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Government Notice Predicts Buyout... AgainBy Graham SummersWednesday, August 1, 2007 In late June, I detailed a little-known SEC form that often points the way big buyouts.
SEC Form 8-K, Item 5.02 may have a lengthy title, but the details are very straightforward: It concerns the election, appointment, departure, and – most importantly – compensation of a company's officers.
Every detail about when and how a company hires, fires, and pays its executives appears in this form.
It details the severance packages a company's officers receive during a "change in control"... also known as a buyout.
Whenever you see a company alter its executive severance packages pertaining to a change in control out of the blue, you have to wonder why they did it. More and more, I'm finding out that it indicates that the company has received an unsolicited buyout offer...
Just look at Oakley (OO).
Oakley published an SEC Form 8-K, Item 5.02 in early June 2007. Less than one month later, Italy-based glasses giant Luxottica Group bought out the company, giving Inside Strategist readers a 60% profit in about a year.
 In late June, we forecast a similar development for steel processor/distributor Ryerson (RYI). Ryerson had teamed up with Swiss Banking giant UBS to consider "strategic alternatives" back in March.
Two months later, Ryerson altered its executive severance package to state that should it be taken private, its officers would not necessarily be forced to retire. It also detailed the severance packages its officers would receive if the company were bought out.
Seeing this, I predicted Ryerson would be acquired sometime in the near future. Only one month later it happened.
On July 24, Ryerson agreed to a $1.06 billion buyout offer from private-equity firm Platinum Equity. However, at $34.50 per share, the buyout was 8% lower than Ryerson's share price on July 29, the date we predicted the buyout.
It hurts to be right and lose money. But we've discovered an important method for predicting buyouts with SEC Form 8-K, Item 5.02. You can screen for these on the SEC's website.
Simply enter 8-K into the Form Type search. You then can scroll through for Item 5.02.
Remember, not every SEC Form 8-K, Item 5.02 pertains to executive severance packages. Anytime a company hires or fires an executive, it publishes one. But a close monitoring of these forms can often turn up stocks that offer quick buyout profits.
Good trading,
Graham
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