Adios PVD?

Yesterday was one of the strangest days I have ever had as an investor.  I woke up around 5:30 and had CNBC on to catch the latest financial news. On the crawl at the bottom of the screen, they said that Provida was being bought from BBVA by Metlife for 2 billion dollars.

Naturally I was excited.  I had written a blog in October (Mid-day update: Good News for 2 Stocks) when a competitor of PVD was bought by the Principal Group at a very nice premium.  So I went to the PVD Yahoo page and read the headlines.  It was poorly written, to say the least (MetLife Buys Provida for $2B to Expand in Latin America).

First, even the headline was a head-scratcher.  It said Provida was being bought for $2b.  but the market cap of PVD starting on Friday was a bit north of $2.4b! How could it be sold for $0.4b less? At first I thought maybe there is another Provida?  Then I thought I had the answer when I read the text:

MetLife Inc. (MET), the largest U.S. life insurer, agreed to buy Chilean pension manager AFP Provida SA (PROVIDA) from Banco Bilbao Vizcaya Argentaria SA (BBVA) in a deal valued at about $2 billion to add fee income in Latin America.

MetLife will conduct a public cash tender offer for all of the outstanding shares of Provida, the insurer said in a statement. BBVA has agreed to transfer its 64.3 percent stake to MetLife, according to the statement.

I thought perhaps the 64.3% was they key.  MET was paying $2b to BBVA for the 64.3% of the company. So I got out my trusty calculator and divided $2b by 64.3% to get the total value of the deal and got $3.1b. Some more quick math showed that would equate to a 28% premium to Thursday's closing price, which seemed reasonable.

I was pretty pumped as 28% of what I had in PVD was going to be one of the best days I had every had on a stock.  I was already up more than 75% on them from when I bought them in 2011.

So around 9 in the morning, I checked the bid/ask on PVD. They had closed Thursday at $109.90, so I am thinking around $140 a share (woo-hoo!). Imagine my dismay when I saw a ask at $108 and a bid at $103.  Now this is a very lightly traded stock in the US, so my first thought was, "they do not understand the deal!  They think it is $2b, not $3.1b". $2b would imply a price in low 90s. I was so sure it was screwed up, I actually went in to Fidelity and put in a bid for 200 shares at $104 for pre-market trading (something I rarely do and frankly has never worked out well for me).  I was looking at other headlines and found one quoting a banker in Santiago that people were disappointed that the deal was done so cheaply and that PVD had opened up down 6% in Chilean markets.  I quickly withdrew my trade.

PVD ended up down about 5% in the US. It was not until the end of the day that I finally understood the price.  Stockholders were not only getting the $2b.  They would also get dividends from 2012 profits and a dividend for the sale of the Mexican arm and Ecqudorian arm of PVD.  The total estimate of these three pieces was $340m.  They closed with a market cap of $2.31b, so it is all now making sense.  The only real question was why BBVA sold their stake "cheaply".  But they are a distressed seller (I am sure they need capital to shore things up in Spain).  And it was a cheap price, as PVD paid over $8 just in dividends last year and are growing at a 15% pace.  In my mind, clearly worth more than $105 a share.

No reason for me to hold until the transaction closes in a few quarters, so I will sell next week.  Here is a snapshot of my entire dividend portfolio.  You can see PVD has been a great performer, even at the 5% haircut!

Stock	Shares	Avg Cost	Current Price	Dividends Received	Pct Change	R3K Change	Diff
AAPL	150	527.94	453.62	-	-14.1%	6.9%	-21.0%
AOD	10,000	3.90	4.06	-	4.2%	1.5%	2.7%
BHK	2,259	12.78	15.47	2,861	31.0%	12.5%	18.5%
CIM	15,000	2.67	3.12	-	16.8%	3.6%	13.2%
CSCO	4,292	17.22	20.83	2,014	23.7%	14.0%	9.7%
CSQ	5,482	8.28	10.39	5,620	37.9%	29.9%	8.1%
FCX	1,110	32.20	35.73	344	11.9%	7.5%	4.5%
HFC	904	36.03	52.77	1,960	52.5%	10.9%	41.6%
INTC	1,974	20.99	21.36	1,998	6.5%	23.3%	-16.7%
JPM	1,684	35.30	47.85	1,494	38.1%	13.8%	24.2%
JQC	4,221	9.12	10.05	4,945	23.1%	13.3%	9.8%
KMF	1,873	22.08	32.04	4,454	55.9%	25.8%	30.0%
MPC	382	44.01	76.21	356	75.3%	11.4%	63.9%
O	561	19.51	43.40	7,564	191.6%	77.7%	113.9%
OIBAX	3,948	4.94	6.61	6,821	68.7%	78.4%	-9.7%
PGR	2,118	20.56	22.68	2,596	16.3%	12.0%	4.3%
PRE	536	67.43	88.18	1,286	34.3%	12.3%	22.0%
PVD	427	65.11	104.48	3,788	74.1%	26.2%	47.9%
SAI	4,726	12.83	12.18	1,938	-1.9%	7.6%	-9.4%
SLCA	2,062	14.34	20.04	1,000	43.2%	5.4%	37.8%
STO	1,040	23.82	27.00	1,121	17.9%	28.7%	-10.8%
VIVHY	2,296	16.70	21.61	3,749	39.2%	10.8%	28.4%
Total Open				55,909	26.5%	14.7%	11.9%
Closed					11.5%	9.7%	1.8%
Combined					15.7%	11.1%	4.6%
Annualized IRR Since 12/31/10					17.2%
2013 Gain					6.0%