Redwire Corporation (NYSE: RDW) stock jumped a lucky 7.7% Monday morning after the company gave an update on its plan to acquire privately held Edge Autonomy, “a leader in providing innovative autonomous systems, advanced optics, and resilient energy solutions” (i.e., drones).
As you may recall, Redwire announced in January that it will buy the maker of Penguin unmanned aerial vehicles for $925 million, payable in $150 million cash plus $775 million in Redwire stock.
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The more things change, the more they stay the same
That’s still the basic plan, but this morning Redwire announced that the purchase will actually be made with $160 million in cash (so $10 million more) and $765 million in shares of Redwire common stock (so $10 million less). Furthermore, $100 million of the “cash” portion of the price will be “paid” in the form of an unsecured promissory note from a Redwire subsidiary.
Is this good news or bad news for Redwire?
Why would Redwire make this change, and is it good news or bad news for the stock?
Well, consider that Redwire stock cost less than $15 before the Edge acquisition was announced but is worth nearly $20 today. Consider too that the Redwire stock being paid to Edge is still valued back near its January price — $15.07 per share. So Edge is already making out like a bandit, receiving shares worth almost $20 when it expected to get shares worth less than $15. Owners of the private company have already made a tidy profit.
It makes sense that Redwire now wants to pay less in shares and more in cash. The adjustment is modestly good news for the stock — probably not worth a 7% share price bump, but still good news.
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Rich Smith 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.
