Scholastic (SCHL) joins the ranks of the many companies participating in a tender offer. The company is offering to purchase up to $200 million of its stock, or between 15.3% and 16.5% of its outstanding shares, depending on the purchase price. It’s offering to buy at a price between $37 and $40 per share. With the stock now at $38.69 and bouncing on the news, there’s no chance of a risk-free profit here, however. So for those investors looking for a quick buck and who didn’t already own the stock, it’s probably better to move on. Unfortunately, the tender offer does not have my favorite provision for small shareholders, the odd lot provision.
Without even the safety net of an odd lot provision, this tender offer is completely off-limits for me. The offer will likely end up oversubscribed, and any shares you offer will probably be prorated depending on how oversubscribed the offer is. And if any significant holder is looking to get out, they could well bid at the low end and tip the offer. So this offer is not really my style, and I’d prefer something that was nearly risk-free, as in a traditional tender offer at a fixed price.
No directors or officers of the company are participating in the tender offer, and that’s generally a good sign for the long-term outlook on the business. Of course, a tender offer itself is usually a good sign that management is looking to create shareholder value.
Scholastic will pay for the tender offer with cash on hand, more than $360 million. So it should have no problem affording the purchase even if the maximum number of shares were tendered. The offer expires on January 26, 2016 unless extended. You can read further details at this SEC filing, and you can see all the recent tender offers on this page.