There’s nothing like a stock buyout for establishing a floor and sending a current share price rushing up to meet said floor. That’s what’s happening to Consolidated Communications (NASDAQ:CNSL) as it’s the subject of a new buyout offer. Consolidated shares shot up just over 42% in Thursday afternoon’s trading, just a hair below the upcoming buyout offer.
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Consolidated’s buyout offer comes from none other than Searchlight Capital Partners, along with British Columbia Investment Management. The duo got together and put together a non-binding proposal that called for them to buy up all the outstanding shares they didn’t already own, paying $4 a piece for them. Searchlight, for its part, already owned 34.3% of the company, so picking up the rest would be comparatively easy.
So what got Searchlight and BCIM interested? In the proposal letter, the pair wrote up notes that they have plans for Consolidated’s operations. The biggest of these involves “…invest(ing) incremental capital into the Company to complete the fiber build-out and fully fund(ing) the plan through the Company turning free-cash-flow positive….” Since Consolidated is a smaller-tier residential and business communications services provider—it only operates in a few states—that would give Searchlight and BCIM potential access to the bottom floor of a long-term cash-flow operation.
Prior to the announcement, hedge fund sentiment was already Very Positive, largely thanks to these investors adding 2.6 million shares to their holdings in the last quarter. Interestingly, in the space between the last quarter and the quarter before that, hedge funds nearly doubled their overall holdings in CNSL stock.
