My assumption is that successful merger arbitrages will be hard to come by in 2009. Quite simply because banks are unwilling to finance deals, companies are less willing to use their own cash and takeover prices will be reassessed and most obviously, there is too much uncertainty..
Take a look at PSD and the 10% spread remaining. The risk of the deal failing is minuscule. Odds of 9-1 in my favor, yet the market is scared of something.
So this IS the good news. These conditions have widened the spreads of arbitrages starting September of 2008. Since I visit a list of pending mergers in the US regularly, I’ve definitely noticed the list getting shorter.
The following is a list of pending mergers as of Jan 8, 2009 courtesy of Merger Investing.
The spreads have closed on many of them since 2008 but there are some where the spread seems to be due to an overreaction.
One merger I started looking into today was EMAG. There is a 45% spread and most would immediately believe the deal to fail, but some other details and the contrarian in me tells me that this is an interesting play.
ROH is another potential deal and we know that Dow Chemical wants the merger. With a 30% spread, the recent pull out by Kuwait could actually have been a good thing IF the price is not lowered.
Disclosure
I hold PSD at time of writing.
By: Jae Jun, www.oldschoolvalue.com
Take a look at PSD and the 10% spread remaining. The risk of the deal failing is minuscule. Odds of 9-1 in my favor, yet the market is scared of something.
So this IS the good news. These conditions have widened the spreads of arbitrages starting September of 2008. Since I visit a list of pending mergers in the US regularly, I’ve definitely noticed the list getting shorter.
The following is a list of pending mergers as of Jan 8, 2009 courtesy of Merger Investing.
Symbol | Announced Date | Closing Value | Last Price | Closing Date | Profit | Annualized Profit |
| ZICA | 8/14/2008 | $0.40 | $0.46 | Unknown | -13.04% | 0.00% |
| DNA | 7/21/2008 | $89.00 | $84.40 | Unknown | 5.45% | 0.00% |
| FONR | 11/14/2008 | $5.00 | $0.94 | Unknown | 431.91% | 0.00% |
| NRG | 10/19/2008 | $26.43 | $24.11 | Unknown | 9.62% | 0.00% |
| MVG | 12/2/2008 | $4.54 | $5.15 | Unknown | -11.84% | 0.00% |
| NTMD | 12/4/2008 | $0.50 | $0.40 | Unknown | 25.00% | 0.00% |
| TLGD | 11/18/2008 | $5.50 | $5.18 | Unknown | 6.18% | 0.00% |
| COWN | 12/8/2008 | $7.00 | $6.47 | Unknown | 8.19% | 0.00% |
| CRXL | 1/7/2009 | $20.55 | $23.00 | Unknown | -10.65% | 0.00% |
| MVCO | 7/28/2008 | $11.25 | $7.74 | 1/7/2009 | 45.35% | 0.00% |
| PSD | 10/26/2007 | $30.00 | $27.40 | 1/31/2009 | 9.49% | 150.59% |
| ROH | 7/10/2008 | $78.00 | $60.00 | 1/31/2009 | 30.00% | 476.09% |
| DSCP | 9/16/2008 | $53.00 | $52.65 | 1/31/2009 | 0.66% | 10.55% |
| NNDS | 8/14/2008 | $63.00 | $57.00 | 2/2/2009 | 10.53% | 153.68% |
| EMAG | 10/13/2008 | $2.85 | $1.96 | 2/11/2009 | 45.41% | 487.47% |
| LNY | 6/16/2008 | $13.50 | $12.75 | 3/31/2009 | 5.88% | 26.18% |
| CPHL | 8/5/2008 | $15.64 | $13.76 | 3/31/2009 | 13.65% | 60.77% |
| ACBA | 9/10/2008 | $11.34 | $10.21 | 3/31/2009 | 11.11% | 49.47% |
| CVP | 9/19/2008 | $2.50 | $2.09 | 3/31/2009 | 19.62% | 87.32% |
| INOC | 10/6/2008 | $3.45 | $1.99 | 3/31/2009 | 73.19% | 325.80% |
| SOV | 10/13/2008 | $3.09 | $3.03 | 3/31/2009 | 2.11% | 9.37% |
| ZIGO | 10/16/2008 | $7.15 | $7.12 | 3/31/2009 | 0.46% | 2.05% |
| FRBK | 11/10/2008 | $9.26 | $8.69 | 3/31/2009 | 6.51% | 28.97% |
| TMTA | 11/17/2008 | $18.70 | $18.69 | 3/31/2009 | 0.05% | 0.24% |
| DISK | 11/20/2008 | $2.75 | $1.80 | 3/31/2009 | 52.78% | 234.93% |
| MNT | 12/1/2008 | $31.00 | $30.95 | 3/31/2009 | 0.16% | 0.72% |
| WVCM | 12/2/2008 | $11.53 | $11.17 | 3/31/2009 | 3.22% | 14.35% |
| ANL | 12/10/2008 | $14.20 | $13.84 | 3/31/2009 | 2.60% | 11.58% |
| SCOP | 12/23/2008 | $5.62 | $5.45 | 3/31/2009 | 3.12% | 13.88% |
| IDEV | 1/5/2009 | $4.50 | $5.38 | 3/31/2009 | -16.36% | -72.81% |
| BUF | 12/22/2008 | $0.12 | $0.11 | 3/31/2009 | 9.09% | 40.47% |
| EQ | 10/27/2008 | $39.31 | $37.99 | 6/30/2009 | 3.46% | 7.30% |
| CYCL | 11/7/2008 | $8.50 | $8.17 | 6/30/2009 | 4.04% | 8.52% |
| ABNJ | 12/15/2008 | $12.02 | $11.93 | 6/30/2009 | 0.76% | 1.60% |
| PBKS | 12/19/2008 | $8.46 | $8.29 | 6/30/2009 | 2.06% | 4.35% |
| AANB | 1/2/2009 | $3.26 | $3.01 | 6/30/2009 | 8.19% | 17.28% |
| SWIM | 1/8/2009 | $8.67 | $8.34 | 6/30/2009 | 4.00% | 8.43% |
The spreads have closed on many of them since 2008 but there are some where the spread seems to be due to an overreaction.
One merger I started looking into today was EMAG. There is a 45% spread and most would immediately believe the deal to fail, but some other details and the contrarian in me tells me that this is an interesting play.
ROH is another potential deal and we know that Dow Chemical wants the merger. With a 30% spread, the recent pull out by Kuwait could actually have been a good thing IF the price is not lowered.
Disclosure
I hold PSD at time of writing.
By: Jae Jun, www.oldschoolvalue.com
