Why Shares of Fortress Investment Group LLC Are Surging

By Jordan Wathen Markets Fool.com

What happened

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Shares of Fortress Investment Group LLC (NYSE: FIG) are trading higher by about 29% as of 10:30 a.m. EST after the company announced it would be acquired by SoftBank (NASDAQOTH: SFTBF), a Japanese conglomerate.

So what

Fortress shareholders stand to collect $8.08 per share in cash, a roughly 39% premium to the closing price on Feb. 13. They could receive up to two more quarterly dividends in the amount of $0.09 per share prior to closing, bringing the total haul to $8.26 per share.

Executives Pete Briger, Wes Edens, and Randy Nardone are committed to staying with the company. Each signed a five-year employment contract and will invest 50% of their after-tax proceeds from the transaction into Fortress-managed investment products.

The company went public just over 10 years ago at $18.50 per share, nearly doubling in its debut to trade at $35 at market open. The IPO was well timed, capitalizing on the market's exuberance for all things financial. By late 2008, however, shares traded for less than $1.00 as Fortress was pummeled by the financial crisis.

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Image source: Getty Images.

Now what

With 34.99% ownership among Briger, Edens, and Nardone, the three all but guarantee that that deal will receive sufficient shareholder support. At a current market price of $7.98 per share, the company trades at a mere 1.2% discount to the acquisition price. Including two dividends along the way, the discount widens but only to 3.4%. The market clearly believes the deal should close on the anticipated timeline in the second half of 2017.

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Jordan Wathen has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.