Sold Switch & Data Facilties

I closed out my risk arb play in Switch & Data Facilities (Ticker: SDXC) today at $19.65. My gain from this trade was 7.11% over a 15 day period (170% annualized return), which was more than my expectations. I wish I can say this was skill, but a little luck played a role... I'm just going to step back a bit and wait for some new arb plays to show up.

Switch & Data Facilties = Done Deal

Today, the U.S. Department of Justice approved the Switch and Data Facilities (Ticker: SDXC) merger with Equinix (Ticker: EQIX). I was getting a bit nervous on this risk arb play, but held my ground. You have to start worrying whenever the Department of Justice initiates a second request for additional information regarding a merger. When that happens, you never know how long the investigation will take. I pretty much backed up the truck in this deal and another nice pay off. This deal closes on April 30th.

Here are my trades:

4/12 1X @ $18.41
4/13 1X @ $18.40
4/13 1X @ $18.41
4/13 2X @ $18.35
4/13 1X @ $18.36
4/15 1X @ $18.26
4/16 .5X @ $18.01

Sold CKE Restaurant, Inc

I sold CKE Restaurant, Inc (Ticker: CKR) today at $12.14 generating a ~ 2% gain over a 9 day period. At this point, I’m not going to get too greedy…

Some Switch & Data Facilities

Today, I picked up a few shares of Switch & Data Facilities Company, Inc. (Ticker: SDXC) at ~ $18.40, which is being acquired by Equinix, Inc (Ticker: EQIX) for ~ $19.06 per share. This is not a 100% cash deal since one can select 0.19 shares of Equinix or $18.06 in cash, but the cash portion is capped at 20% of the overall deal. So it’ll likely be 80% Equinix stock + 20% cash depending on the shareholders selection at time of closing. There is some anti-trust risk in this deal, which is evident in the wide spread. I believe this deal has a good chance of closing soon, but you never know when you’re dealing with anti-trust scrutiny. We should know very soon…

A Little Bit of CKE Restaurants

I’m tasting a higher bid coming for CKE Restaurant’s, Inc (Ticker: CKR). They operate the Hardee’s and Carl’s Jr. burger joints. The private equity firm, Thomas H. Lee, made an initial offer of $11.05 for CKE. Today, CKE announced that they found a better offer during the “go-shop” period. What that offer is… who knows, but it’s higher than $11.05. There are still lots of questions… In any case, I nibbled on some CKE at $11.88 and $11.89.

3Com = Done Deal

ITEM 7.01 Regulation FD Disclosure
On April 7, 2010 3Com Corporation and Hewlett-Packard Company received approval of HP’s acquisition of 3Com from China’s Ministry of Commerce under China’s Anti-Monopoly Law. This approval is the last of the required regulatory approvals. The parties expect to close the transaction on or about April 12, 2010.

I backed up the truck in this risk arb play and it's going to be a nice payoff… :)

3Com On Track for April Close

The acquisition of 3Com (Ticker: COMS) by Hewlett Packard (Ticker: HPQ) appears to be on track for an end of April close. The only road block is the approval by China’s Ministry of Commerce. Here’s a blurb about this deal from TheDeal.Com:

----------------------------------------------------------------------------------

The waiting period for the Chinese Ministry of Commerce to complete its review of Hewlett-Packard Co.'s $3.1 billion merger with 3Com Corp. should expire April 25, but there has been talk that the review might be done before then.

Chinese authorities have reportedly sent out inquiries for comment from 3Com customers, which hold roughly a third of China's network switching and routing market, with responses due April 5. The ministry could render a decision on the deal by April 12, sources say.

The review has been a subject of concern because of past interference by the U.S. government over national security issues in a buyout of the company by a Chinese entity.

----------------------------------------------------------------------------------

The risk arb spread is still very attractive (~ 31.68% annualized return at the recent price of $7.73) assuming an April 30th close. I added more to my 3Com position today at $7.73. My average price is $7.617. Here are my 3Com trades:

1/27/10 1.5X @ $7.47
1/27/10 1.5X @ $7.53
2/3/10 3X @ $7.44
2/19/10 1.5X @ $7.59
2/25/10 2.5X @ $7.60
3/17/10 10X @ $7.60
4/5/10 10X @ $7.73

Now, just have to sit back and wait…