Merger arbitrage traders are preparing for a pivotal few days with high-profile situations involving Activision Blizzard Inc., Teck Resources Ltd. and AMC Entertainment Holdings Inc. all coming to a head.
(Bloomberg) — Merger arbitrage traders are preparing for a pivotal few days with high-profile situations involving Activision Blizzard Inc., Teck Resources Ltd. and AMC Entertainment Holdings Inc. all coming to a head.
“There are a lot of eagerly awaited decisions coming up,” said Cabot Henderson, who focuses on arbitrage and special situations at JonesTrading.
Activision’s pending $69 billion sale to Microsoft Corp. is grabbing the most attention, as the UK antitrust ruling on the deal is due by April 26. It’s the largest pending US transaction, so it stands out for merger investors who have been facing a market stuck in the doldrums, with mostly smaller, private equity deals announced this year.
“If the agency were to block, it would probably be game-over for the deal,” Henderson said. But “an approval with acceptable conditions would shift the deal probability very much in Microsoft’s favor.”
Here’s a breakdown of deal situations that are in focus this week:
Microsoft-Activision Blizzard
More than a year after the proposed deal was announced, the video-game maker’s shares are still around 10% below Microsoft’s offer price. US regulators have already sued to block it. But optimism is growing that the transaction may overcome a major hurdle posed by the UK Competition and Markets Authority after it narrowed its review scope. The regulator is due to make its final decision by Wednesday, the day before Activision is scheduled to report earnings results.
Activision Traders See More Microsoft-Driven Gains: Tech Watch
Glencore-Teck Resources
Also on April 26, Teck shareholders are slated to vote on the firm’s plan to split the business into coal and base metals companies. It would mark a potential climax in the tussle between the Canadian miner and rival Glencore Plc. Glencore made a $23 billion takeover bid which was later rejected by Teck’s board. The Swiss commodities giant said it’s willing to raise its offer if the split fails. Teck’s class B shares in Toronto have gained more than 20% this month.
Glencore CEO’s First Big Move Is Chasing Mining’s Toughest Prize
AMC Entertainment-APE
The court hearing in a case challenging efforts by AMC to convert its preferred APE units into common stock is set for April 25. The teleconference is expected to pave the way for the judge to decide if and when to approve a proposed settlement. Arbitrage traders have been looking to pocket the spread between the two units, but the court fight keeps adding risk and making their trades more costly. The price gap was $3.44 as of Friday’s close.
AMC-APE Bet Looks Like Easy Money, But It’s Perilous for Traders
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