It is with some regret that I sell my Cervus Equipment shares into the recent takeover offer.
Déjà vu
A few days ago, it was announced that Brandt Tractor Ltd, one of Canada’s largest private companies, serving the construction, forestry, road building, agriculture, rail, mining, steel and energy industries, had offered to take over Cervus Equipment for $19.50 per share. Shareholders get to vote on the deal sometime in October and the deal is expected to close before the end of the year.
Brandt is already the world’s largest John Deere forestry and construction equipment dealer, so adding in Cervus’ chain of agricultural dealerships seems to make sense. Management supports the transaction and have committed their shares to the deal and John Deere and Peterbilt Motors have both given their stamp of approval. It looks like pretty much a done deal, although you never know for sure until the money is in your account.
I’m struck here by a sense of déjà vu. It was around this time last year that my Rocky Mountain Dealerships, another Canadian agricultural dealership company, was taken private. While takeover announcements are always a pleasant surprise when they pop up in my email inbox, these two have been a bit of a let-down. I thought both companies were worth significantly more than the price they were bought out at. I’m less disgruntled by the Cervus takeover as I at least got to participate in the rebound from the covid lows, but nonetheless, I had high hopes for this company longer term and am disappointed to see it leaving the portfolio.
I’ve sold off my position at around $19.26 a share. Generally, my rule of thumb is to unload my shares shortly after a takeover offer is announced. After all, you never know when a deal might fall apart, sending the shares right back down again. With Rocky Mountain Dealerships, I held onto my shares for a while after the going private transaction was announced, hoping that a better offer would materialise. But in this case, given that John Deere and Peterbilt would both have to endorse any competing offer, that management has already committed their shares to the deal and that I anticipate less pushback from the investment community on this one, it seems unlikely that a better offer is going to appear. If I waited around for a few more months, I could squeeze out an extra 24 cents a share and collect the full takeover price, but I’d rather have the money in my pocket now and free up both the cash and the mental energy to direct towards new investments.
Nothing cracks the whip like having a pile of cash burning a hole in my pocket. So this will provide good incentive to come up with some new investment ideas as I dive into my second quarter earnings review next month.
Full disclosure: I no longer hold any shares in Cervus Equipment.