Tuesday, 9 October 2012

BAE Quandary

Yesterday I read an article on the BBC website concerning the proposed merger of EADS and BAE systems.

http://www.bbc.co.uk/news/business-19879916

As i have said in a previous post, I do not think the merger will be a good thing for shareholders. EADS is unattractively priced and it's dividend yield is miniscule in comparison to BAE.

The above article mentioned that Invesco Perpetual (BAE's largest shareholder, owning 13.3% of the company), along with many others are also unhappy with the deal.

If the merger goes ahead I'm sure that the resulting stock will be dumped by many funds and investors, especially those seeking dividend income.  This could be very destructive to the share price.

For me this is no longer an investment, it's a gamble, and for that reason I'm out! I've sold my holdings for a price of 324p netting me a gain of 10% excluding any dividends i've received.

It's a bit of a shame as BAE is a great investment prospect as it stands, if the merger falls through I will probably look at buying back in if the price stays reasonable.



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