Great opportunity in LDG(Merger arbitrage)

Discussion in 'Stocks' started by Daal, Sep 11, 2008.

  1. Daal


    CVS offered to by LDG for $71.50
    shareholders(like bill ackman) are saying this is too low and are trying to shop the company around for a higher bid

    Stock now is $71.7x(so the market thinks its likely the bid will be raised)
    LDG will continue to pay the dividend so your downside is $71.50 plus dividends(less tax), the upside is a higher bid, I have no idea how high it could go

    ackman filled a statement of ownership of this stock and days later LDG and CVS announced a deal, he is saying they rush this because LDG management didnt want to look like they got pushed around by an activist so he thinks there are buyers out there

    The risk here is that a " Company Material Adverse Effect" happens and CVS gets the legal right to walk away. But that is very unlikely because its the drug business which does not change much.

    Even changes on the economy and real estate needs to be 'disproportionate' to everybody else to constitute a CMAE(as defined by LDG 8-K)

    So you are getting paid to wait for the deal with the potential for a higher bid. Haven't bought yet but I'm curious if anybody else have an opinion
  2. Daal


  3. Daal


  4. yayt


    Well done!
  5. Daal


    Just saw this paper suggesting the merger arbitrage returns are higher when the bidder is a s&p500 component. here we have TWO bids by sp500 members so the downside should be protected
    Will continue to hold this a bidding war is possible, plus ackman might pull a third bidder then all hell breaks lose