16% Return in about 6-8 months?
I noticed that Anheuser Busch stock closed at $58.50 on Thursday. That represents over a 16% discount offer the offer price($70/share) as part of the InBev merger announced earlier this year. It got me thinking this is a very reasonable arbitrage opportunity.
There are numerous risks involved that could derail the merger from happening, but I would say there is still a high likelihood of it happening.
Reasons Why It Would Still Happen:
-Deal makes sense for InBev's business strategy.
-$1 billion break up fee. BUD gets a big chunk of change if InBev backs out.
-Management teams and company boards from both companies have agreed to the merger. At this point its in their best interests to make this happen.
-Financing was already arranged. I guess there is a reasonable risk that the financing could fall apart with companies going bankrupt, etc. that are providing the funding.
-The biggest concern over the merger, pre-credit crisis was that the US government would block this deal. With the credit crisis I believe that would be a non-issue. The government doesn't want to slow down business at this point with the economy the way it is.
What Could Derail it?
-InBev stockholders vote down merger.
-BUD stockholders vote down merger. I don't think this is a serious
-Financing falls apart. Probably the biggest risk, but there are many opportunities for the management team of InBev to recover if financing falls apart since all the principals will still be in agreement that the merger/sale is a good idea.
-Any other normal merger hiccup.
I am guessing the sale could be complete as early as 2Q09 which would yield a great return. Something to ponder.
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