Shares of specialty chemical company Chemtura Corp. (NYSE: CHMT) jumped as much as 16.1% in trading Monday after agreeing to a buyout offer. At 12:15 p.m. EDT, the stock is still up 15.9% on the day.
Chemtura as agreed to sell itself for $2.5 billion to LANXESS AG in a all-cash transaction. Shareholders will get $33.50 per share if the deal closes as planned, which represents a small premium from where shares trade today.
The agreement follows a year of management looking for ways to unlock value for shareholders. And with the agreement coming at higher than any point shares have traded at over the past year, they have done that, at least in the short term.
When a buyout comes to light, the first question investors have to ask is whether there's further upside or if there's risk the deal will fall through. Right now, based on where shares trade, the market thinks the deal is likely to go through and the price will stick as is. I think that means investors should take some chips off the table in case the deal does fall through. A 16% bounce today is a nice gain and it could take months for the buyout to be completed.