Can Turtles Fly?

As I have remarked before, merger "arbitrage" looks like the most attractive strategy to a newbie like me right now (I put "arbitrage" in quotes because this is a speculation, as opposed to an arbitrage, since I don't hedge by shorting (not possible in some of these cases anyway)). I find the mergers attractive because they are not dependent on the broad market, which is heavily influenced by economic growth, profitability, sentiment, etc (there is a lot of uncertainty with these numbers right now). Furthermore, the merger discount is very large right now due to credit issues and, supposedly, some merger-arbitrage hedge funds leaving the market (due to liquidity problems in other strategies within their family of hedge funds). You don't see such discounts during a normal scenario (i.e. during a typical bull market or bear market). Of the announced mergers, the three I found attractive were ABN-Amro (ABN), BCE (BCE), and Tribune (TRB). You can read my prior w...

I have commented that announced mergers are some of the most attractive in my eyes these days. Given all the market volatility, an announced merger presents good return (5% to 10% for the reasonably safe ones) regardless of market direction. The only thing is that the deal needs to close. I'm not comparing myself to the greatest investor of all time by any means but Warren Buffett just filed a report saying Berkshire Hathaway took a stake in Dow Jones . Recall that Buffett said he did not like investing in newspapers (they are glamour stocks trading at high valuations, similar to sports teams, fashion houses, etc) so this is purely an "arbitrage-type" situation. It isn't a true arbitrage because it isn't risk-free profits (that's the definition of arbitrage). There is no way to purely hedge your position here. In any case, Buffett was clearly confident that the deal will close. Buffett has done a lot of "arbitrage-type" investments in the past. If I ...

Thinking about BCE led me to consider another proposed takeover: the ABN-Amro takeover. There are two competing offers, one from a consortium of RBS, Fortis, and Sander (RFS), and another from Barclays. Similar to the BCE situation, the market is thinking that Fortis may not be able to raise financing via debt. This is actually an attractive deal although although with much higher risk than the BCE deal in my opinion. I have laid out the information I can gather below (I can't guarantee 100% accuarcy with some figures so click here for actual information about the takeover from ABN-Amro). Also note that I am only taking about the offer for the ABN-Amro ADS trading on NYSE (the local shares trading in Netherlands have different conditions). Key Details RFS: EUR 35.60 + 0.296 newly issued ordinary shares of RBS Closing date of RFS offer: October 5, 2007 Barclays: 0.5325 Barclays ADSs + EUR 13.151 Closing date of Barclays offer: October 4, 2007 Vote by ABN-Amro shareholders: Septembe...