TWX Arbitrage

[Joe689]

Thought I would put this in strategies, as this is not quite an "investment".

 

So once the nerves calm down on this stock, I am considering an entry to play some arbitrage.  Too risky?  I may not even wait for the close but instead expect it to climb gradually as a function of time (barring any fundamental changes).    I think the uncertainly made a lot of funds exit.  But then expecting new ones to join in once the nerves, shock and awe of this deal wear off.  Think another x-factor could be a competing offer, although not counting on it.

 

Just wondering people's opinions. 

 

 

[gfp]

Things to keep in mind are that it will take forever to close and AT&T is an expensive short because of the high dividend yield.  Valspar and LinkedIn might be better trades at this time, but the TWX spread looks big on the surface.

[aws]

I bought some TWX yesterday.  It seems like an acceptable risk for a small percentage of my portfolio, and it would be nice to get a return on some of the cash that was otherwise dormant in my account.  I'm looking at it like 10% downside and 25% upside.

 

I assume if the merger fails TWX should trade down around where it was before the deal leaked, roughly a 10% decline to the high 70s.  If the deal goes through you get a return of around 25% on the current price (assuming T doesn't fall far below the 37.41 bottom end of the collar).  If the deal drags out a year that 25% gain will be taxed at the LTCG tax rate which is another little benefit. 

[chesko182]

Hey guys,

 

Just wanted to share my recent article on SeekingAlpha on the merger arb of the At&t/TWX deal.

 

Happy to hear your thoughts and feedback.

 

http://seekingalpha.com/article/4018314-time-warner-attractive-mispriced-bet

 

Thanks!

 

[no_free_lunch]

President Donald Trump said during his campaign that AT&T Inc.’s proposed takeover of Time Warner Inc. should be blocked. His pick to lead the Justice Department’s antitrust division doesn’t seem to agree.

 

Makan Delrahim, a former Justice Department antitrust lawyer now working at the White House, told Canadian business news channel BNN last year that the Time Warner deal doesn’t raise the same hurdles as a merger of two direct competitors, because it would unite a distributor and a content provider.

 

"Just the sheer size of it and the fact that it’s media, I think will get a lot of attention," he said in the October 24 interview. "However, I don’t see this as a major antitrust problem."

 

Those remarks set up a potential clash with an administration that has prized loyalty to its agenda. Delrahim is Trump’s pick to lead the antitrust division, people familiar with the matter have said, which would put him in charge of some of the government’s biggest merger reviews -- the $85 billion Time Warner takeover, as well as pending tie-ups between Bayer AG and Monsanto Co. and Dow Chemical Co. and DuPont Co.

 

https://www.bloomberg.com/politics/articles/2017-03-21/trump-antitrust-pick-saw-few-hurdles-for-at-t-time-warner-nod

 

It is basically just a political argument at this point whether the deal goes through.  If it does there is an easy 9% upside.  Not bad, not bad in this climate.  Downside isn't too bad for a merger, probably a 10-15% haircut if things fall apart.  The little bits I have seen from the trump admin lead me to believe that he doesn't get involved here and the deal gets done.  I am interested in any other opinions.

[no_free_lunch]

There is also this from breitbart.  Yeah the site is a bit controversial but I think that for this particular investment it is relevant as it has links to the trump campaign.

 

Trump admitted that he has not seen all the facts yet, but will keep his options open.

 

“I have been on the record in the past of saying it’s too big and we have to keep competition,” he notes. “So, but other than that, I haven’t, you know, I haven’t seen any of the facts, yet. I’m sure that will be presented to me and to the people within government.”

 

Breitbart News’ Matthew Boyle asked President Trump about whether he has any reservations about approving a merger that puts more power in the hands of the few.

 

President Trump told Breitbart News, “I do not want to comment on any specific deal, but I do believe there has to be competition in the marketplace and maybe even more so with the media because it would be awfully bad after years if we ended up having one voice out there. You have to have competition in the marketplace, and you have to have competition among the media. And I’m not commenting on any one deal, but you need competition generally and you certainly need it with media.”

 

http://www.breitbart.com/big-government/2017/03/02/att-time-warner-merger-still-uncertain-despite-no-fcc-review/