Well, it’s not an all cash deal, so this one is a little more tricky.  Now PFE’s stock price is part of the equation:

“The New York-based company will pay $50.19 — $33 in cash and 0.985 share of its stock — for each Wyeth share. That represents a 29 percent premium over Wyeth’s closing share price last Thursday, before news of the talks began to leak.” - Reuters

and

“Pfizer and Wyeth expect the deal, which carries a breakup fee of 3 percent, to close at the end of the 2009 third quarter or during the fourth quarter. Analyst said there did not appear to be much risk of any anti-trust issues holding up the deal.” (same Reuters article)

Currently, WYE is trading at $43.46.

Let’s do a number crunch for an arbitrage trade on WYE today:

1/26/2009:

WYE: $43.46

PFE: $15.61

So, If I bought 100 shares of WYE today, with the current terms of the deal:

Cost Basis: $4346

(33 * 100) + ((0.985 * $15.61) * 100) =

$3300 + $1537 =

Payout: $4837

Net: $491  (or, 11% ROI)

Conclusion

I cannot ignore the PFE component of the deal.  The lower PFE goes, the smaller the arbitrage gap.  For now, as long as PFE stays above $15/sh, I might consider buying into this deal.  Also, it is important to note that the deal is not expected to go through until 3rd or 4th quarter 2009 (see quotes above).  That’s a long wait if I buy now.

I need to look at the SEC filing and see if there are any other catches.