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Why XO Group Inc. Stock Popped Today

By Steve Symington - Updated Sep 26, 2018 at 1:54PM

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The parent company of The Knot is being acquired. Here's what investors need to know.

Shares of XO Group Inc. (XOXO) were up 26% as of 3:00 p.m. EDT Tuesday after the parent company of The Knot agreed to merge with WeddingWire, Inc. in a deal valued at $933 million. 

More specifically, WeddingWire's lead investors -- Permira Funds and Spectrum Equity -- will acquire XO Group for $35 per share in cash, good for a 44% premium to XO's 12-month average closing price and a 27% pop from Monday's close.

Dark and light chess pieces with a half-dark, half-light pawn in the center of the board; mergers and acquisitions concept.

IMAGE SOURCE: GETTY IMAGES.

So what

The combined company will be privately held, with WeddingWire CEO Tim Chi and XO Group CEO Mike Steib serving as co-CEOs. It will also maintain both The Knot and WeddingWire brands as separate consumer products while simultaneously allowing each brand to benefit from their "expansive complementary networks and diversified features." And of course, the combined company will also include XO's other life-stage websites The Nest, GigMasters, The Bump, How He Asked, and Lasting.

"This is a proud day for XO, a tribute to the dedication of the amazing people at this company, a terrific outcome for our stockholders, and another positive step toward our mission of serving the couples and wedding pros we love," added Steib.

Now what

The transaction has been unanimously approved by XO's board of directors. So assuming it also receives shareholder and regulatory approval in a timely fashion, the acquisition is expected to close in the first half of calendar 2019.

With shares currently trading a few pennies above the agreed acquisition price -- and assuming waiting longer to sell doesn't result in more favorable long-term capital gains tax treatment -- I think XO investors would do well to take profits and put that money to work elsewhere.

Editor's note: A previous version of this article stated that WeddingWire would acquire XO Group; instead, WeddingWire's investors will acquire it. The Fool regrets the error.

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