With the upcoming AT&T merger with DirecTV, shareholders of DirecTV are set to receive a nice package of compensation. The proposed buyout price which will go into effect if the deal is approved by regulators is $95 per share. DTV is currently trading at $87.55 per share, which offers investors a potential 8.51% short term upside in DTV immediately.
If the deal goes through, and AT&T shares trade at least at $34.90 per share, investors of DTV will receive stock worth $66.50 of value, and $28.50 in cash.
For example, if you buy 100 shares of DTV, which would cost you $8,755 right now (not including commissions), you will receive $28.50 back in cash if the deal is approved. That means your cost basis of DTV will go down to $59.05 in AT&T shares, but you will be receiving $66.50 of value.
Essentially, by taking on the risk of the merger not going through, you get more than a 10% discount on AT&T stock now. It is similar to buying AT&T stock at around $32-$33 per share based on its current price. That makes its dividend yield even more enticing.
Disclosure, I am long T and DTV.
If the deal goes through, and AT&T shares trade at least at $34.90 per share, investors of DTV will receive stock worth $66.50 of value, and $28.50 in cash.
For example, if you buy 100 shares of DTV, which would cost you $8,755 right now (not including commissions), you will receive $28.50 back in cash if the deal is approved. That means your cost basis of DTV will go down to $59.05 in AT&T shares, but you will be receiving $66.50 of value.
Essentially, by taking on the risk of the merger not going through, you get more than a 10% discount on AT&T stock now. It is similar to buying AT&T stock at around $32-$33 per share based on its current price. That makes its dividend yield even more enticing.
Disclosure, I am long T and DTV.
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