That is how some describe the special situation of an arbitrage. Here is an idea:
Bayer is buying Monsanto for $128. The deal is going to close before the end of first half 2018.
Currently $MON is selling for $123+ which works out to be slightly under 4% gain within the next four months. Throw in the dividend yield of 1.75% divided 4, this works out to be around 4+% gain by June.
Why is there a GAP between the buy price and the current price ?
Well, three reasons come to mind:
A. People don’t really like Monsanto.
B. People are afraid that the deal won’t get approved by EU regulators. A previous attempt to buy Monsanto failed in 2016.
C. Deal may takes too Long to close due to delays and extensions and people frankly have better places to park their monies.
Well, these risks are real and despite today’s Reuters news that Bayer/Monsanto deal is likely to close before mid year, I won’t add to my already large position in Monsanto. Buffett currently is also betting that Monsanto deal will close.
The world’s largest seed / insecticide suppliers are concentrated to three countries: China (Sinochem bought syngenta last year) , USA (Dow chemicals bought DuPont in august last year), so I think it is more likely that Bayer of Germany will succeed in buying Monsanto.
Cheers!
Submitted March 01, 2018 at 11:33AM by raytoei http://ift.tt/2oLZjNo
