Another Manda Addition: Aladdin Knowledge Systems (ALDN)

MANDA addition: Aladdin Knowledge Systems (ALDN)
The New Year is ringing in with a bit of a surge in M & A activity, much to my delight. My MANDA fund holdings have been drying up and today I’m pleased to make a new addition to it: Aladdin Knowledge Systems (ALDN).

Here’s a summary of the proposed transaction from Barron’s Online: “Aladdin Knowledge Systems (ALDN) an Israeli-based security software company, this morning announced that it has agreed to be acquired by an investor group led by private equity firm Vector Capital in a deal valued at about $160 million.

Aladdin holders will receive $11.50 a share in cash, about a 20% premium to Friday’s closing price, and a 64% premium to the closing price on January 5, when Aladdin announced that it was in talks with Vector on a possible deal.

Vector Capital said it will place Aladdin’s DRM and authentication assets under common management with another one of its companies, SafeNet.

The deal is not subject to any financing condition. The deal is expected to close in 2-3 months.”

The boards of both companies have approved the deal and Wells Fargo will be providing debt financing to support the acquisition. The merger is subject to the approval of Aladdin’s shareholders as well as the usual antitrust regulatory approval.

I picked up the stock today at $10.92. This represents a 5.3% return on the transaction for a 20-30% annualized return, depending on when the deal actually closes.

Other M&A activity
Earlier today Abbott Labs (ABT) announced that it will be buying Advanced Medical Optics (EYE) for $22 per share in cash in an effort to expand Abbott’s medical footprint into the laser vision correction and eye care arenas. The merger is expected to be completed before the end of the first quarter. This deal is yet another example of cash-rich big pharma buying up those quality smaller firms that have been badly beaten down. Expect more acquisitions of this type to continue.

I did not purchase EYE today because it traded above $21.48 which represents only a 2.4% return at best. Call me a pig but I’d like more. If the price drops to the low $21.20s I could be tempted into buying it.

By the way, Abbott stock has been channeling between $50 and $60. (See chart below.) Currently, it’s sitting at $50 and if you’re into playing channeling stocks, as soon as the stock moves up a bit, I’d jump in. (For you options players, a bull-call 50/55 or even 50/60 debit spread would be a good move. The reason I chose a spread over a straight call is that the spread mitigates the effect of volatility.) However, if the stock breaks $50 watch out below! The $50 level represents major support and if it violates that, then a short position is quite justified.

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