Friday, September 26, 2008

Bud may look this good tommorrow

A press release today announced the closing date of the WWY deal. It is set for October 6. If it closes then, and there isn’t any reason why it shouldn’t, I will have earned about a 14% return. Sure beats a money market fund or short term bills.

I’m interested in InBev”s proposed acquisition of Budweiser. The arbitrage spread is about $3.50. The deal price is $70. Tommorrow could be a terrible day in the markets. then again it could be a barnburner. If it stinks, due to the WaMu failure/takeover and the disintigration of the wall street bailout, the market may take BUD down to the $65 range. That potential $5 spread gets interesting.

The BUD deal isn’t as clean as the WWY acquisition. The FTC could come under pressure from Missouri and other stakeholders and the deal could get nixed. The Europeans shouldn’t be a problem. Financing, per InBev is committed. But, in this crazy credit market who knows. Deals can fall apart.

If I buy and the deal falls apart, the stock will retreat to the $55 range. I owned the stock before and I’d be happy to own it again at that level. If the deal closes before yearend I’ll get a return, like WWY, that is far superior to short term yields.

Lets see what tommorrow brings. I may end up with some BUD and some more NCC if it gets through into the WM rout.

No comments:

Add to Technorati Favorites