Why QR Energy LP Stock Jumped Today

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 QR Energy LP (NYSE: QRE  ) jumped 10% today after agreeing to be bought out by Breitburn Energy Partners LP (NASDAQ: BBEP  ) .

So what: In the proposed deal, each share of QR Energy would get 0.9856 shares of BBEP when the deal closes, representing a 19% premium to last night's closing prices. The acquisition was approved unanimously by the boards of directors of both companies.  

Now what: The combined companies would be the largest oil-weighted upstream MLP in the country with a $7.8 billion valuation and 57,300 barrels of oil equivalent per day in production. Management alluded to cost savings as a result of the merger but fell short of saying exactly how much they expected to save. If you're a QR Energy shareholder I don't see much downside in holding on today. The stock hasn't gotten close to the eventual buyout price so there is upside left and the downside risk is if a deal falls through the stock will go down to around yesterday's closing price. It's a risk worth taking given the upside.

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