For some years I accumulated some shares of UST is a DRIP. Now converted to my Wells Trade account. This stock jumped something like 25% on Friday as there are buyout discussions with Altria (MO). This has been a decent, dividend paying stock for me but this is quite a price jump. I can sell now and, I assume, capture some gains or I can hold and if there is a buyout at this level I would get an appropriate number of MO shares which also pays pretty good dividends. As a company I liked UST more than MO but I don't know where to go from here. I have generally been able to figure out some good stocks to buy but I hae no real plan for selling stocks, the idea being to collect dividends and sell some stocks as other needs arise in my life.
Any ideas on how to evaluate this situation?
At one time UST was by far my largest position. Tobacco was 40% of my equity allocation. I still have a good slug of UST. I would have sold on Friday, but I already have >$100,000 realized capital gains this year and this would have added a lot more since this is a very low basis holding.
But from what I have read, it is at least as likely to be a cash deal as stock. I held, only because I would rather put off the gain at least until next year. But that may have been not too smart. If the deal falls through, it is probably back to $50 and maybe lower since I have thought that there is some takeover premium built into the price. And if they pay cash, it is likely to be before yearend anyway.
On the positive side is that UST stayed high and in fact got higher all day Friday, and even crept up in after hours trading. Arbs aren't dumb, so to me that says this is very likely to go, and go at a good price price.
UST has been a wonderful investment for me- while the much of the rest of the world was getting creamed in the dot-bomb fiasco, I was getting well with UST wich had been knocked down with a lawsuit and judgment over their marketing practices, as well as the general bad karma of tobacco at the millenium. I also bought MO about the same time.
IMO Altria is a much better management than UST, but I haven't paid much attention to it recently. (Post spin-off of Kraft and PM International)
Clearly the market feels that Altria will do a better job with the UST assets than UST has been doing lately, and both companies increased in price after the rumor came out.
Let's hope it doesn't fall through, and that those of us who would prefer stock can get that.
Ha