Showing posts from September, 2016

Purchase (Special Situation): Lexmark (LXK)

After a very long absence... I decided to invest in the Lexmark (LXK) takeover by Chinese parties. The deal is expected to close this year and has an expected return (based on my assumptions) of around 8%. Although the company is somewhat different now, I did a lot of research about 5 years ago on Lexmark so I am somewhat familiar with it (it isn't a terrible business but it is definitely in a declining industry). The main risk with this deal is the uncertainty over the CFIUS government agency approval. Takeover price: $40.50 Deal closing: 2nd half 2016 Purchase price: $36.03 Prob (success) = 90% Return  (success) = 12% (@ $36.03) Prob (failure) = 10% Return  (failure) = -31% <<< assume it drops to $25 Expected Return = 8% Overall expected return isn't that high--I like to aim for at least 12% return--but given that the deal is likely to close within an year, the 8% return is good enough for me. The stock may decline 1-2% so if one can time it (and are