http://www.distressed-debt-investing.com/2011/02/…
Very interesting article on DDI re SSCC merger with rocktenn. i think third point has an excellent case here and that the deal cuts recut at a higher price. aug 40 calls look like a nice way to play this.
thoughts?
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Nice find bateman. Agree that Third Point makes a great argument here. I'd play it differently though - assume the deal goes through at today's current stock price - that values SSCC at $38.38/share. It's currently trading at $39. So just load up on the equity. If the deal goes through at the current terms, you lose a few percentage points rather than your whole investment on the options, plus you've still got exposure to the upside.
Any idea what the voting structure is like - the hedge funds only own 9% of the shares. Can they block it without suing?
the equity is definitely safer and if i was a HF with tons of money the equity makes a lot of sense, just way less potential return on the equity with a limited capital base. if the deal is recut at $50, you make a 32% return, definitely solid. However with the calls, you make $10-cost of call (say 1.50)=$8.50 per call or 567%.
i think the risk/reward is skewed and ill take those odds
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