How much will all that new debt cost them?
The deal will cost them $17 billion plus the issuance of about 105 million in new RAI shares or about $6 billion in new capital. They're selling off assets that equal $7 billion but I'm sure there are some taxes due, so I'm estimating they'll need at least $11 billion but perhaps it could be more.
If they're able to issue debt with a 4-5% coupon then RAI is a buy. If it cost them over 8% it's a sell and anything in between I'd give it a hold.
Buy RAI-LO is my new motto and sell it high when it's bought out by Sunprance.
LO is 60.6 now giving it a 4% dividend yield.
Owners of it have about a 70% chance of seeing the deal completed due to possible antitrust issues.
They'll receive 50.5 per share in cash and 29.29% of a RAI share for each of their LO shares.
This is my kind of deal-meaning there's $$$ to be made.
Agreed, I'll go with next May and there's a 30% chance the deal may not get done due to anti trust issues.
Note- The ITYBY shares I bought yesterday are also down about $3 per share to around 91.
NEW YORK (MarketWatch) --" Reynolds American Inc. RAI -2.50% will buy Lorillard Inc. LO -5.03% in a $27.4 billion deal that includes assumption of net debt, the tobacco companies said on Tuesday. The transaction, which is currently valued at $68.88 per Lorillard share, had been on expected after the two companies confirmed that they were in merger talks. For each share of Lorillard, investors will receive $50.50 in cash and 0.2929 shares of Reynolds stock."
Good times for tobacco investors.
Is it time to buy more RAI?
Deal should be finalized soon thus giving me lots of new cash to work with.
Today I bought more--Imperial Tobacco Group plc--ITYBY, in two of my accounts because I believe they'll be one of the main benefactors of the LO and RAI marriage.
I now own ITYBY in three of my accounts with more buys to follow soon.
I'll go with 71.50 consisting of half stock-RAI and the balance in cash. They may also give investors the option to take a higher ratio of stock rather than $$.
"COLUMBUS, IN--(Marketwired - July 08, 2014) - The Board of Directors of Cummins Inc. (CMI) today approved an increase in the Company's quarterly cash dividend on common stock of approximately 25 percent to 78 cents per share from 62.5 cents per share. The dividend is payable on Sept. 2, 2014 to shareholders of record on August 22, 2014.
The Board of Directors has also authorized the Company to repurchase up to $1 billion in shares of common stock upon completion of its current $1 billion share repurchase program."
second Quarter Earnings Announcement Expected: BX has confirmed that earnings will be announced 07/17/2014. With 16 analysts covering BX, the consensus EPS estimate is $0.68, and the high and low estimates are $0.82 and $0.54, respectively.
Expected Timing: Before market open
It's a good day to sell call options against BX. That's what I did in a few of my accounts.
Buy BX "LO" and sell it high is my motto.
Grandma buys more Wells Fargo 7.5% Convertible PFD @ 1204/share putting it in her top 10 for the first time. It's now ranked 10th and makes up 3.9% of her assets.
I would have bought her more but Grandma needs some new teeth and it's going to cost her.
WELLS FARGO & C 7.5% PFD--doubled my position to 2.7% today-paid--1206.66/share.
I'll keep adding if it drops because a 6% dividend is more than enough for me to live on.
IRA #2 took a 1.5% position in HOG today @ $68.147/share. Year to date this account is only up 8% equaling the 8% return for the S&P 500.
I have orders in to buy another stock that could fill soon.
But perhaps you should look at owning some HOG.
I own a 3% position in my farm account and sold put options against it in both my farm and personal account today with the downgrade in the stock.
Also sold put options today against two well known tobacco stocks.
In other news-I also covered 25% of my short position in SPY because I no longer need the hedge.
Sold more put options against both LO and PM today in my personal account and my IRA. Sometimes it's better to be early than late.
In other news- Also sold put options against AIG today because the stock is still dirt cheap and I'd like to own more. I predict they raise their dividend to over $1/share later this year.