CE trading above EUR 10,00 per share !

Although the reason for the existence of this blog is rapidly coming to an end, I have to admit CE is still keeping things interesting. After the end of the post acceptance period Staples informed us that they now have about 99.3% of the issued ordinary shares of CE. This means that about 1.3 million shares have not been tendered, and these are the shares that are still being traded now. So why are these shares trading above EUR 10.00 per share?

My theory is that with the end of the post acceptance period, Staples will start a process through which they will acquire the remaining shares of CE, either through a squeeze out, or through a legal merger. Since Staples has acquired more than 95% of the shares, the squeeze out procedure seems to be the logical choice. The price that Staples needs to pay in the case of a squeeze out procedure, will be determined by the corporate division of the Amsterdam court. Since there is no obligation anymore to pay cash for the remaining CE shares, I believe it is possible that there will be a conversion of CE shares for Staples shares.

The conversion factor will need to be fair, and I believe that this conversion factor will be established with the Staples share price at the end of the post acceptance period. On July 16th, when the post-acceptance period ended, the share price of Staples opened with a share price of $ 20.65 and closed at $ 21.18. Using the average of these two prices, and an exchange rate of about 1.5870, the Euro equivalent of a Staples share would be EUR 13.18 at that date. With these assumptions, a fair conversion factor would be 1.42 shares of CE for each share of Staples.

At the close of European trading today, Staples was trading at $ 22.26, while the EUR/USD exchange rate was 1.5875. According to the theory explained above, this would give a value of a CE share of EUR 9.87, while the closing price of CE was EUR 10.03.

In case current shareholders will not receive cash anymore, but Staples shares, it seems logical that CE shares are now fluctuating with the Staples share price. I am not sure however if this will be the case, but it would explain to some extent the current increase in the share price of CE.

It is still strange to me that the price seems to go beyond a reasonably calculated price, based on the Staples share price. In the post acceptance period I was already surprised about the fact that the CE shares sometimes traded well above the final offer price of EUR 9.25. Probably some market participants have better information than I have, about the final outcome for the last few CE shares.