Scottish Re Group Limited (NYSE:SCT) shares jumped over 10% today as
the company updated investors on its "strategic alternatives". The
company first ran into trouble in July after it blindsided investors
with wide losses for the second quarter due to "lower than expected
new-business volumes, higher than
anticipated retrocession costs and income-tax expense due to the
inability to recognize future deferred-tax benefits". This, combined
with the resignation of the CEO and various profit warnings, caused the
stock to drop over 75%. Since then, the stock has regained some ground
after the company confirmed that it would be able to remain solvant.
Moreover, the company announced that it would begin the auction process
to put itself up for sale in addition to acquiring further financing in
order to remain liquid.
Today, the company announced that it had succeeded in both of its
goals. Scottish
Re announced that it had received proposals from a number of potential
bidders last Friday, along with three written proposals for possible
financing (between $150 - $250 million). Considering the fact that the
stock was trading at $16 shortly before the second quarter earnings
were reported and $25 earlier in the year, many investors are
speculating that the buyout offers may be significantly higher than the
stock's current levels. This is optimism is further driven by SCT's
impressive cash flow. Moreover, the fact that there are several bidders
opens up the doors to a potential bidding war. So, what's the downside?
The company said that it expects its former executives to sell their
stock, which includes stock options (that must be exercised within 60
days of their departure) and shares held in their 401k plans. Whether
or not they sell remains to be seen. Either way, this stock is a great
one to keep an eye on as these events unfold...
Related CompaniesReinsurance Group of America (RGA)PartnerRe Limited (PRE)IPC Holdings Ltd. (IPCR)