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What: DST Systems
So what: Activist investor Russell Glass of RDG Capital told Reuters that he and a private equity partner approached DST management during the past month to propose taking DST private for roughly $65 per share, but management refused because it views DST stock as grossly undervalued. The stock has been trading between $46 and $51 over the last 30 days. A different private equity firm unsuccessfully discussed a takeout with DST in the mid-$60s in March and April, according to Reuters.
Now what: At today's midday price of $54.29, DST trades at a modest P/E ratio of 11 times, and its dividend yield is a mere 1.3%. A $65 takeout price would value DST at about 15 times estimated EPS for 2011 and 2012, which does not seem undervalued given that EPS is forecast to decline slightly in 2011 and 2012. Now that the takeout interest has been made public, shareholders and lawyers will likely pressure management to reconsider a deal. With two different potential buyers, a deal could get done at or above the mid-$60s.
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Fool contributor Cindy Johnson does not own shares of any company named above. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.