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Strategies & Market Trends : Graham and Doddsville -- Value Investing In The New Era
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To: Freedom Fighter who wrote (1220)2/10/1999 7:25:00 PM
From: Freedom Fighter  Read Replies (2) of 1722
 
Sbarros a Good Deal!!,

The Sbarro family recently agreed to up the offer for the shares it does not already own to $28.85. Shareholders accepted. (I think it's still light)

Today, Sbarro's closed at 25 15/16. That is a 2.9125 point gap between the closing price and deal price.

I spoke to the company several weeks ago and they said they expected the deal to close in around four months. I have not spoken to them since then and there's been no news that I am aware of.

If the deal closes on schedule, an investor will receive approximately 11% (+/- depending on commissions and the number of shares purchased) over a 4 month period (perhaps even less). This works out to an excellent annualized rate of return for a deal that has an extremely high probability of closing.

For those of you fearful of an imminent crash or the possibility of the deal falling thru, a June 25 Put can be purchased for
1 - 1 1/16. This strategy surrenders some return, but it STILL works out OK. Worst case if the deal falls thru and the stock collapses, you own it for about $24. Not such a bad downside considering the family loves it at 28.85 and I think they are stealing it at that price. A collapse of course is a very low probability event.

Today, I upped my position with the PUTS. The net price I paid was
26 15/16 including the puts. I calculated the annualized rate of return at slightly north of 19% after commissions assuming a 4 month closing. I suspect it will be sooner and higher.

Wayne Crimi - Value Investor Workshop
members.aol.com


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