TravelCenters of America LLC (NYSE: TA)
TravelCenters of America had an incredible day in the market today, and for good reason. The company announced that it had declined an acquisition offer. Today, we’ll talk about the offer that was declined, why it matters, how the market reacted to the news, and what we can expect to see from TA moving forward. So, let’s get right to it…
TA Declines Takeover Offer
As mentioned above, TravelCenters of America is having a strong day in the market today after announcing that announcing that it had made the decision to decline a takeover offer. According to recent reports, Golden Gate Capital made an offer to buy the company with a price of $14 per share. This would bring the total value of the company to nearly $543 million. The premium on the offer was nothing short of amazing. In fact, the offer represented a premium of nearly 100%. Nonetheless, TA made the decision to decline the offer.
Why This Matters
While looking at it from the outside in may lead to questions with regard to why this matters, the truth is that a declined offer like this is incredibly good news. You see, TA could have sold the company for nearly double what shareholders were paying for it, but decided to decline the offer. This means that the management at the company believes that the value of the stock will climb higher than the acquisition value in due time… representing strong confidence in growth moving forward.
In my opinion, this was an incredibly good move on the part of TravelCenters of America. The truth is that the stock has seen incredibly hard times recently as the result of low oil prices. However, oil prices aren’t likely to stay low forever; and when they do recover, TA stock is likely to recover in a big way as well. So, all in all, the decision that was made was an incredibly strong one.
How The Market Reacted To The News
As investors, we know that the news moves the market. Any time there is positive news released with regard to a publicly traded company, we can expect to see gains in the value of the stock associated with the company as a result. Adversely, negative news leads to declines. In this particular case, the news that surfaced surrounding TA was overwhelmingly positive. As a result, we saw incredibly strong gains in the value of the stock today. By the close of the trading session, the stock climbed to $8.37 per share after a gain of $1.61 per share or 23.82%. These gains are being followed up by more upward movement in after-hours trading.
What We Can Expect To See Moving Forward
Moving forward, I have a relatively mixed opinion of what we can expect to see from TravelCenters of America. The truth is that while declining the offer was a smart move, there are still more headwinds in the near future. With economic conditions in the United States proving to be concerning and a vote for a Brexit on the horizon, there are valid concerns with regard to demand for oil. This will likely continue to drive oil’s price down, leading to more hard times for TA in the future. Nonetheless, the declines won’t last forever. In the long run, the stock is likely to grow.
What Do You Think?
Where do you think TA is headed? Let us know your opinion in the comments below!