With the recent chaos in global markets, merger arbitrage spreads have widened considerably. This has made the risk/reward more favorable, allowing enterprising investors to take advantage. Below are some of the best opportunities in the merger arbitrage area:
From Dow Jones
From Dow Jones
Varian Semiconductor Equipment Associates Inc. (VSEA), Applied Materials Inc.(AMAT) Premium offered: $1.03 or 1.66% Acquirer: AMAT Target: VSEA Offer per share: $63.00 cash Value of outstanding common equity: $4,752,090,000 Target share price: $61.97 Acquirer share price: $11.05 Expected closing: End Of 2011 9/25/2011 (might be October at the latest) Annualized gain: 37.92%
Motorola Mobility Holdings, Inc. (MMI), Google Inc. (GOOG) Premium offered: $2.40 or 6.37% Acquirer: GOOG Target: MMI Offer per share: $40.00 cash Value of outstanding common equity: $11,772,000,000 Target share price: $37.61 Acquirer share price: $533.51 Expected closing: End 2011-Early 2012 1/1/2012 Annualized gain: 20.39%
I don't normally like merger arbitrage because the risk is generally too high and the reward is too low. However, with these kind of annualized returns and ZIRP by Banana Ben and his merry traitors at the Fed, these look like good opportunities, without having to bet on the direction of the stock market. After all, anything is better than 0% at your bank.
Warning: Merger Arbitrage often seems likes a sure thing...and it is until one of the deals falls through and you watch the stock drop 20-30%. The deals listed above are both all cash deals and have a very high likelihood of going through. But no guarantees.
Black Swan Insights