Encore no more: ace company to be acquired

I came across Encore Wire (NYSE: WIRE) less than a year ago. I wrote about WIRE a few months ago. I was amazed by the investment opportunity: a fantastic business model riding on the coattails of artificial intelligence and the green transition, a veteran management team, and a fortress balance sheet with zero debt. I estimated the stock to grow 20x in 10 years. Unfortunately, the journey will have to be cut short.

On April 16th, Encore Wire announced a merger agreement with the Prysmian Group, a large-cap Italian cable making company who wants greater exposure to the American cable market. This is great news for Encore Wire, and a validation of the fantastic work they have been doing. It is also a validation of the investment thesis for Encore Wire. However, this merger means that current shareholders will not be able to enjoy the long-term growth of the company.

Not all is bad, though. Prsymian group will buy Encore Wire at a price $290 per share. Over the time period of less than a year, that amounts to a 78% return for my investment. However, I will now have to look for alternative companies that fit the original thesis. My eye is on Atkore Wire (NYSE:ATKR). More to follow!