Morning Commentary: Alere’s convertibles, stock jump on takeout news; SanDisk edges up again

By Rebecca Melvin

New York, Feb. 1 – Alere Inc.’s convertibles jumped outright and on a dollar-neutral, or hedged, basis early Monday after news that Abbott Laboratories said it would buy the Waltham, Mass.-based diagnostics and services company for $56.00 per share in cash, or about $5.8 billion, representing a 51% premium over Alere’s closing share price on Friday.

Alere’s 3% convertibles, which mature in a few months, jumped about 20 points outright to 121 and were seen better on swap by about 10 points, according to a New York-based trader. Alere shares jumped $16.77, or 45%, to $53.97.

Because they mature in a few months, the Alere bonds have about a 0.25% premium, the trader noted.

Elsewhere, SanDisk Corp.’s convertibles were edging a bit higher again along with the underlying shares amid expectations that the tie up with Western Digital Corp. will occur as planned.

The Western Digital-SanDisk deal was unveiled in October for $19 billion in cash and stock, or $86.50 per share, which represented a premium of about 15% over SanDisk’s share price at the time. On Monday, SanDisk shares were up 97 cents, or 1.4% at $71.67.

The SanDisk 1.5% convertibles traded at 151.25 on Monday, which was up from about 150 on Friday.

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