Harley Shares Roar on Takeover Talk
In the latest round of takeover speculation, traders talk up a buyout by Kohlberg Kravis Roberts. But it could just be talk.
Posted by Charley Blaine on Tuesday, March 16, 2010
Harley-Davidson (HOG) shares shot higher today as traders speculated the motorcycle maker was the potential target of a leveraged buyout.
The stock was up 7% to $28.35 today. Shares had been as high as $28.43.
Traders in Frankfurt, Germany, cited market talk that private equity firm Kohlberg Kravis Roberts was a potential bidder for Harley.
Trading in call options was heavy, WhatsTrading.com options strategist Frederic Ruffy told Reuters.
“Traders are focused on short-term March call options with strikes between $25 and $28 and the April $28 and $30 calls,” he said. March options expire on Friday after the close.
Volatility in the options was “hot . . . and indicates fear as well as short-covering,” said Jon Najarian, co-founder of optionMonster.com. There is a 15% short interest in Harley shares, he noted.
Harley-Davidson had no comment.
“There is a lot of cash chasing very low returns at the moment. So, any company that looks like it is well run and is relatively cheap in valuation may find themselves subject to these rumors,” TD Ameritrade chief derivatives strategist Joe Kinahan told Reuters.
The March calls allowing investors to buy the shares at $27 apiece by this Friday and the April $30 calls are trading briskly, said Jud Pyle, chief investment strategist at OptionsNews Network.
In the last few weeks, there has been takeover speculation in a host of stocks, including Radio Shack (RSH), AK Steel (AKS), supermarket operator Supervalu (SVU), Beazer Homes (BZH) and Calpine (CPN) and chemical producer Huntsman (HUN).
Many haven’t panned out. But Najarian noted that rumors about Smith International (SII) have proved true. It’s being acquired by Schlumberger. And medical instrument maker Millipore (MIL) is merging with Merck of Germany (MKGAF).
“Just like many other stocks in the last few weeks, Harley-Davidson is popping on LBO rumors. On Friday it was Supervalu, today it is Harley,” Pyle said.
Retrieved March 18, 2010; from http://articles.moneycentral.msn.com/Investing/Dispatch/market-dispatches.aspx?post=1707481&_blg=1,1707481
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