Wednesday, September 3, 2008

Another MANDA Addition: Lincoln Bancorp (LNCB)

Our fifth addition to our M&A portfolio is Lincoln Bancorp (LNCB) which agreed today to be acquired by rival First Merchants Corp (FRME). Lincoln shareholders have the option to receive about $15.76 in cash per share or they can choose to swap their shares for 0.7004 shares of First Merchant common stock. The deal is expected to close in the fourth quarter of this year.

If you want to buy this stock for yourself, be careful! The average daily volume is less than 5,000 shares. Floor traders are taking advantage of this illiquidity by expanding the spread between the bid and the ask prices, so if you want to own this stock, you might have better luck placing smaller limit orders (less than 200 shares or so) some place between the bid and the ask. I managed to get my order executed at $13.97/share which represents over a 12% gain on the transaction. Plus, the company has been regularly paying quarterly dividends of 0.14 cents/share. If we only manage to snag the September dividend, our total gain will be almost 14%, and if we're extra lucky, we might get the late December dividend thus increasing our gain to 15%!

Now the press releases don't say when shareholders need to choose between cash or stock, but if First Merchants is trading above $22.50 at that time, we'll make even more money. And with many bank stocks on the upswing, there's a good chance it'll get there in the not too distant future. Yippee!

To see the MANDA Fund's current holdings, click on the Portfolio link on the right under Blog Resources.

In more MANDA news:

Rohm & Haas (ROH) paid a $0.41/share dividend on Sept. 1st.

Community Bankshares (SCB) will be paying a $0.12/share dividend on Sept. 30th to shareholders on record as of Sept. 15th.

Tumbleweed Communications (TMWD) is closing today at $2.41, one of the lowest prices since the takeover was announced on August 8th. There's no new news on the company, but the most important hurdle to this deal is the Exon-Florio process which is a government review of foreign companies to ensure that national security is not breached. (The takeover company is the Sopra Group, a European IT consulting and services company.) Being unfamiliar with the process, I can't give an opinion on the outcome, but if you want to take the risk and are able to pick up the company at this price, you'll wind up with a nice 12% return. Since I've already bought the maximum number of shares allowed by the Fund at $2.52, I can't buy any more, alas.

No comments: