Altera Buyout

xandman said:
Is it correct to assume that the highest yields are the ones with the most chance of falling thru?
More...
In general, yes. Deals with buyers who are A+ rated big Fortune 500 companies generate smaller yields than some shady Private Equity company no one has ever heard of. When BRK bought out Lubrizol and Burlington Northern railway the annualized yields were on par with BRK's short term corporate debt -- around 1-2%.

Sometimes deals are connected to shareholders electing certain payouts in cash, stock or a combination with an upper cap on the cash payout which is prorated depending on what percentage of holders choose this option. So its not always possible to generate a perfectly hedged long/short position in the seller/buyer underlying unless you have a model to predict shareholder election. Sometimes the websites I listed don't take this into account and that inflates the yield they list. As I cautioned: analyze each deal individually.

Other times you have lawsuits trying to stop deals from taking place. Or even better a bidding war from several buyers which can be very profitable. One thing I caution of is dealing with buyout rumours. I only analyze deals with a actual written offer on the table.
 
Interesting situation in some of the Chinese small caps. DATE and CMGE have offers pending but are getting crushed in the china crash. Interesting yields that get bigger by the day but a financial crash in china obviously increases risks of deal financing falling apart.
 
That rumor is getting stronger and you see ALTR has dropped below $50. If it goes stronger, it can easily drop below $40. Disagreement between top executives whether it is a good idea to take over ALTR.
 
You must log in or register to reply here.
Back
Top