What happened
Shares of Nielsen Holdings (NLSN), a market research company, rose as much as 21% in early trading on Tuesday. There's no question about why the stock rose so much, given that the company has agreed to be taken private. Here are some of the key details.
So what
Nielsen Holdings has agreed to sell itself to an investor group including Evergreen Coast Capital, which is an affiliate of Elliott Investment Management, and Brookfield Business Partners LP (BBU -1.04%). The group will pay $28 per share in cash for each share of Nielsen Holdings. Including the assumption of debt, the total value of the transaction is roughly $16 billion. Although the board has approved the deal, it still has to pass muster with shareholders and regulators. Also, Nielsen has a short window in which it can solicit alternative offers.
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The current price represents a 10% premium over an earlier offer from the group. It is 60% above where the stock traded prior to news that a takeover offer was on the table.
The stock price increase today, meanwhile, simply closes the gap between where the price was yesterday and the current offer. There is a slight discount, however, given that there is always a chance that a deal doesn't get consummate as planned. This is typical on Wall Street.
Now what
Given that this is an all-cash offer, current Nielsen shareholders basically have to make the choice between selling now and locking in gains or holding on to get the full offer price. Although there's a go-shop period, the board's approval of this deal after holding negotiations with the buyer group suggests that a materially better offer isn't all that likely. Really conservative types might want to sell now and find a new home for the cash.
That said, if you don't have another investment idea lined up, it probably wouldn't hurt to sit tight until it closes. The risk being that the price would likely fall if the deal fell through for some reason.
