting period. “
“There can be no assurance that the Trian Group will consummate the acquisition or that it will acquire any additional shares.”
These two sections of the letter really bothered me, and it almost looked like it was a way of Peltz to get out of his holdings, according to a few retail analysts.
“I really question whether he intends on buying the company or if he was simply trying to put the company in play, hoping a more credible bidder would come in,” said Anthony Chukumba, a New York-based analyst at BB&T Capital Markets who rates the shares “hold.” “People are starting to do the work and ask themselves, ‘Is this deal really going to happen?'”
“While the stock popped that day, the market’s saying there’s a lot of uncertainty left to this,” said Brian Sozzi, an analyst with Wall Street Strategies Inc. in New York. “It’s saying we don’t know if Peltz can get the financing, we don’t know his motive, we don’t know all of the components of this deal, and we don’t know if Family Dollar would rather boost shareholder returns in other ways.”
Both Sozzi and Chukumba seem to be echoing my sentiments, and so are others in the marketplace.
If investors are still holding shares, perhaps it would be wise to walk away and move on. It almost looks as if Peltz is doing the same.
— Roger Nachman
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