Monday, February 8, 2010

Facet (FACT) - Trading Below Hostile Takeover Price

FACT is trading 15.46 and IV30™ is up 5%. The LIVEVOL™ Pro Summary is below.

The company is in the midst of a hostile takeover bid from Biogen (BIIB). The corporate action is included below:

More news details here:
Biogen Idec (NASDAQ:BIIB) announced that it is prepared to run a proxy contest to replace at least a majority of the directors of the Board of Facet Biotech Corporation (NASDAQ:FACT) if: Facet shareholders tender a majority of the company's shares outstanding before Biogen Idec's tender offer expires and the Facet Board refuses to listen to the explicit wishes of its stockholders.

Biogen Idec reiterated that its all-cash $17.50 per share tender offer for Facet represents its best-and-final offer. Biogen Idec believes its offer fairly values Facet.

It's unusual to see vol increase in a takeover - that and the depressed stock price indicate a fair amount of uncertainty here. The Charts Tab snapshot is included below (click the image to enlarge it).

The stock was trading just below $9 before the bid - then popped above 18.25 intra-day in late December. Recently, however, it has begun to trail downward - it's below 15.50 as of this article.

The Options Tab snapshot is included below (click to enlarge).

You can see that earnings are scheduled for mid March - expo is just 3 days after. If the deal falls apart somehow, it's a reasonable guess that the stock could plummet back to the $10 area. The Mar 12.5 puts are no bid @ 0.20 which at first glance feels cheap. Then again, if there is any feedback from the management at FACT, it will probably occur during the earnings conference call - that hypothetically makes the March options not 1 + months, but more like 3 days. How much are those worth?

It seems like buying many cheap puts (not necessarily March) against fewer long shares could be a good trade - then again who knows how long his drags out - it could turn into the ultimate premium killer - decay, decay, decay... Add the fact that the options are illiquid (total daily average volume is 193 - zero have traded today so far) and the trade is less obvious.

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