Shares of auto parts manufacturer Tenneco (TEN) exploded higher on Wednesday, up 94% as of 11 a.m. ET after the company reported an unexpected net loss for its fiscal fourth quarter 2021.
This morning, you see, the private equity giant Apollo Global announced that it will acquire Tenneco and take it private in a $7.1 billion, all-cash transaction.
Apollo will pay Tenneco shareholders $20 for each share they own. Assuming shareholders approve and regulators don't object, this deal will close sometime in the second half of 2022.
As far as the shareholders part goes, it shouldn't take too much convincing to get them to agree to a near-100% premium price to hand over their shares -- especially not after the earnings report Tenneco just handed in.
In Q4, sales declined 6% and Tenneco lost $0.42 per share, versus more than a $2 a share profit in Q4 2020. "Adjusted" losses weren't as bad -- just $0.11 per share. But Wall Street had forecast that Tenneco would earn $0.16 pro forma, so that probably smarts as well.
Given the option of sticking with Tenneco as an independent company that just reported a loss, or accepting an immediate 94% profit from selling their shares today at $19 and change (or waiting six or so months for the $20 price Apollo is offering), I'd expect investors to sell without a second thought.