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November 10, 2009

In my previous post on the Allied-Ares merger arbitrage opportunity Buy viagra soft tabs without prescription, , I introduced a topic which I realized I've never quite talked about here on The Curious Investor. Buy viagra soft tabs from india, As I intend this blog for both beginning investors and seasoned investors alike, here's a run down on the concept of merger arbitrage, viagra soft tabs approved. Discount viagra soft tabs no rx,

What is arbitrage?
Rigorously speaking, arbitrage is the practice of taking advantage of a price differential between two markets which allows the arbitrageur, viagra soft tabs without a prescription, Viagra soft tabs no rx, or person taking advantage of the arbitrage, to obtain a risk-less profit, viagra soft tabs cost. Cheap viagra soft tabs from canada, Technically speaking, an arbitrage refers to a situation where the same asset sells for a different price in two markets, lowest price viagra soft tabs. Tablet viagra soft tabs, For example, a textbook in the UK selling for $20 and a textbook in the USA selling for $100, buying generic viagra soft tabs. The arbitrageur would buy the UK textbook and simultaneously sell the USA textbook and pocket the $80 difference, buy viagra soft tabs without prescription. Canada viagra soft tabs, The simultaneous stipulation is sort of a idealized hypothetical case. This act would imply a completely riskless arbitrage since there's no risk of being able to execute one transaction or another or risk of pricing changing at any instance in time, buy viagra soft tabs canada. Viagra soft tabs for order, Merger Arbitrage
There's no such thing as a true riskless opportunity in real life is there. In fact, low price viagra soft tabs, Buy generic viagra soft tabs, in today's world of increasing information parity and quickening execution times, can arbitrage opportunities exist, cheap viagra soft tabs pill. Buy viagra soft tabs without prescription, Well, there's one regular kind of transaction structure which creates potential arbitrage opportunities all the time - merger transactions. Viagra soft tabs australia, When an acquiring company chooses to purchase a target, the stocks of the two businesses will continue to trade independently for a period of time as the deal works out regulatory and other issues before closing, free viagra soft tabs. Buy cheap viagra soft tabs internet, During this period of time, there remains risk that the transaction will not close or any number of other events could prevent the transaction from closing, buy viagra soft tabs no prescription required. Cheap viagra soft tabs online, Provided the transaction does close, however, buy viagra soft tabs on internet, Drug viagra soft tabs, the merger transaction establishes an accepted price for the stocks in question and gives an investor the opportunity to extract value from variations to the closing price.

Five Opportunities if you're interested
Here are five pending merger transactions right now, viagra soft tabs rx.

merger arb

The classic merger arbitrage opportunity is the all stock merger. In the above chart, you can see it with Black & Decker and Stanley Works, buy viagra soft tabs without prescription. Viagra soft tabs discount, Here, the proposal is that Black and Decker shareholders will receive 1.27 SWK shares per Black & Decker share, cheap viagra soft tabs in usa. Compare viagra soft tabs prices, Here, we know that at closing day, cheap viagra soft tabs from uk, Buy viagra soft tabs us, there is an established exchange rate for the two stocks. Yet, viagra soft tabs pill, No rx viagra soft tabs, at closing prices, SWK's closing price of $50.17, viagra soft tabs pharmacy online, Viagra soft tabs buy online, today, the exchange of 1.27 shares would yield an implied value of $63.72/share to Black and Decker shareholders versus Black and Decker's closing price of $62.27 today, buy viagra soft tabs in canada. Lowest price for viagra soft tabs, This is the arbitrage opportunity. Buy viagra soft tabs without prescription, As time passes, we know that the valuation gap must close since the stocks of each company technically represent the same combined entity (assuming the merger closes). As we don't know how exactly the gap will shrink, viagra soft tabs prices, Find cheap viagra soft tabs, we can buy the BDK at $62.27 and short SWK at $50.17 to lock in the spread that we have identified.

The second kind of merger transaction is the all cash deal, purchase viagra soft tabs online. Discount viagra soft tabs overnight delivery, This is simple enough. For example, viagra soft tabs without prescription, Oracle offers Sun Microsystems $8.50/share in cash. In this case, there isn't really an "arbitrage" opportunity as you won't be buying and selling the shares on each side of the transaction, buy viagra soft tabs without prescription. The $8.50 simply sets the exchange value and purchasing the target's shares (JAVA in this case) allows you to profit from any spread.

Finally, there's the Pepsi and PepsiAmericas deal where you see that consideration is given in 50% stock and 50% cash. This is simple enough. Calculate the spread as though the transaction were 100% stock. Then, average that with the value of the cash exchange. And, voila, the implied price.

Full disclosure: No position in the stocks mentioned in this post..