StockData.org - Arbitrage Opportunities

If I had followed my risky advice (here) on Dec 30, 2008, I would have made a killing on the ROH-DOW deal.  Well, the deal has been agreed too and I never bought any stock.  Here’s the sorry number crunch:

Deal per share: $78 cash
My entry price on Dec. 30, 2008 would have been: $56.76
Deal closes: 4/1/2009
ROI: 37.42%
Annualized: 148%

OUCH.  Typically, I am investing in $5000 lots, so if I had done it, I would have made $1,871 (less commissions) in just 3 months.

If I had never been bitten in the failed HUN deal, I prob would have bought into this one.  I got scared.  Well, that’s the whole point of this blog for me– to analyze what my thinking is at current points in time.  Hopefully, after a good period of time muddling through M&A deals, I can learn how I react to certain deal opportunities and begin to make money.  In the meantime, I will just continue plugging along!

As my Grandfather would say: “Coulda Shoulda Woulda… but you DIDN’T”

Several articles recently have expounded on 3Com’s “China-centric” business model.

Quotes from some recent articles:

“3Com holds 35 percent of the market for networking products in China, about as much as Cisco Systems”

“”China actually has become our home market,” Mao said.” (Bob Mao is the CEO of 3Com).

“3Com made a net profit of US$92.7 million in the first half of fiscal year 2009, a turnaround from a $54.3 million loss in the same period a year earlier.”

“3Com plans to stay an independent company after a failed acquisition by Bain Capital Partners two years ago, Mao said.”

The last quote is interesting, as it plays against my hunch that COMS will still get bought out sometime in the next 1 or 2 years.

If COMS posts more good earnings news in the next filing, you can bet the stock price will move up.  They’ve had two good quarters in a row now, so three would put the limelight back on, IMO.

Sources:

PCWorld “3Com Eyes Exapansion From New “Home Market” in China.

3Com Abandons North America for China

3Com Excels in China

In a press release today, Tarrant Apparel Group (TAGS) announced it is essentially being bought out by the owners of “Sunrise Acquisition Company, LLC.”  The deal agreement calls for paying $0.85/sh for TAGS.

“Under the terms of the merger agreement, upon consummation of the merger of Sunrise Merger Company with and into Tarrant Apparel Group, all of the outstanding shares of Tarrant Apparel Group, other than the shares held by Mr. Guez and Mr. Kay, will be acquired by Sunrise Acquisition Company, LLC for a price per share of $0.85 in cash.”

I am not sure on the target date.  I will post that when I have it.

My entry price (2/27/2009) is $0.72/sh (or roughly a 18% ROI when said deal goes through).

UPDATE:

I still think VIGN is a takeover target, and so does The 451 Group (here’s another article by them on this topic)

Currently trading at $6.78.

As reported months ago in this article by The 451 Group, Content Management Software vendor Vignette could be a likely takeover target in the near future.

Arb Status: WATCH

Deal Stage: none yet

Not much to go on yet, just a few nice articles (the 451 articles above).

Well, DISK’s press release today does not sound good:

“Representatives of Nyx … have requested additional time to finalize its financing for the transaction. Image’s board of directors has indicated its willingness to grant this request for approximately two weeks if Nyx satisfies certain conditions. Image has informed Nyx that it is reserving all of its available rights and remedies under the merger agreement in the event the acquisition does not close, including termination of the merger agreement and the collection of the business interruption fee.” (source)

Gotta say, this looks like the deal is not gonna happen.  I am out at $1.34/sh.  Another loss for me!  Number crunch to come later.

Exar Corp (EXAR) said it will aquire Hifn Inc (HIFN).  In the deal, I would get either:

• $4/sh ..OR..
• 0.3529 sh of EXAR stock and $1.60 cash

At current HIFN price of $3.87, the cash deal still looks in the money for an arbitrage (roughly 3% ROI).  Mgmt says (via press release) the deal should close in early second calendar quarter of 2009– that means the annualized return should be okay.

This is a friendly deal, so chances are good it will get done.  I am entering a position in HIFN in my simulated portfolio today at $3.87/sh.

I’ve decided to speculate that Yahoo and Microsoft are going to merge again.  Even if they don’t, I think short term price appreciation is to be had:

1. New CEO looks pretty sharp.
2. Price level is low low low.
3. I think Microsoft will come back to the table for some reason or another

Even though a complete buyout has low odds, if Microsoft does come back, at a minimum there will be some kind of partnership.  This can only be good for YHOO stock as it tries to stay competetive in the online ad marketplace.  Pair that with the low stock price and my feeling is that ANY good sales and profit growth news will cause a decide ROI up tic in stock price.

I am in this for the short term– 6 months max.  I am out then, whether the stock is high or low (unless YHOO is in the midst of M&A talks).

I bought (for my simulated portfolio) YHOO today (2/24/2009) at $12.52/sh.

Current trading price/sh: $6.19

From Reuters:

“Dow Jones reported that Lundbeck A/S a Danish pharmaceutical company, is interested in buying Elan Corporation, plc, the Irish Independent reported, without citing sources.” (source)

From WSJ on Feb 9:

“Elan Corp. (ELN) said Monday that Citigroup Global Markets Inc.’s strategic review of the drug company’s options will be ready in around 10 weeks, but said it hasn’t yet made a final decision on the way forward.” (source)

Looks like they are serious about looking for a possible sale.  We’ll start watching it again towards the middle/ed of April ‘09 (Apr 20th the “report” is due) for that report they are talking about.  Chance are mgmt will know ahead of time, so maybe I’ll start watching in March instead (for any signs of an up tic/down tic with no other news correlations).

All that being said, their CFO said he would prefer to just sell a minority stake in the company:

“Elan’s chief financial officer, Shane Cooke, said the sale of a minority interest was one option and was perhaps a “preference.”" (source)

… if that scenario bears, this will not be a good deal for me– 1) No buyout 2) Selling a minority interest will most likely dilute current shareholder value, thus dropping the stock price (and I do not want to buy to hold anyway).

My M&A Status: Still watching, but not buying this one yet.

I am entering a position (for my simulated portfolio) in Image Entertainment, Inc. (DISK) today at $2.16/sh.  They have a deal to be bought out by Nyx Acquisitions, Inc. (of Q-Black LLC) for $2.75/sh cash.

DISK recently said they failed to make a payment of $1.3 M on time, but today it has been reported that the payment came in.  Signs are looking good this deal will happen.

“A spokesman for Image Entertainment stated: “In connection with the delivery of the additional $1.3 million, Nyx, Q-Black, LLC and its principals provided assurances to Image that Nyx is fully capable of and committed to closing the merger. As a result, Image fully expects that, subject to stockholder approval of the merger on February 24, 2009, the merger will close on February 26, 2009.””  - Business Wire

Arb gap: $2.75 - $2.16 = $0.59, or 27.3% ROI.  If the deal happens soon, the annualized return will be great.

Sources:

AP article with deal announcement

$1.3 M payment article (BusinessWire via EarthTimes)

Since the Embarq (EQ) deal by CenturyTel (CTL) is tied to the share price of CTL, I could make a few bucks if I think CTl’s share price will rebound before the strike date (5/15/2009).  Currently the deal is 1.37 shares of CTL for each EQ share owned.  Right now, EQ is trading at a very slight discount.  If I bought today and the price of CTL never changed up until the deal, I would have an ROI of about 3%. But… there is always a but…

I think there is a pretty good chance that the deal will go through, however, some people (see the article listed below by Zacks) think that both stocks are headed lower in the short term.  And since the deal is tied to CTL’s stock price, this would not be pretty.  Current market conditions don’t support a bull position either.

For now, this deal is on watch status only for me.

Sources:

Shareholder approval press release

Zacks article