Sold: Lexmark (LXK)

With markets rallying strongly and the merger spread narrowing considerably, I decided to exit my Lexmark (LXK) risk arbitrage position. If I had waited for full closure, I could have earned 1% more with little risk. This was my first purchase in 6 years :( and am very satisfied with the return.

The key reason for the merger gap was due to uncertainty over CFIUS approval, which eventually happened. Most of the gap closed after the approval was announced.

Purchase Price: US$36.03
Sale Price: US$40.12

Total Return: 11.3% (annualized: 134% -- meaningless, short holding period)

Once the merger is consummated, this will end Lexmark as an independent entity. Interestingly, in a similar path to Lenovo, a former subsidiary of IBM ends up in Chinese hands. It is a sign of the growth of the Chinese economy and the rise in prominence of Chinese companies on the world stage. (Having said that, I still maintain my bearish view of China and think it is in a major bubble which is only experienced a few times each century. What's remarkable to me is that I was thought China was in a fixed-asset bubble (i.e. real estate, manufacturing capacity, railroads, etc) but I never imagined it would also end up with a massive credit boom (after 2008).)


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  2. Thanks for the post. It reminded me to check on my really small LXK merger arb position. It looks like LXK is declaring a dividend of $0.36 mid-December. I'm going to hold on to LXK hoping to extract that last additional drop of blood :)

  3. Good luck with your holding. I was going to deploy my capital in the Motors trust but that didn't work out. Otherwise, I would have held on until closure.


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