WASHINGTON, July 28, 2014 − Wall Street woke up this morning to doubly stunning news on the mergers and acquisitions (M&A) front. Online real estate listing giant Zillow [Z] announced it will buy its fierce rival Trulia (TRLA) for $3.5 billion.
Meanwhile, cut-price retailer Dollar Tree (DLTR) announced a deal to buy one of its chief industry rivals Family Dollar Stores (FDO) in an $8.5 billion deal that includes cash and stock.
News is still coming in, but the real estate deal between Zillow and Trulia will likely close next year. Trulia shareholders, at this point at least, are to get 0.444 shares of Zillow for each share of Trulia they own.
The DLTR-FDO deal will also involve cash and stock. It’s interesting to note that aggressive investor and champion Tweeter Carl Icahn has a substantial stake in Family Dollar and may have been a motivating factor in the agreement between both companies.
M&A mega-deals like this tends to get Wall Street excited. And indeed, the stocks of most companies involved in this pair of buyouts are soaring in pre-market trading around 9 a.m. EDT Monday. DLTR is currently up 11% pre-market while FDO, its target, is up a whopping 50%.
Meanwhile, TRLA is up around 16%. But acquiring company Zillow is off about 5%. This type of post-announcement M&A open is typical, in that the acquirer must spend for the acquisition, pulling the stock down at least short-term, while the company being acquired tends to jump, sometimes impressively, as their shareholders generally get a premium for their shares.
On the other hand, the discount store deal is unusual in that both companies are both up, with target FDO experiencing a huge jump in the price of its shares prior to this morning’s opening trades.
The market itself, however, seems to be readying for a sort of “meh” open at the bell, with Dow and S&P futures barely up around 9 a.m.
Likely, that’s because there’s big news coming all week on corporate earnings, the Federal Reserve’s meeting notes, and real estate figures; and those professional traders not taking it easy out in the Hamptons with their ill-gotten gains, are going to be cagey with buys and sells.
Further complicating strategies: the ongoing collapse in the Middle East and the increasingly aggressive, swashbuckling moves by an out-of-control Vladimir Putin in Ukraine. Plus, GDP and employment numbers. Oh, my.
We’ll be light on recommendations this week for two reasons.
First, the Market Maven will be spending the week as his alter-ego, Opera Maven. The latter is currently camped in a hotel in Santa Fe, New Mexico awaiting the Santa Fe Opera’s opening week opening nights. Opera Maven will be springing into action in CDN’s Entertainment section, bringing you reviews of all 4 full length operas, including one American premiere, and a pair of one-acts.
Second, trading this week is likely to be so treacherous that we’ll likely be avoiding most of the action, as whipsawing prices are a likely result, something that drives investors and traders alike completely crazy with frustration and fear. Best not to get too close to this buzz saw, although trading in the final week of July has been historically rewarding for frantic traders.
We may be looking to do a little shorting if things get nasty, but one step at a time. Meanwhile, we have some operas to get ready for.