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Why Kaydon Shares Soared

By Brian D. Pacampara, CFA - Sep 5, 2013 at 1:48PM

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Is this meaningful? Or just another movement?

Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.

What: Shares of Kaydon (NYSE: KDN) soared 23% today after Sweden's SKF, the world's biggest bearings maker, agreed to acquire it for $1.25 billion in cash.

So what: The deal values Kaydon at $35.50 per share and represents a healthy 22% premium to its closing price on Wednesday. SKF is making the move to bolster its position in the U.S. and lower its dependence on the still-sluggish European market which accounts for about half of its business.   

Now what: SKF expects the deal to generate about $30 million in annual cost savings and roughly $50 million in sales synergies. "We have followed the development of Kaydon for a long time," said SKF President and CEO Tom Johnstone. "The complementary nature of their products and technologies, their geographical and customer presence and their manufacturing footprint will enable us to even better serve our customers and distributors in the industrial market worldwide." So, while Kaydon may now solicit competing bids for a 40-day "go-shop" period, holding out for a dramatically better offer doesn't seem prudent.

Fool contributor Brian Pacampara has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. Try any of our Foolish newsletter services free for 30 days. 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.

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