A buyout for one of our stocks, decent but not wonderful

I profiled the Australian mining equipment company for the Irregulars last year, after it was teased by the Motley Fool as one of their favorite Australian picks … and I reiterated my interest in the stock earlier this year, before fears of a China slowdown really hit the shares, saying that it was getting genuinely cheap. They released disappointing earnings after that, which hit the stock pretty hard, and now … with a lower share price … in swoops a takeover offer from GE.

This is a small company and coal mining equipment is not necessarily red hot right now, so I don’t know whether or not there will be any competition for the firm — whether another large player like Joy Global, for example, might try to outbid GE … it’s possible, but I don’t know how likely it might be. They have left themselves open for a better offer, the details of the deal are in the presentation are here … and they also are holding out for a possible better deal by selling the mining services division separately, which is allowed for in the GE deal. GE has promised to buy mining services as part of the A$1.27/share deal, but also said Industrea can get more if they sell the division separately for a higher price than agreed upon, so the A$1.27 is a hard floor but the number could rise a little as part of the deal, even without a competitive bidder.

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I don’t personally own Industrea shares, but, unfortunately, the China mining slowdown (or feared slowdown) and the rough quarter took the stock down enough that the premium price gets us to just about break-even (It was at A$1.30 when I wrote about them). If I held shares, I would continue to hold them unless you have a particularly lucrative short-term idea to roll that cash into — at A$1.23, the market is leaving a little bit of return on the table for arbitrageurs over the next four months before the tentative shareholder meeting to approve, and there’s also the chance that other bidders or a separate sale of that mining services division could sweeten the deal. Adding four cents over four months doesn’t sound so exciting, but that’s a 3% return in less than half a year and GE is a strong acquirer — and Industrea is ...

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