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Why OM Group, Inc.'s Shares Jumped 28% Today

By Travis Hoium - Jun 1, 2015 at 11:38AM

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A big buyout offer has investors bidding this stock higher today.

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 OM Group, Inc. (NYSE: OMG) jumped 28% today after the company agreed to a buyout from private equity group Apollo Global Management LLC.

So what: Apollo has agreed to pay $34 per share for OM Group, and then it will sell off the Electronic Chemicals and Photomasks businesses for $365 million. OM Group will have a "go-shop" period where the board of directors can actively solicit other bids that could potentially increase the value of the buyout. But there's no guarantee that a better offer exists. 

Now what: Given the fact that shares are already trading near the buyout price, traders are confident that the worst-case scenario is that the current offer gets executed as planned. While there may be some upside if a new bid emerges, the premium of 28% from Friday's closing price is probably enough to scare off most potential bidders. I might take some or all shares off the table after this offer today, because I think the biggest risk is that the deal falls through, and with shares trading at nearly $34, it's not worth that risk given the limited upside.

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