Thursday, December 13, 2007

Merger Arb oppty with Penn National Gaming

If you are interested in side stepping some of the recent market volatility with a short-term merger arbitrage strategy, why don't you roll the dice with the pending merger transaction of Penn National Gaming Inc (PENN)....

The recent shareholder approval on December 12th, 2007 provides on more step closer to closing the deal.

On June 15, 2007, Fortress Investment Group LLC and Centerbridge Partners, L.P made a merger offer to PENN. Under terms of the deal, if the acquisition is complete by June 15, 2008, shareholders will receive $67 per share. If it closes after June 15, the price will increase by about 1.5 cents per day.

If you are unfamiliar with this strategy, please read my first merger arb post with MRK/RNAI for some background.

Here is the 1 year chart on PENN, currently trading at $59.65 per share at the December 12, 2007 close.




Details of the trade:

Purchase 419 shares of PENN for $25,003 including $10 in commissions. At $67 per share, this trade will provide you a gross return of 12.3% with your money working for about 6 months.

Closing Date Annual Percentage Rate Scenarios

May 15th, 2008: 27.8%
June 15th, 2008: 23.2%
July 15th, 2008: 21.2% includes 30 days of 0.0149 per share

(based on a 350-day calendar)

Author Disclosure: I do not own any shares of PENN or FIG. This strategy is highlighted for entertainment purposes for my mock short-term portfolio.


Sources:
Company website
SEC Edgar website
Yahoo Finance

8 comments:

Anonymous said...

You may want to go to this site to get a clear understanding of the timing and regulatory issues involved in the PENN merger:

www.maresearch.com

Anonymous said...

If PENN share holders will receive $67 per share, why is the stock
trading below $60?

Is it because the payout is not until June? I'm just wondering if I
am misunderstanding anything before I buy some PENN.

ETStockideas said...

The stock is trading below the $67/share due to the amount of timing to the anticipated close of the deal along with the remaining approvals.

Anonymous said...

If you are someone looking for merger data, you should check out www.madmergers.com.

Anonymous said...

If you are someone looking for merger data, you should check out www.madmergers.com.

moose said...

The reason it trading so low is because of the doubt that FIG can come up with the $...........Joe

RyanHegs said...

Finance Puzzle,
Thanks for the info on PENN. This arb opportunity has been off my radar. I have done a lot of arb trading over the last 2 years and have a blog with all my past, present, and future transactions at www.ryanhegs.com.

-RyanHegs

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