M&A Heat Wave

While the world was watching the ping-pong match between Dell and Hewlett Packard on 3par (HP finally won), many other M&A deals were heating up under the radar.

Take the example of Casey’s General store. Casey, a convenience store operator in the mid-west, first received an offer from Couche-Tard, the largest convenience store operator in Canada for $36/share on April 9, 2010. The action turned ugly pretty quickly as Casey alleged and sued Couche-Tard on dumping its share immediately after it made its offer, thus depressed Casey’s share price so Casey could be acquired cheaply. Couche-Tard subsequently raised its acquisition price a few times, the latest on September 1st to $38.5/share. This latest bid did not last long, as Casey now says that there’s another bid at $40/share for the company.

With more than one buyer in the picture, Casey’s share shot up to $42.76, now trading at a premium of 6.9% to the latest offer price by the unidentified buyer. If indeed a bidding war ensues, similar to the one between Dell and HP, Casey’s share can continue to go higher.

Another M&A deal, one between BHP Billiton and Potash is going through a similar path. Potash rejected the latest offer of $130/share by BHP, and is now entertaining different buyers, including a rumour bid concerning Singapore’s state investment company, Temasek Holdings, and Sincochem of China. Potash is now trading at 15% premium to BHP’s offer price.

A look at 10xreturn’s M&A stock centre reveals that quite a few potential M&A deals are trading at premiums. One of the interesting one is Dynergy Inc., with an offer of $4.5 from The Blackstone Group, but is currently trading at $4.86/share. With the share trading at 8% premium to its Blackstone’s offer, there’s definitely speculation that another bid may come along.


Daniel Ho is the founder of 10xreturn.com, a financial portal providing financial information and market statistics for investment professionals.

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