Saturday, 17 March 2012

BCE Buys Astral Media

Yesterday, it was announced that BCE Inc. was going to acquire Astral Media for $3.38 billion. This is a play from Bell to expand its french-media content so that it has a stronger presence in Quebec. If the deal goes through, Bell will own all of Astral Media's assets including all the pay and specialty television services, radio stations and out-of-home advertising activities (such as the advertisements seen in the majority of bus shelters in my hometown of Toronto).

The deal is going to be funded through a combination of cash (75%) and BCE common shares (25%), with Bell retaining the right to replace shares with cash in whole or in part at closing. BCE will acquire Class A Non-Voting Shares of Astral Media for $50 and I happen to be holding some of those so I'll be making a nice little profit from this deal if it all goes according to plan.

As of writing this blog post, those shares are at $48.55, the price seems to be lower than the $50 because of the risk that the deal may fall through. However, if everything works out, I can get about a  dollar and  half more. So the question ends up being if I think it is worth it to hold the shares until the end of the deal (which would be a couple months from now). If it falls through, the stock price of Astral Media would plummet, but the Board of Directors at Astral along with the majority of the voting shares are supporting the transaction so it seems likely that it will work out.

In my very short investing life, I haven't been put into a situation like this before so I don't really know what to do. I think that I should hold on to the shares and wait it out to see how the deal unfolds. Yes, there is a risk that the deal falls through and share prices tank, but based off what I read, I believe that the possibility of that is low. I may change my mind as more information becomes available (and if I have time to read it; school is really piling on the work). Also, I may just set up a stop-loss as a back up and take what I can in the worse case scenario of the deal being called off (and yes I plan to write some more blog posts that are actually helpful to people who are unfamiliar with terms like stop-loss; again, school is being mean right now).

For some reason, I'm excited about this. Probably because this is a new investing experience, hopefully it plays out well for me and even if it doesn't, I'll have gained experience for the next time I happen to be in this situation.

-the Paperboy

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