Shares of sports retailer Hibbett (HIBB) soared higher on Tuesday morning after the company agreed to be acquired British retailer JD Sports Fashion for $1.1 billion. As of 10:30 a.m. ET, Hibbett stock was up 19% and hitting 52-week highs.
A good year for Hibbett shareholders
This deal has already been unanimously approved by Hibbett's board of directors and is expected to close later this year, pending shareholder and regulatory approval.
Under the terms of the agreement, JD Sports will pay Hibbett shareholders $87.50 per share, which is about 1% higher than where the stock is trading right now. However, it's a huge premium to where shares where trading less than a year ago. As recently as June, Hibbett stock was trading at $36 per share. So depending on when investors purchased shares, today's acquisition announcement could be a big win.
What should investors do now?
As mentioned, Hibbett shareholders have about 1% more upside if they keep holding their shares, which isn't much. Moreover, Hibbett management won't be paying a dividend or repurchasing shares from now until the acquisition is complete. Therefore, there's little reason to keep holding Hibbett stock today.
For Hibbett shareholders who elect to go ahead and sell before the acquisition is complete, it's important to get to work finding a replacement investment -- time is a factor generally in investors' favor, so the more time cash is in the market, the better.
For its part, Hibbett was a profitable company that had a cheap valuation, trading at about 8 times its trailing earnings before agreeing to be acquired for about 11 times earnings. Therefore, investors who liked Hibbett are probably looking for stocks with growth at a reasonable price (GARP). Those can be harder to find but they are out there for those willing to diligently search.
