Investment Hunting just started a Blogger Interview series with an interesting interview with Roadmap2Retire a few days ago (June 21). One question in particular caught my attention, If you could only use one metric to evaluate a stock, which one would you choose? Sabeel’s answer was spot on in my book (I don’t think there is one metric that can be used to evaluate stock. If everything could be boiled down to one single number, investing would be easy. The reality is that investing in a company is a multifaceted aspect and there a hundreds of things to consider – both from a qualitative and quantitative standpoint.), but led me to ponder the proverbial what if: If there were only one which would it be?
The worst kept secret is now official, Baxalta (BXLT) is being acquired by Shire (SHPG) in a stock and cash transaction valued (10 Jan 2016) at $45.57 per share of BXLT. I was late to the Baxter party, buying into it just prior to the Baxalta spinoff due to valuation concerns. These were confirmed shortly after spinoff with Baxter now a resident of my penalty box following the delivery of my very first (and currently only) dividend cut.
Having persevered, we are now being justly rewarded. To break out the benefits – it’s a cash and stock transaction:
- .1482 sh of SHPG and $18 for every BXLT share.
This represents a 13.8% premium over Friday’s close and a 22.5% premium over cost. Not too shabby a return for six months. Then reality sets in. The negatives are many:
- Has a formal ruling been received regarding tax consequences due to the spinoff
- Impact of Shire’s impending move from Ireland to the UK on taxes
- Shires’ dividend rate (currently ~.3%) on an interim/final schedule
Although I like the combination and the pipeline, this deal calls for a longer term view than I’m willing to provide. Therefore, I anticipate selling prior to or shortly following the merger depending on valuation (i.e., is the $18 premium effectively priced in).