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EnigmaDude (97.68)

site:caps.fool.com/blogs MIG

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February 21, 2008 – Comments (2) | RELATED TICKERS: MIG

For those of you too new to CAPS (or too old!) to recall the post about using Google to search the Blog posts, the title of this blog shows the proper syntax for such a search. In this case I wanted to see if anyone had recently blogged about Meadowbrook Insurance Group (MIG) who today announced their plan to acquire Pro Century Insurance (PROS).  

PROS has been one of my top picks since I started using CAPS about 9 months ago. Their share price soared today on the news of the MIG merger.

Turns out that EPS100Momentum wrote a blog post on MIG back in October. Because I own shares of PROS in real life, I now have the decision of whether to cash in my shares at $20 (when the merger is complete) or convert them to shares of MIG.

After some of the bearish blogs that I read today I am leaning toward selling my shares and hoarding the cash for a while!

2 Comments – Post Your Own

#1) On February 23, 2008 at 7:39 PM, StockSpreadsheet (77.42) wrote:

Depending on how close the shares are to the merger price, you could just go ahead and sell your shares on the market now and take the cash.  That insures that you aren't hurt in case the merger doesn't go through.  Also, once the shares get close to the merger price, they won't move much until the merger is completed, which might be several months from now the way most mergers go.  (Of course, if a rival bidder comes along, they could push up the price, which you would lose out on if you sold now.  You will have to decide if you want to take that risk.)  Another thing is that the acquiring company usually drops in price due to the outlay they are making for the acquired company.  You might be able to buy shares in the acquiring company cheaper later.  You should also do your DD on the acquiring company to make sure that you would want to own it, factoring in if they have to take on debt for the merger, (either assuming the debt of the acquired company, taking on debt to pay for the shares, (assuming it is not a stock-swap merger), or both), which would push up the debt-to-equity ratio and increase their debt-servicing payments, which will lower earnings and could put downward pressure on the stock, especially in this market. 

Personally, I tend to sell my stock when they annouce a merger, especially if I am holding stock in the acquired company.  It has usually worked out more profitably for me that way.  After the acquiring company takes a share-price hit, I can usually buy it cheaper later if I really want to own the company.  Just my opinion, so take it for what you think it is worth.  Just something I think you should consider.  Good luck with your investing.  May all your picks be winners.

Craig 

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#2) On February 24, 2008 at 12:38 PM, EnigmaDude (97.68) wrote:

Carig - thanks for your insights!  I respect your opinions and enjoy reading your posts as well.

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