What: Shares of industrial parts maker Blount International Inc (NYSE:BLT) exploded 85% higher after agreeing to a buyout.
So what: American Securities, LLC, and P2 Capital Parners, LLC, agreed to buy Blount International for $855 million, including assumed debt. The deal will pay shareholders $10.00 per share, an 86% premium from Wednesday's closing price.
Blount has a 50-day "go-shop" period when it can seek a higher bid, but given the premium the company is getting, that might be a stretch for potential buyers.
Now what: The buyout price is still well below Blount's 52-week high of $17.97, but short-term, it's a great bounce for shareholders. Clearly expectations had gotten so low in recent months that management and private equity buyers thought more value could be generated without the scrutiny of a public company. Today would be a great time to take some risk off the table given the stock's trading within pennies of the buyout price, because the only upside potential is a better offer, and the downside risk is a deal falling through and shares potentially dropping to where they were yesterday.
Travis Hoium 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.