Mergers & a Buy

The first full week of 2019 was busier than usual with three mergers completed – and I still haven’t completed the year end conversion on my blog data.  I’m getting there though – although one unexpected item was the decision of three of my companies to change their names exacerbating the conversion even further.  I figured this week we would dive a little deeper into the mergers and the subsequent purchase.

Guaranty Bancorp

This one was straightforward with Independent Bank Group (IBTX) shares swapped for GBNK shares on January 1st.  On September 13th I had sold my IBTX shares at $66.15 which was prescient in that the 4th quarter selloff hit Financials particularly hard.  I now have more IBTX shares than I previously had with a cost basis of $48.67.  So my arbitrage angle worked out nicely on this one.

Green Bancorp

The next one was Veritex (VBTX) shares swapped for GNBC shares, also on January 1st.  Holding both sides to completion was a losing proposition as both were impacted with the 4th quarter swoon.  Making matters worse was the forced sale of the new shares (computer glitch on the broker side) locking in a loss on the transaction.  I still retain the old shares so my booked loss is $6.54 per share.  At least the prior one was a nice offset.

Shire Plc

As with a number of investors, I incurred a paper loss on the Baxalta spinoff from Baxter on July 1, 2015 along with the subsequent acquisition by Shire on June 3, 2016.  While this loss was offset to a degree by the cash component of the Shire merger, a loss was carried forward.  On January 8th, the Takeda Pharmaceuticals (TAK) acquisition of Shire was completed.  While the shares have arrived, the cash component is expected next week.  Citi (the ADS sponsor) has provided initial indications that this merger is a fully taxable event (cash and stock) under the new tax law.  Chalk another unintended consequence onto the Trump plan as the intent of the IRS ruling was to increase revenues, I’ll finally be able to book my remaining loss on next years’ taxes decreasing their take (if the ruling holds).

Becton Dickinson

Tom at Dividends Diversify recently performed a Deep Dive on BDX, which I won’t go into here, but I had been researching preferred issues of which they had made the cut.  In general terms preferred stock pays a fixed dividend, has less (or no) voting power, but has a higher standing in the event of bankruptcy.  Each issue is different so it is wise to review the prospectus.

This is my first foray back into preferreds since 1978.  Becton’s pfd A (BDXA) is not callable, yields 5.34% (at my purchase price) and matures May 1, 2020 when it converts to .2361 shares of BDX stock.  The proceeds were used in financing the CR Bard acquisition.  I bought on the 8th making me eligible for the February 1st dividend.  I suspect we’ll see a little dilution in BDX when these mature.


So there we are with my ‘week in review’ and hope you had a good start to your year!


 

 

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6 thoughts on “Mergers & a Buy

    • You and I always seem to approach things similarly but from different angles, BD preferred had made the cut on my screener and when your post appeared I just moved my due diligence their direction. So credit is warranted as without your post I probably would have missed the February dividend. Thanks!

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    • Still unsure on the ‘arbitrage’ strategy as market whims play more of a role than I expected, I’ll have a better sense on the next two upcoming mergers which have a cash element. I have more faith in the convertible preferreds!

      Congrats on your marriage!

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  1. Yep … it was one of my earliest lessons in that preferreds being essentially fixed income proxies are no match in an inflationary environment. Ten years later I was heavy into Treasuries until they got called and repositioned overweight into common stocks. So far this round I’m looking at convertible preferred issues rather than pure preferreds. You could say that at long last I’m diversifying my portfolio a little 🙂 You’re right in that they are intriguing to research!

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