Shares of Anixter International (AXE), a provider of enterprise cabling and security, electrical and electronic wire, and utility power solutions, are up 15.5% as of 1:30 p.m. EDT today on news that the company has agreed to sell itself to private equity powerhouse Clayton, Dubilier & Rice in a deal valued at $3.8 billion, including net assumed debt.
The transaction will result in Anixter becoming a private company, and is expected to close by the end of the first quarter of 2020, management said.
Clayton, Dubilier will be paying all cash, so investors can expect to be bought out pretty cleanly in a few months, receiving cash for their shares. On the other hand, a handful of law firms have already announced shareholder derivative lawsuits in response to the merger, arguing that the buyout price -- $81 per share -- may not be fair.
And they may have a point: $81 is only about 13% more than the shares fetched at market close Tuesday -- not a huge premium. The resulting valuation, 14.4 times trailing earnings, may be a fair price in most markets, but with the average S&P 500 stock now selling for more than 22 times earnings, there's an argument to be made that Anixter is selling out too cheaply.
Another possibility here is that, because the price looks so cheap, Clayton, Dubilier's expression of interest may attract rival bidders. Indeed, the terms of the agreement expressly permit Anixter management to solicit competing bids for 40 calendar days continuing through Dec. 9.
With Anixter stock surging past the offer price to more than $82.50 a share at last report, it looks like investors are on the hunt for a better offer -- with or without help from the lawyers trying to sue Anixter.