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Gold/Mining/Energy : Strictly: Drilling and oil-field services
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To: Wowzer who wrote (45970)6/7/1999 1:53:00 PM
From: Brent Hogenson  Read Replies (1) of 95453
 
NBR -- PESC spread.

NBR is suppose to buy out PESC with the exchange rate of 1.025 shares of NBR for every 1 share of PESC. The stock prices are not even close to parity yet.( NBR - 23.75, PESC - 19.56 ) The market is leery because NBR renegotiated the Bayard acquisition.

The bottom line is NBR wants PESC. They already own 10% of the company and have had their eyes on them for years. This industry slump was the catalyst that made them act. PESC originally turned down the merger twice until NBR threatened to go hostile. I am sure some kind of reassurance was made for the upper management and their jobs.

I am writing NBR december calls strike price 20 for 6.25
I am buying PESC december calls strike price 15 for 6.25

When the merger goes through I will be long NBR Dec 15 calls and short NBR Dec 20 calls - FWIW I've done 40 of these.

My take $5,000 per 10 - the risk - the merger doesn't go through and you're short NBR and long PESC. I have spoke to both companies and they both are doing what they can to get the merger done. They both want it and are going through the regulatory requirements. Both companies say the deal will be done in August or September.

The sale will tie up a little equity until the merger goes through.
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