Must of traded before the stock closed up $2/share.
The seller is well hedged but other than the dividend they have nothing left on the up side.
"Montpelier Re Holdings Ltd. MRH will be acquired by Endurance Specialty Holdings Ltd. ENH in a cash-stock consideration of $1.83 billion."
Anyone follow ENH? Both firms are based in Bermuda and MRH is being purchased at a 15% premium to book value via $$$ and shares in ENH which trade at a 10% discount to book value.
I upped her monthly distribution check by another 11% starting this April. To stay even she only needs to earn 6% on her capital. My goal is to earn her 8% but thanks to a robust stock market like most investors she's done much better than that.
Thank you Berkshire Hathaway.
NY Times article explains it well--"Reading the Fine Print in the Heinz-Kraft Deal" Google it..
"Kraft shareholders will receive one share of Heinz stock for each share of Kraft stock. This is par for the course. The unusual part is that Heinz is private and will publicly list its shares in connection with this transaction.
This immediately raises valuation issues.
Because Heinz shares do not trade in the market, their value is uncertain. Kraft, therefore, took a leap of faith in accepting the offer. This may not have been a huge leap since you can pretty much assume that Heinz would be priced similarly to Kraft in terms of multiples to earnings and revenue. In fact, since Heinz is better-run, it may even be priced higher. These are numbers that the investment bankers can easily compute."
Worth about $23 billion now.
The DOW OLN deal is interesting as well. I own some DOW and BRK has warrants that are close to the $$$$$$$.
Bought more BRKB in account #3, I took a 11.7% position in the stock at 143.2/share.
His HNZ/KRFT pending shares are now worth about $23 billion and the 3G boys will build this firm into the largest food company in the world. Next up will be a deal with PEP.
Account #3 makes up about 5% of my equity holdings.
Buy today in your personal accounts and the next dividend will be qualified, so I agree-it's a good time to take a position. If the drop continues then start buying in your IRAs.
"Return Of Capital
The majority of special dividends are classified as a return of capital and lowers your cost basis. Which is just the original value of the shares when purchased.
What this means is, your cost basis is reduced by the amount of the distribution. It’s not a taxable event until you sell the shares. You will eventually pay capital gains on the difference between the selling price and the new cost basis. The exact tax implications will depend on the tax code and price of the stock at the time of the sale."
Google the subject. Chances are that the dividend will be considered a return of capital that will lower your cost basis in the stock.
Berkshire owns about 1.5% of all the outstanding shares of GMCR through its 400 million share position in KO.