XUE - Xueda Education Group

[aws]

This merger arbitrage play is starting to break apart. It was schedule to close in Q2 at 5.45 net per ADR.  It's traded in a tight range of 5.25 to 5.40 since October, so the potential gain has been very small and not that interesting.  But two days ago it started to fall and today it closed at 4.95.  If the deal were to close on the current terms it would result in a 10% gain within two months, which is certainly getting into the interest range. 

 

It looks like the reason for the crash is that the acquiring company, Xiamen Insight Investment Co Ltd, is being investigated over some possible securities violation.  This article has a copy of a text about this, but it's in Chinese and I haven't found much english language news about this.

 

http://www.reuters.com/article/idUSL3N1881PC

 

Can anyone read the document or have any other info that may help evaluate the odds of this deal closing?

[HJ]

The Chinese security regulator gave the onshore listed company notice that there is material information missing in how they intend to transfer the onshore shares to the majority holder of the US stock.  Therefore the securities regulator will officially "investigate" the onshore company.  I'd say the odds are not good this will go through, especially in light of the fact that all of this is happening in the background of this:

 

http://www.bloomberg.com/news/articles/2016-05-10/china-said-to-mull-curbs-on-domestic-backdoor-listing-valuations