Q: Hi,
Sunoco has offered to buy Parkland @ $44 per share or for a mix of cash/shares. PKI closed at $38.25. Is this a good opportunity or is there a lot of deal risk? Little confused by the lack of stock movement. Holding a small position.
Thanks!
Sunoco has offered to buy Parkland @ $44 per share or for a mix of cash/shares. PKI closed at $38.25. Is this a good opportunity or is there a lot of deal risk? Little confused by the lack of stock movement. Holding a small position.
Thanks!
5i Research Answer:
The deal is for 0.295 SUNCorp units and $19.80 cash for each PKI share. Holders can choose either stock (0.536 units) or cash ($44) but the cash total is capped so shareholders will get a pro-rata allocation most likely as $19.80 cash and 0.295 units. Thus, the stock did not move so much because investors will still be taking on Sunoco stock risk. Simpson OIl, which was set to take over the board of PKI is not happy, and since it owns 19.75% of the company it could make a full takeover more difficult. We would consider deal risk higher than normal here, and would not consider it an attractive arbitrage opportunity currently.