Monday, November 10, 2008

New MANDA Addition: Centennial Communications

I know I said that I was putting a freeze on any new acquisitions for my M&A Fund, but rules are made to be broken and besides, this looks like a fairly solid deal. The credit crisis seems to be easing (a little) and consolidation in the cellular communications space is inevitable. Well, today Centennial Communications (CYCL), a guppy in the ocean of cellular carriers, was swallowed up by industry leviathan AT&T (T). It's an all-cash deal worth $8.50 per share. Centennial's stock more than doubled on the news over yesterday's closing price of $3.84. Centennial's largest shareholder has already agreed to the merger. Completion of the deal is subject to shareholder and regulatory approvals. AT&T figures the acquisition to be completed by the second quarter of 2009.

An analyst quoted by Reuters put in his two cent: "I'm surprised to see a deal in this economic climate. But on the other hand, AT&T is using cash on hand and taking advantage of the significant decline in asset prices," said Michael Nelson, a wireless analyst at Stanford Group. "This is one of the few rural wireless assets left. Perhaps it was inevitable," he added.

I bought the stock near the end of the day at $7.80, representing a 9% return on the trade (assuming the deal goes through). That's roughly a 30% annualized return. I'll take that right now, thank you!

Reader FYI: I'm doing research on those high dividend paying master limited partnerships (MLPs) and should have a report on them in the next few days, so stay tuned!

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