Why Civitas Solutions Is Soaring Today

What happened

In response to the announcement that it has accepted a takeover offer, shares of Civitas Solutions (NYSE: CIVI), a provider of health and human services to people with special needs, rose 12% as of 10:33 a.m. EST on Wednesday.

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So what

Civitas Solutions announced that it has agreed to be acquired by Centerbridge Partners, which is a private investment management firm.

Here are the details of the transaction:

  • The takeover price is $17.75 per share, which represents an enterprise value of about $1.4 billion.
  • The deal will be made in cash.
  • The merger has been unanimously approved by Civitas' board of directors.
  • The deal is expected to close before the end of Civitas' second fiscal quarter.

Traders bid up the stock to within a few pennies of the takeover price in response to the news.

Now what

Centerbridge Partners manages about $27 billion in capital, so there's no doubt that it has the resources to complete this transaction. The deal has also received the unanimous support of Civitas' board, so the odds of it closing on time look to be very high.

It is worth pointing out that a handful of law firms have already announced their intention to investigate this acquisition because they believe the $17.75-per-share takeover offer is too low. However, it isn't clear at this time whether their efforts will ultimately lead to a higher price.

The best move for Civitas shareholders to make today is to consider the tax ramifications of selling now versus waiting until the new year. After that, they can start to think about other healthcare stocks they can buy with their proceeds.

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Brian Feroldi 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.