Barnes & Noble and Safeway Climb on Buyout Offers

The Dow finished down slightly, as Barnes & Noble and Safeway both gained on potential purchases.

Feb 21, 2014 at 10:00PM

Although we don't believe in timing the market or panicking over daily movements, we do like to keep an eye on market changes -- just in case they're material to our investing thesis.

Stocks survived a rocky housing report to finish the day essentially flat as the Dow Jones Industrial Average (DJINDICES:^DJI) fell 30 points, or 0.2%, while the S&P 500 dropped by the same percentage. The Dow was actually trading in positive territory most of the day, but slipped toward closing, in part due to a flurry of activity from options traders as those positions expired at market close.

Existing home sales fell to its lowest level in 18 months in January, as annualized sales hit 4.62 million, down from a mark of 4.87 million in December, and worse than estimates at 4.7 million. The report was just the latest data point to indicate the economy has slowed, though investors have attributed the poor numbers to bad weather. The National Association of Realtors said as much, as chief economist Lawrence Yun noted, "Some activity will be delayed until spring;" but Yun also acknowledged that tighter inventory and rising prices and mortgage rates may have cooled off the market.

Turning to individual stocks, Barnes & Noble (NYSE:BKS) finished up 5.4% after the bookseller received a surprise buyout offer. G Asset Management, a small private equity group, offered to purchase 51% of the company at a value of $22 a share, or just the Nook unit at a value of $5 a share. G Asset had previously proposed in November to acquire the Nook unit at a price valuing the company at $20/share, but B&N turned down that offer. Shares closed at $17.69, indicating the market doesn't really see this deal going anywhere; but it should provide some comfort to investors knowing there is a potential buyer out there for the struggling retailer. Barnes & Noble will report earnings next Wednesday, and will likely shed more light on any potential sale.

Another stock moving higher on deals news was Safeway (NYSE:SWY), which finished up 4.3% after confirming that it was in talks to sell itself to Cerebrus Capital Management. A Reuters report this afternoon said the grocery chain was in "advanced talks" with the private equity firm for a leveraged buyout deal that could be reached in as soon as a few weeks. Cerebrus is no stranger to the industry, having bought several grocery chains from SUPERVALU last year, so the purchase would make sense for the buyer, giving it a dominant position on the west coast. There is no price tag on the deal yet, but Safeway, with a market cap of $8.8 billion, hit a 52-week high on the news at $37.70. Continued share appreciation could force Cerebrus to act faster, as the stock is likely to rise if investors suspect a coming sale.  

Two retailers poised to pop
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Jeremy Bowman has no position in any stocks mentioned. The Motley Fool owns shares of Barnes & Noble. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

4 in 5 Americans Are Ignoring Buffett's Warning

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Jun 12, 2015 at 5:01PM

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David Hanson owns shares of Berkshire Hathaway and American Express. The Motley Fool recommends and owns shares of Berkshire Hathaway, Google, and Coca-Cola.We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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