Martha Stewart Hype Does Not Hold Up

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Martha Stewart Living Omnimedia Inc. (NYSE: MSO) announced, Monday morning, that it signed a definitive merger agreement under which Sequential Brands Group Inc. (NASDAQ: SQBG) acquire all outstanding shares of Martha Stewart Omnimedia for $6.15 per share. This deal will be payable 50% in stock and 50% in cash. The agreement has been approved by the boards of directors from both companies.

The acquisition is expected to close in the second half of 2015. The deal also includes a 30-day “go-shop” period for Martha Stewart Omnimedia.

Under the terms of the merger agreement, Martha Stewart will continue to be an integral part of the brand, with a renewed long-term commitment to serve as chief creative officer. She will become a significant stockholder of the new public holding company of Sequential and MSLO. At the same time, Stewart will be nominated to serve on its board of directors as of the closing.

The Emeril Lagasse culinary brand will also be added to the Sequential portfolio.

Yehuda Shmidman, CEO of Sequential, commented on the merger:

In fact, research shows that the Martha Stewart brand has 96% awareness among women in the U.S. and 7 out of 10 women say that Martha has and does influence the way they think about, organize, and manage their homes. Looking ahead, we believe that we can leverage our global activation platform at Sequential in partnership with Martha and her team to develop the next chapter of growth for the Martha Stewart brand.

Speculatively, MSLO stock was hiked way up last week and it is also worth noting that investors who bought the stock last week and in the period between mid-March and mid-April lost out on this deal. Investors who bought at any other time in recent years made money on this trade.

Shares of Martha Stewart Omnimedia were down 14% at $6.00 just Monday morning. The stock has a consensus analyst price target of $6.56 and a 52-week trading range of $3.40 to $7.11.

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