Sunday, April 22, 2007

Two arbitrage deals

In this article, we will look at two arbitrage deals that may give the shareholder a 6% upside within a month and in the worst case two months.

The first one is FICC and the second one is TNOX. First FICC.

FICC is Fieldstone Investment Corp and is being bought out by CBass, a unit of MTG. ( ticket MTG ). The offer price is $4/share and the deal has got SEC approval. The share holders meeting is scheduled for the 22nd of May and the deal is expected to close soon after. Currently the stock is trading at a discount of 6.3% to the eventual buy out price. While the likelihood of the deal to close is good, it is by no means a done deal. However, low stock volume and steady price indicate that the likelihood of the deal going through is high. If the deal doesnt go through, the share holders wont be left with much.

The second company of interest is TNOX. The company is being bought out by Genentech for $20/share but is currently trading at $18.85. This gives a return of 6.1%. The share holders have already approved the deal but SEC approval is pending. The company is saying that the deal is expected to close in the first half of the year.

Both deals have considerable risk and some upside. If the deals dont go through there is a large downside as well.

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