In June of last year, PENN National Gaming Inc. (PENN) agreed to be acquired by a group of investors led by Fortress Investment Group (FIG) for $67 in cash for each share of the stock. At the time of the buyout announcement this was a 31% premium over the previous days stock close at $51.14.
Right after the merger was announced the stock shortly dropped for 7 straight trading days. Normally after a buyout announcement stocks trade pretty close to their buyout price, say within 5% of the actual buyout offer. PENN was only at that range the first day the merger was announced. Now the date of the merger also has a play on how close the stock will actually trade to the buyout price. In the case of PENN the merger wasn’t set to complete till 12 – 16 months after the announcement, a bit long for some people’s tastes. The terms of the buyout agreement had a clause that said if the merger wasn’t complete after 12 months the purchase price would increase by $0.0149 per day after June 15th 2008.