Let's lay out the facts as they stand today.
As some have suggested, this is a very attractive arb. to play, especially if you BOT at yesterdays price of $75.00/GDT.
From my research I see little risk in returning $80 on a $75 purchase, in approx. 60 days.
The numbers:
Each share of GDT will be exchanged for $42.00 in cash and $38.00 in BSX.
IF BSX is less than......$22.62, GDT receives 1.6799/BSX
IF BSX is greater than $28.86, GDT receives 1.3167/BSX
As of Jan. 17th, the collar was significantly expanded: (noteably the timing of the collar which will protect the GDT'ers.)
Expanded collar through closing -- To provide Guidant shareholders with additional certainty of value, Boston Scientific has adjusted the bottom of the collar around the stock portion of the merger consideration by $1 from $23.62 to $22.62, which is approximately 10 percent below the closing price of Boston Scientific stock on Friday, January 13, 2006. The top of the collar remains $28.86. In addition, Boston Scientific has moved the timing of the collar from just prior to the date of the Guidant shareholders meeting until just prior to the closing date.
Interest payments -- If the closing of the transaction does not occur by March 31, 2006, the $80 per share price would be increased by $0.0132 in cash for each day between April 1, 2006 and the date of closing (representing an annual interest rate of 6 percent).
Boston Scientific expects to complete the transaction by the end of the first quarter of 2006. Finally I would note that there are no financing conditions and as of Jan. 17th, 30% of BSX holders have voted in favor of the merger.
Examining the primary risks reveals little chance that BSX would voluntarially
Insider buying at BSX is very positive as well:
fool.com
Examine the risks of the deal not going through:
Most analyst agree there is little chance that BSX would voluntarily walk from the deal.
Regulatory approval is nearly certain given the ABT purchase/ BSX’s divesture of Guidant's vascular intervention and endovascular businesses.
For what will likely be a 60 day hold and relatively little risk, it's a very sweet return.
Good luck,
Eric |
