New Merger Arbitrage With JAZ

For those that are not readers of The DIV-Net, I just wanted to let you know that I’ve written a post on another potential merger arbitrage play. With the closing date expected to be Sept 17, those that are interested could start looking into it.

As of Aug 15, there is currently a 8.95% spread which is annualized to 72.57% but be sure to weigh up the probabilities before making any decision.

Check out the post at DIV-Net.


No position held

[tags]merger, arbitrage, special situation[/tags]

  • Jae,

    I thoroughly enjoyed your article on the JAZ arbitrage. I am looking into branching out by implementing other strategies for diversification purposes. Value arbitrage sounds like an interesting concept to me that could yield decent returns.

    Best Regards,

    Dividend Growth Investor

  • Hi DGI,

    Another one I recently came across is Tumbleweed (TMWD) which I will have to look into. It is a cash transaction which I prefer much more than share transactions.

    I’m still trying to improve and smooth out my processes when it comes to arbitrage but it does help boost returns.

    I also just ordered “You Can Be a Stock Market Genius” by Joel Greenblatt which deals with special situation techniques including arbitrage. Looking forward to reading it.

  • Jae,

    I read parts of the 1988 Berkshire Hathaway letter to shareholders where Warren Buffett gives his four questions for investing in arbitrage:

    To evaluate arbitrage situations you must answer four
    questions: (1) How likely is it that the promised event will
    indeed occur? (2) How long will your money be tied up? (3) What
    chance is there that something still better will transpire – a
    competing takeover bid, for example? and (4) What will happen if
    the event does not take place because of anti-trust action,
    financing glitches, etc.?

    I myself was turned onto arbitrage ever since I saw BUD’s price creep up after the cash deal was announced. If I could make 1% per month with arbitrage I would be happy to diversify my returns.

  • The four questions are exactly what I try to answer. I look at a situation and try to give it a probability outcome like in a casino and then I make my bet.

    I also usually don’t get into a workout unless there is about 1 month left. I’ve only acted on 2 arbitrages to date and the holding period has been around 3-4 weeks for both.

    If you come across some stuff, I’ll be very interested to learn about it.

Ready to try Old School Value?