Singapore-based Flextronics offered early Monday to buy Solectron to create a bigger manufacturing services provider with a wider range of services to companies that make electronics, cell phones and computers. Solectron's shareholders are being offered Flextronics stock or $3.89 in cash. By the end of Monday's trading, Solectron closed at $3.88.
Credit Suisse analyst William Stein said the Milpitas, Calif.-based company's stock will no longer trade based on its earnings potential and fundamentals as a standalone company. Instead, the shares will trade based on how likely Flextronics International Ltd. is to close its $3.6 billion offer.
Stein upgraded Solectron to "Neutral" from "Underperform." The shares will fluctuate until the sale closes, Stein said. Still, the shares have little room to drop with Flextronics expected to close the deal by the end of the year.
And there you have it: Solectron will no longer trade on its own fundamentals, but on expectations about the merger.