Thursday, May 22, 2008

Another buyout offer on one of my stocks: Calpine (CPN)

On April 30th, I wrote about a buyout offer on my shares of Wrigley (WWY) from Mars. In that same post I wrote about purchasing shares of Calpine (CPN) which was one of my first non-dividend stocks I have purchased in several years.

My reasons for purchasing the Calpine:

1. Low cost producer of energy
2. One of the greenest producers of energy
3. Young age of power plants
4. The raising cost of building new power plants
5. I think the stock will start to pay a dividend over the next few years.

Well today Calpine (CPN) was offered a buyout from NRG Energy (NRG). NRG offered 0.534 share of its stock for each Calpine share and based on NRG's trading price on Thursday, the offer values Calpine at $21.76 per share.

I think this deal will happen for a price closer to $24 than the current offer of $21.76 and here's why. The hedge fund Harbinger Capital Partners, which owns more than 24 percent of Calpine's shares, said the offer represents a good starting point and that Calpine's board should immediately negotiate with NRG over terms.

I bought the stock on April 28th for $20.25 a share and after a couple of weeks I now have a gain of over 11% on the stock. I am hoping for a couple more dollars a share after further discussions between Calpine and NRG.

I also purchased more shares of Royal Bank of Scotland (RBS) today after yesterday's big drop.

Disclosure: The Div Guy owns shares of WWY, CPN and RBS at the time of this post.

9 comments:

Dividend Growth Investor said...

That's very interesting Div Guy. Maybe the money, invested in WWY and then invested in CPN are bound to be invested in opportunities which eventually are bought up. Call it Karma if you want, but please let us know what you will be buying with the money form CPN..

Div Guy said...

DGI,

It is kind of funny how things work out. I am not sure where I will put the CPN money yet. I will most likely add to one of my current holdings that has dropped in price. I will let you know when I buy something new.

Dividends4Life said...

Since they are paying you in shares have you decided if you are going to hold NRG Energy?

Best Wishes,
D4L

Div Guy said...

D4L,

After my first review of NRG, I plan on selling my shares of CPN. When the deal is finalized, I will sell my shares hopefully at around $24.

Dividend Growth Investor said...

Another interesting fact is that BUD is very likely to be bought out pretty soon by InBev. After the WWY buyout, i think that dividend aristocrats are pretty likely candidates for buyouts. These stocks have moat :-)

Div Guy said...

DGI,

BUD is one I was looking at to purcahse but with the buyout talk the stock has jumped too high for me.

Dividend Growth Investor said...

[...]DivGuy is getting pretty good at finding buyout opportunities to invest in. I enjoyed reading his post Another buyout offer on one of my stocks: Calpine (CPN).
[...]

Div Guy said...

DGI,

Calpine just rejected the offer from NRG. I think they will get a better offer of $24 from NRG or another company. If the stock drops back down to $20, I will buy more shares.

PENNY STOCK INVESTMENTS said...

Not big on insurance.