A quick arbitrage opp, with a hat tip to the excellent Theodore Tonca for providing the lead in his annual letter.
CRFN is acquiring ECBE in a deal value at ~$60m. CRFN will issue 3.55 shares of stock for every one share of ECBE.
The deal looks highly accretive- ECBE is getting bought out for under book, and there should be plenty of synergies (you can find a bit more on the deal here).
CRFN is currently trading for $4.65, and ECBE for $15.05. That represents a potential spread of just shy of 10%.
Now, this spread will be difficult to “lock in”. Both names are a bit illiquid, and you probably don’t want to short CRFN given that illiquidity. But, as I mentioned in this morning’s post on PPG arbitrage, I don’t think you need to hedge as in the long run the gain and loss from market movement should balance out.
Most importantly, I think CRFN’s stock post deal will look fairly valued to slightly cheap. Thus, it’s not like you’re receiving AOL / Time Warner stock that would terrify you to hold for longer than a second. Take your time, earn the spread, and then sell when you have a chance and the market isn’t under pressure.
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