STUDENT TRANSPORTATION INC 5.25 PCT DEBS T.STB.DB.A

At what point does this become a buyout target?

[rehsifylf]

Whether the current 12.5% dividend is sustainable is unknown. But certainly, the doubt that it is has driven down the price and made money for shorts over the past year. Looking at First Group PLC in the UK - they are making almost no margin on their First Student - which is the largest School Bus transportation in US. From their Nov report they indicate that for 2015 the average contract price increase for bussing is 5.3%, and that with those increases they have retained 86% of the contracts. The STB financials are tricky based on the impact of financing activities, but from what I can tell, even with no increases in 2015, they could easily pay a 25 cent US dividend and make money. Its safe to assume that STB has also increased contract pricing in 2015, and that operating costs are down somewhat - but I won't count that. At a offer price of $5 US, the immediate return (without any costs savings) for First Student would be .25/5 = 5%. Given that First Student is currently making ~0%, offering 5 $US/share for STB would seem to be a pretty good deal for them. Since first student is a UK company and the GBP is also suffering against the dollar, I'm not suggesting they would be the buyout company - just that it would be good value for them. $5 US would represent a 38% premium over the current trading price.