Middleby has agreed to acquire Welbilt in a $4.3 billion all-stock deal
The shares of Welbilt Inc (NYSE:WBT) are bounding up the charts this morning, up 20.9% to trade at $18.90, earlier hitting a more than two-year high of $20.94, amid news that Middleby (MIDD) has just inked a deal to acquire the commercial foodservice equipment manufacturer in an all-stock deal valued at $4.3 billion. Welbilt shareholders will receive 0.1240 shares of Middleby under the terms of the deal, which also offers a 28% premium over Welbilt's 30-day volume-weighted average price (VWAP).
Prior to today's pop, WBT has been charging up the charts, though it hit a snag at the $17 level in late March, pulling back to its 60-day moving average before plateauing around the $16 level. The stock was struggling with pressure at the 20-day moving average coming into today, too, though the security is now well past this pressure and trading at its highest level since November 2019.
Today's price action could cause some of the bears circling WBT to jump ship. The equity's Scheffer's put/call open interest ratio (SOIR) of 2.38 stands higher than 92% of readings from the past year, implying short-term option traders have been incredibly put-biased of late.
That being said, options on WBT are still cheap, making now the perfect time to speculate on WBT's next move. The security's Schaeffer's Volatility Index (SVI) of 58% stands higher than just 6% of readings from the past 12 months. In other words, option traders are pricing in relatively low volatility expectations at the moment.
Short sellers have started to hit the exits, but there's still room for a short squeeze, with the 6.19 million shares sold short making up 4.4% of the stock's available float. Plus, at WBT's average daily pace of trading, it would take exactly one week to cover these bearish bets.