Another MANDA addition: American Land Lease (ANL)

Bad year for M&A activity
The fact that 2008 has been a bad year for mergers and acquisitions is a “duh” type of statement, but the extent of withdrawn deals is noteworthy because it is unprecedented. According to a Reuters article published this morning, M&A activity is down 35% globally with over 1100 deals canceled which is 300 more than were canceled last year. Estimated total value of the withdrawn deals is around $800 billion with underwriting banks losing more than $815 million in fees. JPMorgan-Chase (JPM) and Goldman Sachs (GS) lost an estimated $73M and $64M in fees respectively. Guess they really did need a bailout.

Brighter prospects for next year
The good news is that many M&A experts feels the worst is behind us and things can only get better. Hoping that will be the case, I took another plunge into the M&A market and picked up some shares of American Land Lease (ANL) today at $13.30 per share. The proposed acquisition was announced a couple of weeks ago on December 10th. Expecting to close in the first quarter of next year, the all cash deal is for $14.20 per share. Just after the merger was announced, ANL was trading around $12.60. Although the terms of the deal sounded viable, I was skeptical for two reasons. The first was that market volatility as given by the VIX was still extremely high and I wasn't sure at the time where it was heading. (Market volatility measures not only market risk but lately has been paralleling credit risk.) The other reason was that I got burned previously on another real-estate acquisition—BlueGreen Corp. (BXG)--that didn't pan out and I wasn't eager to make a similar mistake. (It was one of those canceled deals.)

So what changed my mind?

What changed my mind was the fact that ANL's stock price has been steadily rising on much heavier than normal volume ever since the deal was announced. (Average daily volume is 83000.) Most likely this is the result of the terms of the deal which states that the acquiring company, private equity firm Green Courte Partners, must own at least 88% of ANL's outstanding shares. This reassured me that Green Courte seems to be serious about the acquisition and gave me enough courage to buy the stock today. If the deal does go through in the next month or so as projected (keeping my fingers crossed), I expect to make a tidy 6.8% profit which translates into an annual return of roughly 80%.

Other MANDA news
The current MANDA chart listed under the MANDA portfolio is not up-to-date. The return values don't reflect recent dividends. It'll be updated later today and include the addition of ANL.