After a pause in action due to the post election run-up in valuations, it appears the action is opening up once again in merger activity. One of the positions I initiated in October is the latest target. I entered Stonegate Bank (SGBK) due to their US government sanctioned Cuban interaction as well as being a potential takeover target. In fact, Vivianne (Well Rounded Investor) and I had this very discussion. Low and behold, Home Bankshares (HOMB) saw the benefits that I did.
The terms of the deal are not purely defined probably due to potential market volatility. It will be a cash and stock deal with the ratio defined nearer to close. Per the 8-K, the combined stock/cash value is $49.00 per SGBK share. Considering my entry point was $34.17, a roughly 43% gain over 5 months is not too shabby. The only disappointment is the $49 total is a less than 6% current premium which would indicate HOMB believes a significant part of SGBK’s rise in share price was due to emotion (Trump rally) rather than fundamentals.
My intention is to take the money, retain the shares and perhaps buy a little HOMB on weakness as I believe my initial Cuba premise still stands. Besides, HOMB being a $13B bank post acquisition places them in the arena of being a potential acquisition target themselves.