Paramount-Warner Deal Odds Seen as Too Low, Leaving Room for Arb Profit

M&A · Partnership

โดย Bloomberg·Read original

Summary · why it matters

Arbitrage traders say market-implied odds of roughly 70% for the Paramount Skydance Corp. takeover of Warner Bros. Discovery Inc. are too low, leaving room for profit as the $110 billion deal clears a key US regulatory hurdle. The spread between Warner Bros.'s stock and Paramount's $31-a-share offer stood at $4.76 as of Wednesday's close, little changed after the Justice Department closed its investigation, because that approval was widely expected. Remaining risks include potential state lawsuits led by California, antitrust reviews in the UK and Europe, and financing and political pressures. Roy Behren of Westchester Capital Management, which manages the $2.5 billion Merger Fund and is wagering on the deal, called the 70% probability way too low and said the deal is significantly mispriced. The companies aim to close in the third quarter, with a ticking fee of 25 cents a share per quarter if delayed, which Behren said could yield nearly 35% annualized return even with a November close.