Sunday, January 22, 2012

Taking over the business

So, it finally happened: one of the companies I have held, loved, extolled, hated, feared, and gradually warmed back up to again has had an offer by a larger company to buy it out.  Dundee REIT has agreed to buy Whiterock REIT for a 20% premium of the previous 20-day average price.

Since the deal has yet to be ratified by the shareholders the price for shares of Whiterock have only jumped 18-19% ish.  Some people sold off their holdings expecting the deal to collapse and hopefully buy back in after the price returned to it's previous value, while some investors jumped in hoping to exploit the small difference between the current market price and the offer price, while some very optimistic investors are either holding, or jumped in awaiting a potentially superior offer from another company.

As I see it, there aren't any other REITs in Canada that would be large enough to be able to comfortably absorb Whiterock.  So if the shareholders like the 20% bonus then I suspect they will all vote in favour.

I'm still undecided.  I liked Whiterock because they always did carry a bit of doubt since analysts couldn't agree about various operational aspects of the company so there was always a discount and thus a very high yield.

Since I had liked Dundee too (with aspirations to buy some in the future when my portfolio was bigger) I get the feeling that I'm just going to vote in favour and take the shares rather than take the cash buyout.  This will at least save me from a little capitol gain when the units get absorbed.

Now how does this help you?  (I can hear you shaking your heads)  If you had been following my posts and perhaps had a few shares of Whiterock then my gain would have been your gain.  If you haven't been following my advice then this little windfall might finally give you the kick in the pants you need to start yourself down the DIY investment path.

Or not. 

Full disclosure:
Approximately 9% of my holdings were in Whiterock REIT.  (Before the announcement)  Now that Dundee has agreed to buy it out at a premium, my new valuation puts it to about 12% of my portfolio.  Once the dust settles, I'll re-balance my holdings to get this back down below 10%...  Ideally 8-9% and no more. 

Disclaimer: I'm writing this article to HELP you.  If you do something stupid based on my advice without thinking it through yourself, then you have only yourself to blame.  Plus if you try to sue me for bad advice I don't have any money either, so good luck with that.  Seriously people, stop making your lawyers rich... they don't need the cash!  WE DO!  If you get burned a couple times, it's a learning experience.  Just try to remember to NOT fall in love with your holdings.

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