Exelon Acquiring Pepco

[jazz4cash]

EXC will acquire POM. I have a moderate position in POM. EXC closed today at 35.03 (Down 3.15%) and pays $1.24 dividend (3.4%). POM closed at 26.76 (+17%) and pays $1.08 (4.7%). The acquisition price is $27.25/sh and the deal is not supposed to close until 2Q15.

Now what happens?

I am specifically concerned that the dividend payout will be reduced. I assume I will get the equivalent qty of EXC shares based on the $27.25 price, but how will the dividend payout be adjusted? Should I sit tight or collect the ~17% premium and move on?

100 shares of POM pays $108 annual dividend.
Priced at @ 27.25 it buys 77.8 shares of EXC priced at 35.03.
77.8 shares of EXC pays $84 annual dividend.

 

[heeyy_joe]

SELL.

 

[haha]

Some time ago I bought Exelon as a proxy for natural gas prices. That bet had begun to pay off fairly well, when they made what appears to be an overpriced acquisition. It seems that they are trading what may have become somewhat overpriced stock for some regulated utility assets and business. Maybe they no longer are attracted to the merchant power business.

If your payout is less (and it may not be, this is a long way off and they may eventually declare a dividend higher than the old EXC dividend). In any case, even if you give up a little income, you have very likely increased your security.

My gains are short term, so I will just sit tight. In any case it is not a very big position for me (2%).

 

[wingfooted]

What you will is the number of shares held times the acquisition price plus any dividends before the deal closes.

It is an all cash deal, so you won't get any EXC shares.

It is very typical that one of two things happen

1). The deal falls through and your shares will plummet in value.
2). A bidding war will erupt and someone will offer more than the acquisition price. Your shares will go up in value.


Frankly, if it was me, I would be thankful to get nearly a 20% pop in one day, sell the shares, and never look back.

 

[steelyman]

My gains are short term, so I will just sit tight. In any case it is not a very big position for me (2%).

I also hold Exelon, but my earliest lots were bought much higher than recent prices. I'll keep the losses for now and take the dividend. I'm working down other losses

I think I first bought in 2006 when I was behaving like a stock market Yosemite Sam.

 

[jazz4cash]

What you will is the number of shares held times the acquisition price plus any dividends before the deal closes.

It is an all cash deal, so you won't get any EXC shares.

It is very typical that one of two things happen

1). The deal falls through and your shares will plummet in value.
2). A bidding war will erupt and someone will offer more than the acquisition price. Your shares will go up in value.


Frankly, if it was me, I would be thankful to get nearly a 20% pop in one day, sell the shares, and never look back.

I am <slowly> coming to the same conclusion. I did see where it is an all cash deal but somehow can't imagine shareholders accepting that (but it seems they almost always do). The close is a long way off with numerous regulatory hurdles (5 state PUCs involved). The class action vultures are circling, but I have minimal positive experience when that occurs. Thanks for the feedback.

 

[jazz4cash]

Update:

Pepco suspended their dividend. The merger approval from shareholders and all jurisdictions except Wash DC was completed last year. Pepco is based in Washington DC which has various regulatory bodies that are holding up the deal. This started ~2 years ago and was supposed to be completed by 3Q15. This experience has taught me a lot. Shareholders are wusses and really have very little influence in these situations. The good news is that I got out last year very close to the buyout price and have about 40% gain since the announcement.

 

[Mulligan]

Update:

Pepco suspended their dividend. The merger approval from shareholders and all jurisdictions except Wash DC was completed last year. Pepco is based in Washington DC which has various regulatory bodies that are holding up the deal. This started ~2 years ago and was supposed to be completed by 3Q15. This experience has taught me a lot. Shareholders are wusses and really have very little influence in these situations. The good news is that I got out last year very close to the buyout price and have about 40% gain since the announcement.

I never have played merger arbitrage play before, but I have been looking at POM stock price and have been tempted, as price is now close to stand alone price. The dividend is suspended only by agreement with Exelon until merger is officially cancelled, or completed. Plus EXC will owe them over a $100 million if its cancelled. A dividend will be restored. But, POM does have fleas. No regulatory rate actions since merger talks and their finances are deteriorating.


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[steelyman]

Deja vu all over again. I see I posted in this thread a couple of years ago. I still hold those EXC shares, and Quicken reports that my return on investment is around -15%. I have a long-term call option out there for sale on a portion of it, but that's about it.

I'm no longer behaving like Yosemite Sam, nor am I a Market Timing Winged Monkey. I guess retirement calms you down a bit.

 

[Mulligan]

Deja vu all over again. I see I posted in this thread a couple of years ago. I still hold those EXC shares, and Quicken reports that my return on investment is around -15%. I have a long-term call option out there for sale on a portion of it, but that's about it.

I'm no longer behaving like Yosemite Sam, nor am I a Market Timing Winged Monkey. I guess retirement calms you down a bit.

Im still Yosemite Sam in my mind when it comes to trading. But my buy finger does a good job of rejecting 95% of my impulses. I talk big about stocks but ultimately take the run and hide approach. For example I own Exelon. But its in their subsidiary PECO in the form of trust certificates.


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[jazz4cash]

I have no opinion of EXC, but many EXC shareholders seem to feel that POM merger is necessary to stabilize EXC so the stock can appreciate. The merger is all tangled up with the regulators and politicians so I would stay away. Actually I was going to ask Mulligan if there were some POM preferreds that might benefit from these shenanigans. I think many POM
shareholders don't understand going on.


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[Mulligan]

I have no opinion of EXC, but many EXC shareholders seem to feel that POM merger is necessary to stabilize EXC so the stock can appreciate. The merger is all tangled up with the regulators and politicians so I would stay away. Actually I was going to ask Mulligan if there were some POM preferreds that might benefit from these shenanigans. I think many POM
shareholders don't understand going on.


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Jazz, POM doesnt have any preferreds. They used to and from companies that they bought out along the way, but have since retired all of them. Electric preferreds are getting harder to find as many are called when another utility buys them out. Or they have called them and have issued debt instead as the market to borrow has been cheaper. Only about a half dozen or so utilities that I am aware of have preferreds. And most of those are just old issues that never got retired. Only a couple utilities have actually issued any new ones the past few years.


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[Mulligan]

Idle cash promotes risky behavior from me.... Ok, I couldnt resist. I put a 500 share just for the helluva it bet at $21.65 on Pepco today. If Im wrong, so be it and I will own the stock and go from there. But Exelon has a lot of sweat and greenbacks in this. Maybe they can make one last effort to grease some open wallet pigs and get this passed. The stock is down near its pre-buyout offer price from a few years ago, all the while most all other utilities have climbed significantly since then.... Oh well, time will tell.


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[jazz4cash]

Idle cash promotes risky behavior from me.... Ok, I couldnt resist. I put a 500 share just for the helluva it bet at $21.65 on Pepco today. If Im wrong, so be it and I will own the stock and go from there. But Excelon has a lot of sweat and greenbacks in this. Maybe they can make one last effort to grease some open wallet pigs and get this passed. The stock is down near its pre-buyout offer price from a few years ago, all the while most all other utilities have climbed significantly since then.... Oh well, time will tell.


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Yikes!


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[Mulligan]

Yikes!


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If this is the riskiest investment I have ever done, I must have lived a sheltered life, ha! Its not like I invested in Chesapeake or Valiant. They are a profitable company and will get a $150 million walk away bonus. The dividend will be reinstated once the official termination with Exelon occurs as they were the one not allowing the dividend per the merger agreement. Heck if it does sink into the teens, on selling fatigue I will pony up another 500. I flipped another utility a few months ago Empire District from $20 something to around $28 in 2 months time plus a divd, when I smelled they would be looking to be acquired. Of course I bailed a bit too quick as they found a suitor quickly and it was recently trading near buyout offer of $33. Maybe its time for Mr. Market to take back that easy money I made.


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[Coolius]

Idle cash promotes risky behavior from me.... Ok, I couldnt resist. I put a 500 share just for the helluva it bet at $21.65 on Pepco today. If Im wrong, so be it and I will own the stock and go from there. But Exelon has a lot of sweat and greenbacks in this. Maybe they can make one last effort to grease some open wallet pigs and get this passed. The stock is down near its pre-buyout offer price from a few years ago, all the while most all other utilities have climbed significantly since then.... Oh well, time will tell.


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The Dark Side, Lord Darth Mulligan has gone over to, I am of strong feeling.

- Yoda the Jedi Knight

 

[Mulligan]

The Dark Side, Lord Darth Mulligan has gone over to, I am of strong feeling.

- Yoda the Jedi Knight

Coolius, you always have some spare investing cash laying around. Come join the The Dark Side with me. What is more exciting than buying a stock that you have absolutely no idea what is going to happen? Look closely in the Exelon financial statements in the line item, "greasing the local DC officials". If that number has been increased the merger isnt dead yet!


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[Coolius]

Thus the Evil Darth Mulligan tries to sway the young and foolish Jedi Trainee to cross the aisle to the Dark Side, just like the Emperor did to him so very long ago in a galaxy far far away.....

But, watch ye thereof !! In the cold damp mists of the Dark Empire, your very essence - otherwise known as investment funds - will be sucked away faster than the thrust of a lightsaber.

No, most Evil Lord !! I will not venture to those lands of whence you speak. You are well equipped for your task, with a pension that doth exceed your living expenses; this Jedi Trainee hath no such like resources. Thus only his wits and senses hath he, to protect himself from those who would lurk to entice, for they be such as yourself......

 

[Mulligan]

Thus the Evil Darth Mulligan tries to sway the young and foolish Jedi Trainee to cross the aisle to the Dark Side, just like the Emperor did to him so very long ago in a galaxy far far away.....

But, watch ye thereof !! In the cold damp mists of the Dark Empire, your very essence - otherwise known as investment funds - will be sucked away faster than the thrust of a lightsaber.

No, most Evil Lord !! I will not venture to those lands of whence you speak. You are well equipped for your task, with a pension that doth exceed your living expenses; this Jedi Trainee hath no such like resources. Thus only his wits and senses hath he, to protect himself from those who would lurk to entice, for they be such as yourself......

Nice prose Coolius! Hmm, since unassuming Pepco is too risky, I suspect trying to sell you on Chesapeake and Valeant would fare no better?


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[Mulligan]

Im not giving up hope. Businesses are rallying support for the merger citing improved grid with Exelon takeover... Just need a few bills stuffed in the right peoples pockets and maybe there is still hope.
http://www.businesswire.com/news/ho...o-Holdings-Exelon-Merger-Grows-D.C.-Community


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[Coolius]

Irresistible entreaties of Lord Darth Mulligan have skillfully overcome weak resistance of the young & foolish Jedi Trainee, who has succumbed to the siren song of the Dark Side.

The foolish one, casting aside all reason and thoughts of self-preservation, hath rushed headlong into the dark mists of the Empire, following Lord Darth Mulligan thence to the Dreaded Catacombs, oft whispered by men of valor in hushed tones, known as Merger.

There, he suffered to give up valued resources for vague promises of gain by merger. As it was thus foretold by Lord Mulligan, that the last holdouts in WDC-PUC might in time capitulate and assign their seal of approval on the proposal.

So now the foolish young Jedi waits, in fear and trembling, for the Monster called EXC-POM to emerge, or forever hibernate within its chambers.

 

[Mulligan]

Well give it a month or so, and we will find out. One thing is certain, I did call BS Exelon's threat to walk away by March 11 deadline correctly. I noticed on Pepco's website they also posted exact same article I cited a few posts ago...They are obviously trying a new angle...Pressure imposed by community leaders on officials to consummate the deal.


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[Mulligan]

Chickened out and sold half earlier this morning, watched it sink and sold other half... $5 profit, what a trade! Actually I sold because I dug deeper into the company. Thought I would be fine just holding the shares if merger didn't come through. But its dividend history is down right a disgrace, raised 2 cents in last 15 years, and its future costs are tremendous. The DC politics overseeing this company doesn't help either.


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[Coolius]

Chickened out and sold half earlier this morning, watched it sink and sold other half... $5 profit, what a trade! Actually I sold because I dug deeper into the company. Thought I would be fine just holding the shares if merger didn't come through. But its dividend history is down right a disgrace, raised 2 cents in last 15 years, and its future costs are tremendous. The DC politics overseeing this company doesn't help either.


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And likewise did the young and foolish Jedi Trainee.

So without treasure they sought so eagerly, the Jedi Trainee and Lord Darth Mulligan, doth emerge from the dreaded Catacombs, bruised and battered but whole and safe.

And the Monster called Merger remained bound in his cave, held by the heavy chains of his captors, otherwise known as the WDC politicians. And thus he stays, and may never again see the light of day.

And Lo! As they departed forth, they looked back and the cave entrance was slowly collapsing, closing off all future entrance to that dreaded edifice. So it is to this day.

Thus another adventure doth end, and new dangers and forays await the pair as they proceed upon their journey.....

 

[jazz4cash]

There is a meeting and possibly a vote Wednesday. Looks like it sank today and I expect a bigger hit when shareholders realize their March divi is MIA unless they get approval. With all the politics its a spec trade.

You guys are hilarious.
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