E Sh-tdown To End

2018 is shaping up to become another year during which our selected small caps get cashed out by takeover bids. We had only one such takeover in 2017, of Stada Artzneimittel, a German generic drug producer, by a hedge fund pair which still owe us money because the final price paid to German shareholders significantly topped what was paid to owners of its American Depositary Receipts. We also gained from two mergers, which revalued our holdings in two stocks.

Back before the Global Financial Crisis (2007-9), we got bought out of holdings regularly at huge premiums.

As of today there have been two buyouts in our portfolio.

*Amazon (AMZN) cancelled its collection of “Prime” membership after I sent the firm a copy of Friday's blog. It shouldn't be necessary to go public with disputes in order to settle automatic sign-ups to a sneaky system of collecting payments headlined as a “free trial.” The message about the “non-renewal” was headed “Don't forget to smile!”

News today from Bermuda, Brazil, Britain, Canada, Chile, China, Colombia, Denmark, Dutch Antilles, France, Finland, Germany, India, Ireland, Israel, Italy, Japan, Mexico, Panama, Sweden, Switzerland, and the USA where the sh-tdown is being ended.


*American International Group and Validus Holdings (VR) of Bermuda today announced that AIG will pay $5.56 bn to buy the Bermuda-based reinsurance firm and also re-enter the Lloyd's of London market. Commented Harry Geisel, a bit of an insurance maven who first tipped VR, CEO “Ed Noonan always said he would sell if the price was right.” Now a recovering AIG is using its excess capital to make the play. The deal is expected to close by the summer but already VR has gained 44.46% today and is 57.4% over what we paid for it. It booked the highest gain on the NYSE. The deal will be at $68/sh plus 0.38 per share in quarterly dividends at least twice. .

Given that newbie AIG CEO Brian Duperreault says he can cover the costs of the deal, which also gets AIG into crop insurance, we think it is unlikely to be derailed. After the spate of hurricanes and earthquakes last year, VR lost about 15% but Harry insisted that the company would be able to recoup P&C payouts this year with higher premiums. At this stage, unless regulatory risks appear, we will hang in until the formal tender. AIG is a US stock and it fell today on the news and its down-rating by S&P over what it will cost.

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