This sure seems to be market over-reaction. Two prisoners escape, and a governor is calling for closing a private prison that represents less than 10% of CCA's revenues. The company's fundamentals are good, the company continues to add beds.
IMO, these levels (after the dust clears) represent a good buying opportunity.
Quick math as I see it (for current purchasers of CCA, holding til the end of 1999), any comments appreciated.
Purchase price: $20/share
PZN current price: $23/share
Conversion of CCA into PZN = 20 1/8 (value post conversion of 1 CCA share given current market price of PZN)
So, 1/8 point gain for current holders. Arb opps seem to have disappeared.
Estimated one-time dividend from accrued CCA profits: $2/share
PZN dividends in 1999 = approx .43/share * 4 = $1.29/share total, end of 1999 (based on last Q's dividend, and no dividend growth).
Total 1999 dividends (provided merger complete during 1st Q 1999, and merger is accretive) = $3.29 / share or 16.45% return for holding 17 months.
If market is overreacting, include share appreciation...
IMO, a 16.45% return is worth the risk.
Again, would like opinions - these are my quick back of the envelope estimates, going on little sleep (while still at work, ugh!)....
Mort |
