Buy PCC before merger

Last year I wrote about the merger of PMC Commercial Trust (PCC) with CIM Urban REIT. After some shareholder revolt, It looks like the merger will go through. To reiterate, here are the details of the merger:

  • Existing shareholders will receive a special $5.50 dividend.
  • The merged company will have a implied valuation of $2.439 billion (based on CIM Urban equity) and pay a dividend of 3.5 after the merger.
  • PCC shares should trade at $10.50 (pre-dividend of $5.50) if the merged company trades at the implied valuation.

Currently, PCC trades at $9.50. 

Because of the shareholder revolt, CIM three founders have “agreed to purchase up to 2.75 million shares of PMC Commercial at a market price of up to $5.00 per share under a 10b5-1 trading plan. The plan generally will expire on the date that 2.75 million common shares of PMC Commercial have been purchased or August 10, 2014, whichever is earlier.” Read more about the agreement here.

The agreement should provide a price support to the post-merged company. I expect the shares to trade higher from $9.50 to $10+ in coming weeks. I owned some shares for years and have loaded up recently after the agreement was announced.

Disclosure: I am long PCC

5 thoughts on “Buy PCC before merger

  1. It is always possible that after the dividend, it trades below $4, but the chances are that it will trade higher.

    1. The 2.75 million shares the CEOS are buying.
    2. The book value of the new company will be $5. If it trades at the book value, it will trade $5 post dividend or $10.5.

    No guarantees though

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