Exited American Greetings: 36.62% Total Return in 15 Months

As you probably know, American Greetings (AM) is going private. A group of the founding family members (Weiss) have offered $18.20/share and the board has accepted the offer. The deal is expected to close in Jul 2013. I recommended and bought the stock first in Dec 2011. Over the last 15 months, I have added to my initial purchase a few times and as the Weiss family made the first offer to take the company private, I advised my members to continue to hold the stock.

The following is the chronology (links lead to the exclusive premium content that I am now making public):

  1. Dec 15, 2011: Initial recommendation with a target of $30/share
  2. Dec 23, 2011: Target reduced to $23/share. Stock still a buy
  3. Dec 23, 2011: First purchase of stock at $13.02/share
  4. Jan 04, 2012: Increased position at $12.65/share
  5. May 10, 2012: American Greetings assumes Senior Secured Debt from the struggling Clinton Cards in UK out of receivership, ultimately giving it ownership of half of Clinton Cards’ 750 stores. For a mere $56 m in investment, American Greetings acquired $300 million in revenues. A fire-sale acquisition, that in my understanding was the key reason why the Weiss family started to entertain the thought of taking the company private. If I acquire $1 for 16 cents, I know I would try to keep all the upside for myself – so really can’t blame them Smile
  6. Sep 26, 2012: The Weiss family makes the first offer to take the company private at $17.18/share. I recommend my members to NOT sell and keep holding the stock.
  7. Jan 17, 2013: Increased position in AM, bought additional shares at $15.37/share
  8. Jan 18, 2013: The Weiss family raises their offer to $17.50/share. We are still not selling
  9. Apr 01, 2013: The Weiss family raises their offer to $18.20/share + a dividend of $0.15/share to be paid in June. The Board accepts the offer
  10. Apr 02, 2013: The stock is sold from the Value Stock Guide Premium Portfolio at $18.15/share

My average cost across the 3 purchases was $13.82/share, after adjusting for the commissions paid.

Come July, the stock will cease to exist. However, there is still an opportunity to buy the shares today and collect a dividend of $0.15/share, giving you a pretty much risk-free ~1% return in 3 months. If you have money parked in a CD or a money market account, this is a much better deal with very little risk. There is also a possibility of some capital appreciation.

The company is selling at less than its intrinsic value so long term shareholders are right to feel aggrieved. However, for me this is especially good timing to shore up my cash position as with the latest purchase in March we were down to 5% cash in the portfolio.

Besides, it is often wise to just take your gains and move on.

Comments

    • says

      @Mark We have already sold as the post indicates. I do not think there is any profitable arb potential at this time. Whopper Investments went long recently but they are going to be disappointed.

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