Sold Baxalta and Added Solarwinds
I sold my Baxalta (Ticker: BXLT) position today at $39.99 and just broke even once again on the trade. This trade just didn’t work out as there was no surprises when Shire finally announced the deal. Also the potential tax issue still lingers.
In the place of Baxalta I picked up some Solarwinds (Ticker: SWI) at $58.81 (~4.5% position), which is being acquired by the private equity firms: Silver Lake and Thoma Bravo for $60.10 in cash. The only remaining hurdle to closing the deal is to raise $1.5 billion. The lender meetings are being held this week with the goal of getting this deal wrapped up in the first week of February. I’m modeling a close by February 12, which works out to a potential net gain of 2.12% (~23% annualized).
posted by Money Turtle @ 1:07 PM
14 comments
14 Comments:
interesting deal and business of SWI
the firms are buying SWI are very well known and shouldn't have problems to find capitals for a risk in this kind of business. Financials are ok of SWI, there is little risk and trend of sales is very strong for the coming years.
I'm thinking so to follow you in this trade, but usually when I do I enter with 100%.
How do you see a close in 1 month? just financing is the issue? or they are waiting other things like shareolder meetings, regulators etc etc?
The shareholders just approved so right now the only thing left is marketing the debt. They're doing the road show this week and hopefully get this debt sold by the first week of February.
how many time have you seem them to fail to get this debt sold? is very rare... or I am wrong?
The only time where I saw deals fall apart was really in 2008 during the credit crisis, which I view as one of those 1 in a 100 year storm. In 2008 Penn National Gaming,Harman National and Sallie Mae fell apart due to the credit crisis.
Wit the market going down daily, do you see this negatively impacting the ability to secure financing?
I don't see the lenders running away from this deal. Goldman already has picked up some of the debt. The debt to equity is reasonable for a private equity deal. I think they'll see reasonable demand for this deal...
Regarding BXLT, are you concerned that the tax issue may cause the deal to be cancelled? At the current prices, the discount is close to 10%. Are you considering getting back in? Your updated analysis would be appreciated.
I noticed the price on SWI has fluctuated a bit today. Do you think this is just a normal fluctuation that may present a better buying opportunity, or does this reflect the markets uncertainty about this deal?
BXLT: There’s always a risk in proceeding with a transaction without obtaining a definitive tax ruling from the Fed. Example, Yahoo… I'm busy on other deals right now and once those (hopefully) close. I will evaluate BXLT.
Regarding SWI, it’s the junk market jitters. I doubt that the lenders will walk if junk continues to deteriorate. Petco was able to complete their offering with some discount so that’s somewhat encouraging.
money turtle is right...junk market is causing alot of distress recently to merger deals. my favourite now is still CVC. One more good thing going for the CVC deal is that New York City had approved the CHTR / TWC deal which shows the CVC deal can also be done
u see $MDCO get bought?.. the company is favorite stock of biotech stock letter
It looks like MDCO is on the market based on the recent news from Bloomberg. I can see MDCO get taken out.
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Deal looks quite good for reasons you mentioned (Good portion of equity), but debt/EBITDA ratio is still high. Bought some in low 58s, but just unloaded them at 58.9-58.97.
Not that it means a lot, but Moodies rated the debt for this deal similar to Veritas
https://www.moodys.com/research/Moodys-assigns-B2-corporate-family-rating-to-Veritas--PR_337186
https://www.moodys.com/research/Moodys-rates-SolarWinds-B2--PR_341020
Also, just read these two pieces today...obviously always tailrisk, but at these levels, spread is no longer super attractive for me
http://www.ft.com/intl/cms/s/0/3ace5424-bfdc-11e5-9fdb-87b8d15baec2.html#axzz3xxdT1kEp
http://www.ft.com/intl/cms/s/0/528226e2-91db-11e5-bd82-c1fb87bef7af.html#axzz3xxdT1kEp
Anyway, hope everything goes smoothly!
gl
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