Weekly Market Dose: Office Depot and Office Max Merger and others
Hello Ladies and Gentlemen,
Another hustling and bustling week in the Financial Market this week. Notable inputs I had this week include:
- The 2 Day Bear run and a miniature rally on Friday
- The leaked merger between Office Depot and Office Max
- NetSpend being sold to Tsys
This has been an interesting Merger and Acquisition scenario. This was a "Merger of Equals" scenario, but Office Depot is paying about 2.69/Share for every Office Max share that shareholders own. The hyperlink above that explains the leaked merger by Thomas Reuters has created a deviation from Financial Academia case study. To elaborate, despite this being a Merger of Equals case scenario the overall hedge strategy did not turn out to be the norm. The reason is because the "arbitrage" or "hedge" should of been Office Depot stock share dropping because of taking additional debt and decreasing its financial statements; While, Office Max should of been sold at a percentage of the agreed premium over the price that the announcement was made. Another possibility is that the merger wasn't ready for the public to view, and it triggered Wall Street to assume that it could of been a failed merger which resulted in the price of both firms to go back to "Fair Value." There are other reasons why the scenario did not play out the way it did, and I encourage the viewer to share their view. Ultimately, the merger will still occur and this will create consolidation for the Office Retail industry and create cost savings for both firms in hopes that it can compete with Amazon, Wal-mart, and Staples (to name a few). Interestingly enough Staples was once Romney's creation and now that #2 and #3 in Office Retail industry have merged this will create speculation on Staples being bought out by a Private Equity firm even if Staples holds a strong hold after its restructure.
NetSpend sold to Tsys for $1.4 Billion
One of the "Diamonds in the Rough" I discussed earlier last week would be "NetSpend." The Small Cap firm that had a market capitalization of about 1.1 Billion was recently sold for $16.00/share. The Business is innovative and are one of many start ups who are trying to revolutionize the financial payment industry. I believe in the next few years there may be a shift in how currency or liquid assets will transact due to ever changing Global Currency War concerns and the convenience of data information mining such as electronic wallets.
Closing Thoughts
The activity of business buyouts are still "Full Steam Ahead," but investors should tread lightly when speculating on the next buyout. Make sure to perform due diligence and research before investing in a business. The market indexes such as the DOW and SP 500 are starting to display signs of saturation and possible "market bloating," and indicate a pull back. I am not implying a bubble (read this for another view on the bull run thus far). Possible case scenario models may appear on future blogs I post, which will hopefully release every Friday. Thank you all for taking the time to read my posts, and I look forward to sharing insightful financial discussions soon.
