Merger Arbitrage Blog

July 2017 Trade Updates #1

Dramatic changes in my portfolio as I continued to trim non-core positions and add to my core positions. Large concentration risks on two main merger plays now but one of them should be completed within 2 months.


SOLD Mobileye, Brocade, Fortress Investments, Moneygram, Brookdale Senior


Mobileye: With the annoucement from Israeli Tax Authority and a press release from Mobileye, the merger seemed to be progressing towards the final stages of completion, much faster than the original Q4 2017 estimation. Only Korean antitrust remains to approve and the tender date had only been extended from 20th July to 28th July meaning there is a real chance the merger may close within weeks since the management confidently extends the tender by only 8 days (We see this with Syngenta tender too where they only extended their final tender by 2 weeks prior to close). I would be happy to hold but this week there is an even better opportunity to deploy cash with the Monsanto dip (too bad it didn't last long enough). Decent profit margin exited position at 18% annualized profit for a major position.

Brocade: Similarly the merger is drawing to a conclusion but the MOFCOM clearance is still not obtained. There maybe a slight chance this will drag out for 1-2 months so I rather not wait for the extra 0.3%. Closed all near $12.69-$12.70. Divdend plus slight profit at 2.75% annualized for a major position. In the end this didn't work out as my assumption of a June close didn't materialized.

Fortress Investments: Divested this non-core position. Slight profit at 7.3% annualized.

Moneygram: Bad news as Alipay had to refile for CFIUS and this adds to uncertainty and waiting time. Euronet Worldwide adds fuel to the fire by criticizing the Alipay deal. Divested non-core position. Slight loss with -0.5% annualized returns.

Brookdale Senior: Took a loss of 37.5% annualized for a minor position. After 1.5 months of no news and activity in the merger front, especially with the buyer being Chinese, I decided to bale out of this position. Only time will tell whether its a wise choice (like ANF) or not.

ADDED Monsanto, Cabela:

Monsanto: Added investment to major position. Monsanto's share price came under pressure after the ex-divdend and after news that some states like Arkansas temporarily banned the herbicide dicamba due dift problems with older versions of the chemical. However the bans should be solved by updating the regulations on usage like Missouri and Tennessee.had imposted. Adding to the regulation woes is California had declared that Roundup may cause cancer. All these negative news had impacted the share price which dropped to a low of $116.2 from $118 and I think its a wonderful opportunity to add positions at lower cost. The impact to the merger should be minimal and these are issues which could be resolved.

Cabela: FTC approval came early July and with this only the last hurdle which involves the sale of Cabela's World Foremost Bank to Synovus remains. The sale should be completed relatively quickly and some documents indicated that Federal Reserve questions on the sale is quite benign. Overall chance of success is high and I anticipate the merger to be completed by end of August. This became my 2nd largest position as the merger is still tasty with a 2.5% spread remaining.




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