Wednesday, November 29, 2017

Some Axalta Coating Systems

It’s really boring sitting out there without a merger arb / special situations play. So today, I initiated a position in Axalta Coating Systems (Ticker: AXTA) at an average price of ~ $37.50 (~ 7.7% position). It looks like an all cash bid from Nippon Paint will occur shortly. I’ve seen price talk ranging from low to mid $40s so we will see…

22 Comments:

At November 30, 2017, Anonymous Anonymous said...

MT,


I started looking at AXTA last evening before you posted your message. If you are holding common consider looking for an options partner with short term covered calls for additional potential profit.

My thoughts on AXTA deal with Nippon after some due diligence:

As the second and now sole bidder, how does Nippon Paint complete due diligence, financing and finalize a DMA (definitive merger agreement) in such a short period of time?

Estimated price estimate low to mid 40's are purely Analyst estimates. They always tend to over shot, especially if they know a deal bid is pending. Beware of these inflated estimates.

Take a look at options open interest for Dec / Jan calls and they will not confirm strong conviction of offer price above $40.

When AXTA became in play the stock price (unaffected) on 10-26-17 closed at $28.34. Figure out what current AXTA stock price appreciation (+30%) to gauge how much more gain there could be.

What is the track record of dealreporter's success in predicting deal timing and general price estimate?

I am considering taking an AXTA position and looking for a good entry point for a very short trade, although I am very cautious.


Regards,

Inforesource7

 
At November 30, 2017, Anonymous Anonymous said...

All,

ALERT:

Still time to take a position in AET by CVS deal. Read WSJ journal article ASAP. Deal is for $200-$205 mostly cash and could be announced as early as Monday. Use todays intra day high candle stick wick as barometer as to how deal may be greeted on monday.

Regards,

inforeosurce7

 
At November 30, 2017, Anonymous Anonymous said...

MT,

It looks like AXTA deal will be for $40. Here is the article that offer me a clue. When you divide $8.91b deal by shares outstanding = approx. $40 per share.


https://asia.nikkei.com/Business/Deals/Nippon-Paint-closing-in-on-9bn-Axalta-bid


Regards,

Inforesource7

 
At November 30, 2017, Anonymous Anonymous said...

MT,

Correction to my last message an $8.91b deal divided by 243.63m shares outstanding = $36.57 per share. Please double check my math.



Regards,

Inforesource7

 
At November 30, 2017, Anonymous Anonymous said...

No deal.. wtf

 
At November 30, 2017, Blogger Money Turtle said...

That was a nice blow up. I bailed out generating a new loss of 21.9% over a 1 day period. Fortunately, it was not a large position, but still this stinks...

 
At November 30, 2017, Anonymous Anonymous said...

MT,

I cant believe the deal news today, both good and bad. I am going nuts. AET, AXTA and PNK.


reuters
No Nippon/Axalta deal. Sources tell us Nippon's latest offer was for $37 per share in cash, Axalta wanted more http://www.businesswire.com/news/home/20171130005908/en/Axalta-Nippon-Paint-Acquisition-Discussions … $AXTA


Regards,

Inforesource7

 
At November 30, 2017, Anonymous mergerpie said...

i was thinking to going in for Axalta too but didn't pull the trigger. This happens all the time for pre-mergers.

 
At November 30, 2017, Anonymous mergerpie said...

the wide spread for AET in regards to the rumored price of $200-$205 is probably right..about 11-13%... about the same as AT&T / Time Warner... one factor is time..this kind of big merger will take at least 1 year to go through the regulatory approvals and large scale vertical mergers are under increased scrutiny now...

 
At December 01, 2017, Anonymous mergerpie said...

today's news that bayer and monsanto cleared CFIUS. Big surprise and proof that if you are with the U.S government, everything is smooth...

 
At December 03, 2017, Anonymous Anonymous said...

MT / Fellow Turtles,

$Smile....

Aetna's board set to approve $68 billion sale to CVS Health: sources
https://www.reuters.com/article/us-aetna-m-a-cvs-health/aetnas-board-set-to-approve-68-billion-sale-to-cvs-health-sources-idUSKBN1DX0NC

Wow, $207 deal with 70% cash and %30 stock mix. Any predictions on how AET may trade tomorrow and this week? One more bit of news to add into your calculation, for additional upward fuel. Senate passed tax reform bill at 2:AM early Saturday morning. Remember what happened with the market last week rocket fuel)?

Note: CVS tax rate = 38.405%, AET tax rate = 43.473%. These two companies will benefit immediately if tax bill becomes effective for 2018.

Identify your stocks with high corporate tax rates and watch them pop. I have access to all U.S. corporate tax rates if you need a quick lookup.



Regards,

Inforesource7

 
At December 03, 2017, Blogger Money Turtle said...

The deal terms for AET far exceeded my high end expectations. I like the nice cash makeup in this deal. Thanks Infosource7 for giving me a heads up in this deal. I picked up some AET at ~ $182 (~ 13% position).

 
At December 03, 2017, Anonymous Anonymous said...

MT,


Yes exceeded my expectations as well, $Smile. Yes we hope the traders like the extra cash kicker as well. Your Welcome. Glad to here you pick up a good position. I am playing AET deep in the money calls across two option chains and two accounts (~22% position in larger account) as a trade. My next challenge comes Monday morning after the market opens as trading options is not as easy as the common. I do not feel comfortable trying trailing stop limits, especially with this trade. Most traders think we will at least see a pop up around last Thursday's intra day high of $192.37. I would like to think we blow through that but then where? Ideally AET should go up and tag $200, settled back some and then maintain upper $190's for the remainder of the week. Nobody knows except the pro's.

I am not resting on my laurels after this trade. There are other opportunities still ripe for the taking.

Have you ever come across bull winkel from the old yahoo message board days in your cyber travels?


Regards,

Inforesource7

 
At December 03, 2017, Anonymous mergerpie said...

i would recommend sell if the price is favorable tomorrow... the merger is in a sensitive sector (healthcare) and would be highly scrutinized for antitrust..

 
At December 03, 2017, Blogger Money Turtle said...

I do remember Bull Winkel from the old Yahoo message board days. Don't know what happened to him... I do see many of the old timers on Seeking Alpha.

I am anticipating a high 190s print for AET on Monday.

 
At December 03, 2017, Anonymous Anonymous said...

All,


Get your cheat sheet ready for tomorrow. For the CVS stock portion Fridays close was $75.12 x .8378 shares = $62.93 + $145 cash = $207.93 for AET shareholders. Double check my figures if you choose to.

Watch CVS stock price for tells in pre-market trading. Based on formula above here are abbreviated numbers to monitor.

If CVS stock price = $70.12 floating deal price is $203.74
If CVS stock price = $65.12 floating deal price is $199.56
If CVS stock price = $60.12 floating deal price is $195.37
If CVS stock price = $55.12 floating deal price is $191.18
If CVS stock price = $50.12 floating deal price is $186.99

Good luck to all AET / CVS traders tomorrow.


Regards,

Inforesource7

 
At December 06, 2017, Anonymous mergerpie said...

spread approaching 15% for AET / CVS... I will start a minor position and sell when the spread approaches 10%..

 
At December 06, 2017, Blogger Money Turtle said...

I didn't expect the market to react so negatively to the merger. I sold at the open on Monday and made a little bit. There's plenty of time to see how the regulators view this tie up. I'll stay on the sidelines for now.

 
At December 06, 2017, Anonymous mergerpie said...

i am cautious on this..as you had said...enough time to play in and out...

 
At December 10, 2017, Anonymous Anonymous said...

MT / Mergerpie,

Please excuse the delay on reporting AET by CVS numbers. I have been bogged done with personal family issues this past week. All of my positions in AET were call options, no common stock. I have two different accounts and had to use a spreadsheet to crunch some numbers. AET opened up on Monday (9:30am) at the high and then gradually fadded like I thought it might. I guess no big institutional players wanted to push it up any more. Then on Friday the day traders had a green light to push it up for a nice day trade. Go figure.

In any event I sold right after the open on Monday. Account #1 was held for 13 days. Simple return was 28.39% and annualized return = 101.11%. Account #2 was held for 27 days. Simple return was 18.34% and annualized return = 136%. Keep in mind these are options returns. Overall I am happy and like these deals.

Not sure what else may pop due to holiday season but you never know. I am laser focused on the NXPI by QCOM tender offer deal right now. Consensus is after QCOM wins U.S. regulatory approval (end of December or earlier January) then both will talk about how to win over 80%+ in tenders. No shareholders want to tender when the current price is $5 higher than tender offer of $110. Activist Elliot Mgmt. would like a bump up to $125. Elliot and others hold approx. 20% of the shares. So at current price of $115 its like taking a position because you know there is a deal in the works and we have a general idea what the offering price may be. You could call the $110 tender offer a Put option for any downside protection. Hypothetically if QCOM killed the deal and paid the break up fee, what do you think will happen to NXPI stock Price? Most believe it would go up not down to pre deal price in low $80's. This is a gift waiting to be taken for all of us. Please dont bet the farm. Be Smart. Be modest. Be confident. Consider taking a position before the U.S. regulatory approval comes in otherwise it may be too late. Stock price will ramp up in anticipation.


Regards,

Inforesource7

 
At December 12, 2017, Anonymous mergerpie said...

good returns inforesource!..i am thinking about the NXPI deal and having two different minds on it...

one issue is will QCOM pay up to $125 for it?

another is will QCOM afford not to pay $125 because Broadcom is circling and QCOM definitely needed a big deal or size to defeat the bid.

 
At December 12, 2017, Anonymous Anonymous said...

Mergerpie,


It all comes down to what QCOM's vision is for the future. We know before AVGO entered the scene, QCOM needed and wanted NXPI to diversify its business model. QCOM knows it will have to raise its offer for NXPI. Elliot Mgmt. recently came out with its value analysis indicating NXPI is worth $135. We believe it is a negotiation marker to get QCOM to bump up to at least $125.

Now if QCOM does not want to merge with AVGO at a higher price than $70, QCOM has a poison pill in a higher bid for NXPI. The more QCOM pays up for NXPI, the more AVGO has to raise its offer for QCOM. If QCOM wants NXPI and a chance to negotiate with AVGO at $70+ they could try and thread the needle by offering NXPI $120 or so, hoping they NXPI/Elliot accepts and still allow AVGO to raise its bid within reason.

We know AVGO wants QCOM to win NXPI but at the lowest price as possible ($110). Why wouldn't AVGO not want QCOM along with NXPI? The more QCOM pays up for NXPI, the more AVGO has to raise its bid for QCOM.

Do we really think NXPI is the odd company out of this love triangle? Not I.

We are witnessing a great game of corporate chess. We are bystanders that could benefit from the chess match, as long as we select the right target.

Right now its all about what QCOM see's as its future.


Regards,

Inforesource7

 

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