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Shares of Silver Spring Networks Inc. (NYSE: SSNI) rose 27.7% in September, according to data from S&P Global Market Intelligence, after the smart-grid products company agreed to be acquired by Itron Inc. (NASDAQ: ITRI).
More specifically, on Sept. 18, 2017, Silver Spring Networks stock soared after it announced a deal to be purchased by Itron for $16.25 per share in cash -- a 25% premium to its closing price the previous trading day -- valuing the company at $830 million (net of its $118 million in cash).
Silver Spring Networks CEO Mike Bell added, "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."
The purchase should also help Itron drive growth through recurring revenue, according to Itron CEO Philip Mezey, while at the same time increasing "profitability beyond [Itron's] mid-teens EBITDA margin target."
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Itron, for its part, expects the deal to be accretive to both adjusted earnings per share and adjusted EBITDA by 2019. It should also result in roughly $50 million in annualized synergies within three years of its closing date, which is currently expected to be later this year or early in calendar year 2018, pending regulatory and shareholder approval.
That said, shareholder approval may not be a given, as a number of law firms have already announced investigations into whether Silver Spring Networks breached its fiduciary duty to shareholders by selling the company at too low a price. After all, as I pointed out last month, Silver Spring had a rough start to 2017 and was down 5% year to date leading up to the acquisition announcement.
In any case, I tend to want to give management the benefit of the doubt with regard to what's best for shareholders over the long term, and I suspect the aforementioned investigations will do little to prevent the deal from closing. With Silver Spring Networks stock trading at almost exactly the acquisition price -- and unless waiting to sell would result in more attractive long-term capital gains tax treatment -- I continue to believe that investors would be wise to take their profits and put them to work in another promising stock.
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