Why Silver Spring Networks, Inc. Stock Skyrocketed Today
What happened
Shares of Silver Spring Networks Inc. (NYSE: SSNI) were up 24.2% as of 1:45 p.m. EDT Monday after the company announced it will be acquired by Itron Inc. (NASDAQ: ITRI). Shares of Itron are up around 4% as of this writing.
More specifically, Itron will acquire Silver Spring Networks in a $16.25-per-share cash deal valued at roughly $830 million, net of Silver Spring's $118 million in cash. That's a 25% premium over Silver Spring's closing price on Friday. Itron will finance the purchase with a combination of cash on hand and $750 million in new debt.
So what
That leaves Silver Spring Networks stock up around 18% over the past year. For perspective, shares were down around 5% over the same period as of Friday's close, as the company was still reeling from a pair of disappointing quarterly reports in February and May of this year. More recently, however, the stock had begun to rebound last month after Silver Spring announced encouraging second-quarter 2017 results.
"We are ramping our new customer programs, winning additional smart utility and smart city awards, and driving our technology into the broader Industrial Internet of Things opportunity," added CEO Mike Bell at the time.
"Joining forces with Itron will enable us to help more utilities and cities adopt the industrial Internet, improve their performance and reliability, and better position themselves for a connected future," Bell added today. "This strong combination will address end-to-end solutions for our customers and will create immediate value for our stockholders; it will also provide new opportunities for our employees as part of a larger, global technology leader for the Internet of Important Things."
Now what
Itron also expects to generate roughly $50 million in annualized cost synergies within three years of completing the deal, noting that it will be accretive to both adjusted earnings per share and adjusted EBITDA by 2019.
As it stands, the deal has already been unanimously approved by both companies' boards of directors, but still requires approval from regulators and Silver Spring's shareholders. Therefore, the purchase is expected to close later this year or in early 2018. So with Silver Spring Networks shares trading within pennies of the agreed acquisition price -- and unless waiting to sell would result in more favorable long-term capital gains tax treatment -- I think Silver Spring Networks investors would be wise to take their money and put it to work elsewhere.
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Steve Symington has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.