What Happened in the Stock Market Today

Image source: Getty Images.

Stocks began the trading session with gains but trended lower through the day to end up with very minor losses on Monday. The Dow Jones Industrial Average (^DJI 0.67%) and the S&P 500 (^GSPC 0.87%) indexes each fell by the smallest of margins.

Today's stock market

Data source: Yahoo! Finance.

Meanwhile, housing stocks had a good day after the National Association of Home Builders revealed that homebuilder confidence jumped to an almost one-year high this month. The confidence index improved to 65 from 59 in August, while economists were expecting it to stay flat.

Merger and acquisition news drove the biggest swings for individual stocks, and helped Infoblox (NYSE: BLOX) and Isle of Capri Resorts (NASDAQ: ISLE) soar in heavy trading on Monday.

Isle of Capri cashes out

Regional casino specialist Isle of Capri Resorts soared 30% after announcing a buyout deal it struck with rival Eldorado Resorts (ERI), which agreed to pay $1.7 billion in a mixture of cash and stock for Isle of Capri.

Image source: Getty Images.

It isn't Eldorado's cash that it will be putting up for this merger, though. The company aims to take out a $2.1 billion loan to fund the purchase, which makes this a highly leveraged transaction given that its market capitalization is currently below $700 million.

Executives believe the deal is well worth the added debt burden. "This acquisition marks further progress toward our goal of strategically expanding our property base to realize benefits of scale, increasing long-term strategic and financial flexibility, and driving shareholder value," Eldorado Chief Financial Officer Tom Reeg said in a press release. The deal will boost its footprint from less than three properties to 20 casino-resorts across 10 states.

Isle of Capri investors should be happy with the 36% premium they're getting for their shares, according to management. "We are pleased to reach this agreement," CEO Eric Hausler said, "which provides Isle of Capri shareholders with substantial and immediate value, as well as the opportunity to participate in the upside potential of the combined company." Between those two choices, I'd take the cash payment, since the large premium and huge debt load attached to this deal could produce disappointing overall returns from here.

Infoblox goes private

Infoblox, the network control specialist, jumped 15% following news that it is being taken private. Vista Equity Partners agreed to pay a 33% premium over Friday's closing price, translating to $26.50 per share, to own this company.

Image source: Infoblox.

The deal takes Infoblox off of public markets just as business trends were turning up. In late August it reported a second straight year of net loss, but the red ink was nearly cut in half to GAPP net loss of $14 million from $27 million.

CEO Jesper Andersen and his executive team forecast slightly positive operating margin for fiscal 2017, meanwhile, compared to last year's negative 5% result.

Still, the management team saw a brighter future in partnering with Vista Equity than in continuing its expensive push into the enterprise market on its own. "This transaction will provide immediate and substantial value to Infoblox stockholders," Andersen said in a press release, "while also giving Infoblox greater flexibility to execute on our long-term strategy."

Shareholders can sell their stock at any time leading up to the closing of this deal (expected sometime over the next few months). Yet, with shares valued at just under the proposed transaction price, there aren't many good reasons to wait that entire time. You're likely better off taking that cash and putting it to work somewhere else.