Stocks rebounded strongly on Monday as trade worries subsided. The Dow Jones Industrial Average (^DJI) and the S&P 500 (^GSPC 0.56%) both recovered losses from Friday and then some.
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All sectors were in the green, but technology and financial shares had notable gains. The Technology Select Sector SPDR ETF (XLK 0.26%) rose 3.8% and the Financial Select Sector SPDR ETF (XLF -0.06%) added 3.2%.
Merger deals were in the news today, as The Finish Line (FINL) announced it is being acquired by a British company, and USG Corporation (USG) rejected a buyout offer.
The Finish Line gets snapped up despite disappointing sales
Shoe retailer The Finish Line announced it is being purchased by British sportswear specialist JD Sports Fashion for $13.50 per share, sending shares soaring 31.1% to $13.83. The $558 million, all-cash deal has been approved by the Finish Line board and is expected to close no sooner than June 2018.
Finish Line also released preliminary results for the fourth quarter which showed that the company's sales woes had resumed after a promising third quarter. Revenue increased 0.7% to $561.3 million, thanks to an additional week in the quarter this year, while analysts were expecting $577.5 million. Comparable sales declined a whopping 7.9%.
JD Sports Fashion, a public company that trades on the London exchange, has been growing rapidly due to acquisitions, the opening of new stores, and positive comparable-store sales. The acquisition of the Finish Line gives it a presence in the U.S. and additional purchasing power with suppliers such as Nike. Given that sales headwinds that Finish Line has been struggling against appear to be unabated, a buyout with such a generous premium to the recent share price is probably a decent outcome for its shareholders.
USG jumps on news of a buyout attempt
Shares of wallboard manufacturer USG Corporation surged 19.5% after the company's board rejected a $42-per-share buyout offer that was being put together by Berkshire Hathaway (BRK.B 0.18%) and German company Gebr. Knauf KG.
Berkshire CEO Warren Buffett filed a document with the SEC on Friday that revealed that the company was in negotiations with Knauf to dispose of its 30.8% share of USG, a large portion of which Berkshire had picked up for a bargain price at the bottom of the housing crisis. The filing revealed that Knauf had offered the $42 price to USG on March 15 and that Buffett had offered Knauf a six-month option to buy all of Berkshire's shares of USG for no less than $42 per share. Knauf would pay $2 per share to Berkshire up front for the option, and the option exercise price would be the price offered to all other USG shareholders, minus the $2. At the time of the filing, Knauf had not yet responded to the offer.
Shortly before the market opened, USG issued a press release rejecting the offer, saying it undervalued the company. "Our Board is always looking for ways to deliver value to all of our shareholders, but Knauf's opportunistically timed proposal is wholly inadequate as it does not reflect USG's intrinsic value, including the significant opportunities ahead of us," said Steven Leer, USG's non-executive chairman of the board, in the press release.
Now that an offering price is out in the open, USG investors seem to feel secure in believing that $40 is a new floor on the stock price, and -- if the USG board gets its way -- the final price could go even higher.