Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.
So what: The cash-and-stock offer values DigitalGlobe at $17 per share and represents a 26% premium to its closing price on Thursday. Although DigitalGlobe reportedly rejected the offer, the news itself suggests that the shares are undervalued and also sets the stage for a higher bid.
Now what: Given the scale and cost benefits that a combined company would generate at a time of significant pressure on the U.S. defense budget, the chances of a deal seem decent. "This proposal represents the most prudent course of action for both GeoEye and DigitalGlobe," GeoEye CEO Matt O'Connell said, "given the continuing uncertainty in the market created by the U.S. government's budget review process for 2013 and beyond." With the shares of GeoEye and DigitalGlobe still down significantly over the past year, taking a small speculative bite into both might not be a bad bet.
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