Reason I asked, if I use sum of the parts analysis, the stock should be worth more than the $2.5 it was trading yesterday: The remaining stores should be worth ~$6B using the Walgreen price for the stores they purchased, their pharmacy management sub should be worth ~$3B. After subtracting the remaining debt they will have, assuming they pay down debt using the proceeds of the Walgreen stores sale, to ~$2.5B. The company stocks should be worth ~$6.0-$6.5 a share. What am I missing?
Good call. Its not going away. And look at how Sears has bounced on and off over the last two years. One bit of news on this thing and you'll get a NICE pop. I might buy some of next years calls on this thing. Gotta look and see whats up with those.
The remaining stores aren't worth 6bn. If they were, RAD would have easily sold the balance as part of the transaction to appease the FTC. Instead there was only one buyer who was interested: FRED and it was determined they couldn't handle the purchase. WBA could pay a hefty premium because they had some strategic reasoning.
Walgreens didn't purchase stores in direct competition with theirs, and the stores they did purchase were likely the more valuable ones either from a sales perspective or real estate perspective. So I'd question a broad brush analysis like yours. I think $6 is ambitious, but I have a bullish position looking for mid 3s in the near term.
I still think Krogers might jump in the mix at some point. They were chatting before FRED came into the picture. Krogers can't grow earnings organically, they need something to answer to their shareholders. And B&T... at least according to RAD's statement... they kept the most profitable stores. The balance sheet will look better after the dust settles but there will still be a lot of debt I think. Who knows. Its a crapshoot.
On Monday I looked at buying calls but decided to buy the stocks instead. options on RAD were very pricy, with IV >50%-60%.