Why BRE Properties Shares Surged

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.

What: Shares of BRE Properties (NYSE: BRE  ) soared 11% today on a report that Essex Property Trust (NYSE: ESS  ) offered to acquire the residential REIT.

So what: Citing two unidentified sources close to the matter, Bloomberg reported that Essex offered roughly $5 billion for BRE this week, representing a premium of about 22% to yesterday's close. According to one source, the offer is even higher than a $60 per share bid made by Land & Buildings and another investor group earlier this year, suggesting that there's a bit of a bidding match for BRE going on. 

Now what: I'd be cautious about buying into the buyout buzz. The downside seems just too big if a deal doesn't happen, given BRE's still-hefty debt load, while Wall Street has already baked in much of the upside. Unless you'd be perfectly willing to own BRE as a long-term income investment, it's probably best to watch the process unfold from a distance.

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