Shares of Ferro (NYSE:FOE) were trading more than 22% higher as of 10:45 a.m. EDT on Tuesday. Driving that rally was news that the technology-based coatings and color solutions company had accepted an acquisition proposal.
Ferro has accepted a buyout offer of $22 per share from Prince International, a portfolio company of the private equity firm American Securities. The all-cash deal values Ferro at $2.1 billion, including the assumption of debt. That’s 12.4 times its trailing 12-month adjusted EBITDA. The per-share purchase price represented a 25.1% premium to its closing price Monday and was 33.8% above its 90-day volume-weighed average price.
The company also reported its first-quarter results Tuesday. Net sales rose 14.3% to $288.4 million, which beat analysts’ expectations by nearly $28 million. Meanwhile, its earnings jumped 15.8% to $0.22 per share, which was $0.01 per share above analysts’ consensus estimate.
While Ferro reported a stronger-than-expected quarter, all eyes are now on the transaction that will take it private. The deal comes at a healthy premium, making it less likely that a competing bid will emerge. Given that the stock rallied to more than $21.50 a share following the announcement, there’s not much upside left. Because of that, shareholders might want to consider cashing out now rather than risking the deal falling apart before closing.
This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.
View more information: https://www.fool.com/investing/2021/05/11/why-ferro-stock-is-soaring-today/