Shares of printing company R.R. Donnelley & Sons (RRD) rose dramatically in early trading on Wednesday, gaining as much as 39% at one point. At roughly 11 a.m. EDT today, the stock was still up around 37%. The company reported earnings this morning, but in reality nobody really paid all that much attention. It was the other announcement, about the company being bought out, that got investors excited.
To get earnings out of the way, Donnelley's third-quarter sales were higher by 6% year over year. Its operating margin improved by 20 basis points. Earnings came in at $0.57 per share, up nearly 80% from the $0.32 in the third quarter of 2020. And it paid down some debt, strengthening its balance sheet. All good things, but pretty meaningless when you put it up against the news that Donnelley is being bought out.
Affiliates of Atlas Holdings have agreed to buy R.R. Donnelley for $8.52 per share. It's an all-cash deal valued at around $2.1 billion. This is a 29% premium over the stock's price on Nov. 2. R.R. Donnelley has 25 days to solicit higher bids, which helps explain why the stock is trading above Atlas' offer. That said, assuming this deal gets consummated, it is expected to close in the first half of 2022.
Because R.R. Donnelley's shares are trading above the current buyout price, investors have an interesting choice to make. Sell now and lock in the big gain, or wait it out and see if a better deal comes along. The worst-case scenario in that situation, assuming the agreement doesn't fall apart, is that you get Atlas' $8.52 acquisition bid. That said, for conservative investors, it might be wise to simply take the money and run given that there's no guarantee a higher offer will materialize.