RE: JDSU/SDLI Merger
I have held both of these stocks since March, they are my largest holding at the moment. I doubled my position when the merger was announced.
JDSU closed at 117.75 today, its high for the year was 153.42, and I think we will see that price again before the year is out.
SDLI closed at 354.5, its high for the year was 460.5.
The merger is a 3.8 trade of stock. This means, at todays price, that full value for SDLI would have been 447.45, or 92.95 more than it is. This is a 26% Arb discount, so the bet 26% is that the merger does not go through.
My thinking is as follows:
1) JDSU/SDLI are the best two companies to be in, in their field.
2) Even if the merger does not go through, I think they are the best play, the next 12 months, among the stocks we follow here.
3) I believe that all signs indicate that the merger will fly.
4) I believe that JDSU will end the year at least at 150, or 18% more than it is now.
5) This means, if I am right, that the SDLI merger will go though with an SDLI valuation of at least 570. (JDSU @ 150 times 3.8= 570)
6) With SDLI presently at 354.5 this would be an increase of 215,5, or 60.7% over todays price.
That is why SDLI is 20% of my portfolio at the moment. |
