Risk Arbitrage: Teck Caminco Takeover of Fording Canadian Coal Trust

With the BCE deal seemingly on the ropes (stock is off another 8% today), it may be questionable to consider risk arbitrage but now may actually be a good time. I am looking at the Teck Caminco--a Canadian mining giant--takeover of Fording Canadian Coal Trust (FDG; TSX: FDG.UN). The stock is trading way below the cash portion of the offer but there are many question marks about financing. The latest suggestion by the Teck CEO that other coal users, such as steel producers, may finance the deal seems like grasping at straws.

The risk with this deal is that Fording is trading at rich multiples given the commodities bull market over the last few years. The stock is up 100% in the last year so it's not clear to me what the downside is in a failed takeover (in contrast, something like BCE has a definable downside of about $30 per share.)

Comments

  1. vladoSeptember 30, 2008 at 8:44 AM

    There is currently a 26% upside to this stock before it meets the $42 offer.

    ReplyDelete

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