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Merger Arbitrage Blog

June 2017 Summary & Trade Updates

This month my mark to market performance is +2.9%, mainly helped by $MON and $MBLY while $PF dragged.

SOLD Neustar, Abercrombie & Fitch, CST Brands

Neustar: The company received CFIUS approval on 13th Jun and when the price reaches $33.45, just $0.05 short of the merger price, I sold all my holdings rather than wait for the deal to close. Gain is about 20% annualized.

Abercrombie & Fitch: This is taking a little bit too long for the bidders to firm up their interests for my liking. I decided to bail out rather than risk a scenario where the bidding fails. I got 7% annualized for my efforts.

CST Brands: The merger received FTC approval as expected in June and closed this month. I sold all my holdings when the price was at the merger price just days before official closing. Gain was 6.64% annualized. Not great but safe and steady.

TRADED Tribute Media, NXP Semi

Tribute Media: As doubts creeped in following the courts order stayed the decision for the TV discount rules which could scrap the whole merger. I bought in at $39.23 and sold 93 shares of Sinclair to hedge and utimately sold Tribune at $41 within a few days after the federal court decided not to emergency order to block FCC's plan to reinstate the TV discount rules. 

NXP Semi: Traded NXP Semi on the EU decision to proceed to phase 2 investigation of Qualcomm/NXP Semi merger. This will delay the merger by another 3 months. The share price dropped to $108 where i snapped up a minor position and when it recovered to $109.6, I disposed the entire position as I am not sure if Qualcomm will increase its merger offer price.

BOUGHT Cabela

Cabela: Added a major position in Cabela after rumors indicated that FTC is likely to allow the merger to proceed. The decision date is 5th July. I was originally skeptical on the prospects of a quick resolution the FTC 2nd phase investigation due to my own analysis that as much as 25% stores overlap but it seemed like FTC is looking at the general market (sports/outdoor equipment stores) instead of a narrower market segment (large format sports/outdoor equipment stores) so in this respect the market shares of both Cabela and Bass Pro shrinks to below 10%. With the reasoning, it is very likely FTC will approve the transaction with little divestitures and concessions. The only hurdle left is Cabela's banking business that are being sold to Synovus which in turn will divest the credit card business to Capital One while retaining the deposits. This workaround is the solution for the original plan which involves only Capital One and which met heavy regulatory opposition.

ADDED Mobileye, Monsanto: Added to both core positions as I expect them to be low risk and high rewards.

PRE-MERGER:

Brookdale Senior: The senior housing business is rumored to be in talks with China suitor Zhonghong Zhuoye Group and is expected to be announced soon since the news broke out around 14th June.However, doubts remained about the validity of the news and its Chinese buyer as the price dropped sharply and recovered again. This is a speculative position.

Pinnacle Foods: News broke out early June that Conagra is in advanced talks to buy Pinnacle Foods and on paper it looks like a good fit and I bought a minor position but the trade unravelled within one day when news came that the merger parties had broken off talks.

 

 

 

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