NeighborCare (NASDAQ:NCRX), incorporated in 1985, is a provider of institutional pharmacy services in the United States. The company offers it services to long-term care facilities in 32 states and the District of Columbia. Its pharmacy operations consist of institutional, community-based professional retail, and onsite pharmacies that are located in customers' facilities. In addition, NeighborCare operates home infusions, respiratory and medical equipment distribution centers.
NeighborCare is currently a "buy-out" target of Omnicare (NYSE:OCR), a provider of contract pharmacy services. An offer has been on the table for many months, however Neighborcare's board has continually rejected the $30-per-share cash proposal, calling the deal financially inadequate and advising shareholders against approving the merger. Due to this opposition from management, Omnicare took its proposal to the company's investors, initiating a hostile bid in an attempt to complete the transaction.
The strategy appears to be working and earlier this month, OCR extended its take-over offer, noting that nearly 60% of NCRX shares have now been tendered. Shareholders of NCRX have until March 4 to release their stock but regardless of the outcome, it appears the value of the company has been firmly established in the $28-$30 range. Traders who agree with that assessment should consider this speculative position. It will not be included in the OW portfolio.
Sell Put MAR 27.50 QNY-OY
Current Bid = $0.65 Open Interest = 4589
Potential Profit (5 contracts) = $325
Initial Margin (5 contracts) = $5,070
Return on Investment (max) = 7.5%
Cost Basis in Stock = $26.85
Days to Expiration = 26