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Why Verso Popped 26.1% Today

By Travis Hoium – Dec 20, 2021 at 12:23PM

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An acquisition is pushing this paper stock higher.

What happened 

Shares of Verso (VRS) jumped as much as 36.1% in trading on Monday, after paper products company announced that BillerudKorsnas will acquire it. The stock traded in a very tight range and ended the trading day up nearly 35%. 

So what 

BillerudKorsnas as agreed to pay $825 million, or $27 per share, for Verso in an all-cash transaction that the board of directors unanimously approved. The offer is also a big premium from a $20-per-share offer Verso got from Atlas Holdings in July.

Paper rolls laid out in a warehouse.

Image source: Getty Images.

The deal isn't intended to bring much synergy to BillerudKorsnas' business as much as expand the company's footprint. And by 2029, two of the company's production machines are expected to be upgraded with an investment of about $1 billion. 

Now what 

For Verso investors, shares are already trading above the $27 offer price. That means some traders are expecting the offer to be increased, but that may not happen. I think it's wise to take some profits today in case the offer isn't increased and the deal is completed as currently planned. At the very least, today's pop in shares is worth locking in, given the risk that shares drop if the acquisition falls through for some reason. 

Travis Hoium has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

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