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VHC buyout options

Apr. 08, 2011 10:38 AM ET
John H. Ford profile picture
John H. Ford's Blog
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As I mentioned in previous articles, it appears some Wall Street investors are betting on a buyout. This could be pure rumor, or in my opinion, there has been an information leak. If they are negotiating a buyout, it's very difficult to keep that completely under wraps, and leaks are not uncommon. There are probably 20 people on the inside who have that information, and one slip of the tongue to a spouse or a crony, can begin an avalanche. But, we do not know for sure what is going on. Here are some options as I see it:

Option number one: there is a $50 per share offer on the table and VHC is happy with the price, and negotiating final terms. In this situation, shareholders will benefit in the near term.

Option number two: there is a $50 per share offer on the table, and VHC will not sell at that price. This could be better for shareholders in the long term. If VHC believes their company is worth more than $50 per share, it probably is, and that will eventually reflect in the share price.

Option number three: there are no buyout offers at present. I believe the market is betting on a buyout, and that expectation has driven the price to $27 a share. If it turns out that there are no buyout offers on the table, the share price could rapidly drop back to the low teens. But, in the long run their business model should pay off for shareholders, it will just take a while.

We will eventually know the truth, but right now, we are enjoying price appreciation that could be based on rumor, speculation, or facts.

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