Please ensure Javascript is enabled for purposes of website accessibility

Why Cincinnati Bell Stock Just Jumped 20%

By Rich Smith - Updated Jan 24, 2020 at 1:12PM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

A mystery bidder appears and offers a super-premium price.

What happened

The news just keeps getting better for shareholders of Cincinnati Bell (CBB).

Last month, the stock surged nearly 35% in a day, after it announced plans to sell itself to Brookfield Infrastructure Partners (BIP -0.52%) for the princely sum of $10.50 per share. Today, Cincinnati Bell stock is marching higher once again on the revelation that an unnamed "infrastructure fund" has proposed to pay even more to acquire the company: $12 a share, cash.  

Hands raised holding auction paddles in a bidding war as a gavel crashes down

Image source: Getty Images.

So what

Cincinnati Bell made its latest announcement just this morning, and its stock is already up another 20.2% as of 11:30 a.m. EST today. Management said that two days ago, "it received a non-binding proposal from an infrastructure fund [not identified by name] to acquire all of the outstanding shares of common stock of Cincinnati Bell for $12.00 per share in cash."

The new offer trumps Brookfield's previous offer by more than 14%, and like Brookfield's offer, is all cash and carries none of the risk of a stock-based acquisition being devalued if the acquirer's own stock price slumps. As such, you'd think this new offer would please Cincinnati Bell's board. But in fact, while management says it has commenced discussions with the fund, it is for the time being still sticking with its "existing recommendation in support of the transaction with Brookfield Infrastructure."

Now what

So why are investors now bidding up the stock past $13 a share if there are no assurances that a deal with the fund will be approved, and if (more to the point) neither Brookfield nor this new mystery bidder has offered to pay anything more than $12?

Clearly, investors are hoping a bidding war will erupt, and Brookfield will raise its offer -- even past $12 a share. Whether they're right about that, or whether the final sales price will ever even exceed $10.50, remains to be seen.

Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Stocks Mentioned

Cincinnati Bell Inc. Stock Quote
Cincinnati Bell Inc.
Brookfield Infrastructure Partners L.P. Stock Quote
Brookfield Infrastructure Partners L.P.
$61.75 (-0.52%) $0.32

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning service.

Stock Advisor Returns
S&P 500 Returns

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 05/24/2022.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.