DPS merger....stub value

[ugadawg_98]

DPS is being bought by Keurig/Green Mountain.

I was buying this morning in the $118s.

 

You get $103.75 plus stub of new business.

Cost basis on stub around $15. Stub to pay .60 per annum dividend or 4% yield

 

Thoughts?

[writser]

My thoughts are that you should probably do a little bit more work valuing the stub. What does the pro-forma company look like?

[hillfronter83]

My thoughts are that you should probably do a little bit more work valuing the stub. What does the pro-forma company look like?

 

I took a quick look and here is my quick dirty napkin analysis:

the merged company will have about $11b sales. Using COKE's current P/Sales of about 0.48. I got about $3.8/share for the stub so current price is too expensive for me.

[ugadawg_98]

There's a better discussion on this on the Investment ideas forum, so I'm posting there now.