Nice call! I have to admit that it surprised me, but that's the kind of surprise I like! 7.5% div bump is welcome as well...
Yes, performing nicely the last two days. But given the size of the LO deal, the accompanied debt, and the increased stake by BTI, i.e., to maintain its 42% share in the larger RAI, I'd be very surprised at a special div, stock split or the like. The regular dividend would need to adjust to account for the larger earnings base, with the 75% target RAI stated at the deal's announcement last year.
As far as BTI is concerned I could see them eventually having a majority share, but an outright purchase of the entire RAI seems premature for the foreseeable future IMO.
Although I have confidence in the new RAI, I'd prefer to wait a quarter or two as the merger-related activity is incorporated, and financial results for the larger company are reported. I am also curious as how the non-cigarette products, i.e., vapor and snuff, perform, since at least on paper RAI is placing a good deal of expectation there. My opinion only...
Additional note: RAI's FAQs indicate that fractional shares will be redeemed at the rate of $72.2977. So "shootme"'s .635 should be worth $45.91.
My experience is that fractional shares paid in cash always take an extra day or so vs. the main proceeds. You won't lose it, and it will be paid in cash.
Correct, the only pertinent number is the $72.15 (RAI), and how that affects the conversion formula. LO share's price has been a red herring for some time, unless one were buying or selling pre-merger close.
There is a good set of FAQs on the RAI website concerning the merger and implications for LO shareholders. Fractional shares will be redeemed for $72.2977. Also, cost-basis for new RAI shares to LO holders is $72.15.
There are separate guides for certificated, book-entry, and brokerage held shares. Also, "The transaction is considered a taxable event for LO shareholders," which we anticipated. I think this is worth a look to all concerned.
It's been a great run, since the 'tracking stock' days with Loew's. Big gains, very nice dividends, capped off by a good acquisition by RAI. Thanks, Newport, and now onward under the new Reynolds...
With closing tomorrow (6/12), when should we see the cash proceeds and RAI shares in the accounts? Will the various transactions be effected on the closing day or would there be a business day or so delay?
Agreed for LO as far as the 'formula' goes. But I thought the market would boost RAI's price a bit now that the final hurdle to the merger's closing has been overcome.
Reuters article states that closing is now expected on June 12, following Judge Kessler's granting an unopposed motion allowing the transfer of the Kool, Maverick, Salem and Winston brands to Imperial.
It's been a great run, and let's hope that Newport prospers as a brand under the new RAI as it did for LO.
I, too, own some BTI currently, and so if it took over the (new) RAI completely, I'd assess how much of the individual stock assets I'd want with one entity. If I felt BTI were over-weighted, then I'd sell some provided I had a useful and intelligent alternative for the proceeds. I like the diversity of what would be a US and international market.
June 1 is the record date for the dividend. Its payment was contingent upon the merger not being closed by this date. Closing will be after 6/1 so div will be paid.
The prospective dividend policy was stated to be a 75% payout. So we will need to see what the new entity's earnings (per share) look like to determine the quantum of the new dividend. A few moving parts here, but the picture should be clearer with some pro-forma projections.