Vector Group to be acquired for $15/share
Moving on from a classic small cap value stock
Just a super quick update here.
This morning, Vector Group Ltd (VGR) our, “Anti-ESG value buy” from last year announced that it is being acquired by JT Group, a Japanese company that operates in the tobacco, processed food, and pharmaceutical industries.
It looks like a great deal for JT - while I didn’t look into it, I assume they will be able to refinance VGR’s 10.5% 2025 notes at a vastly lower interest rate while also benefiting from the margin-building strategy outlined in my article.
While it might be possible, I see limited upside - I doubt that a third party will come in with a higher offer.
The Boards of Directors of both companies have unanimously approved the merger agreement
Limited buyer pool for a cigarette business
Good incentives at VGR’s decision-maker level - substantial insider ownership, 9.4% private shareholder who has the board’s ear means that other options/potential bidders were likely already considered
The 41% total return from publication date was good, but not fantastic. I am happy with the outcome but will miss following the stock (I have invested in and traded VGR for about 14 years).
If anyone thinks there is still upside potential I’d love to hear your view (email or DM via Substack).
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NOTE: I am finishing up work for the next feature article. This is a beaten down small cap with decent liquidity (+$2 million/day average dollar volume). I believe there is a hidden earnings catalyst - management is “slow rolling” what appears to be a significant business model change that has the potential to substantially improve margins.
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