One of the most impressive movers in today’s market has to be Tricon Residential (NYSE:TCN). Shares of TCN stock have rocketed nearly 30% in early afternoon trading on reports that Blackstone (NYSE:BX) will be taking the company private.
In a $3.5 billion deal, Tricon shares will be bought out for $11.25 per share in cash. This represents a 30.25% premium to where the stock recently closed, with the stock pricing in a very high probability the deal closes.
For investors in Tricon, this deal is certainly a welcome one, with shares now trading confidently at 52-week highs. Let’s dive into what to make of this deal and whether investors may want to trade around this news.
TCN Stock Surges on Blackstone Take Private Offer
As with all acquisition agreements, there’s some level of risk to be considered. As of 2 p.m. EST, shares of TCN stock are trading around $11.08 per share. This suggests that some small amount of risk is currently being priced into this transaction.
Now, given Tricon’s business (which is centered around the Canadian housing market) and Blackstone’s size, there’s likely to be little regulatory scrutiny around this deal. And even if it falls through, the 30% premium Blackstone was willing to pay for Tricon suggests the company is undervalued. That’s a nice vote of confidence for shareholders who have stuck with the stock through recent central bank interest rate hiking cycles.
This deal appears to be beneficial for Tricon’s management team, which intends to continue to build up to $1 billion of new single-family rentals in the U.S. market and $2.5 billion of apartments in the Canadian market once the deal is closed. For governments on both sides of the border clamoring for more affordable housing, this should ease any regulatory concerns.
To be sure, this acquisition is an important one for investors to keep an eye on. If Blackstone continues to creep into the residential real estate market, other smaller players in this space could see a boost.
On the date of publication, Chris MacDonald did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
