Tuesday, August 02, 2011

Varian Semiconductor Equipment Associates (risk arb play)

I thought I would take a break from the risk arb plays after the closing of L-1 Identity Solutions since there wasn’t much going on. I did some screens and Varian Semiconductor Equipment Associates Inc. (Ticker: VSEA) popped up. They are being acquired by Applied Materials (Ticker: AMAT) for $63 in cash. The deal was announced on May 4th and is currently awaiting regulatory approval from several countries (still waiting decisions from US, China and South Korea). I picked up a few shares yesterday at $60.93 and looking for this deal to close at the end of September (3.4% return, which equates to an annualized gain of ~ 20%). The spread has started to widen a bit due to some perceived risk. I don’t see any major regulatory hurdles with this deal. From what I’ve read, there is a small overlap in some high-end ion equipment between these two companies, but this overlap is tiny and is not big enough to block the deal. The timing in the closing of the deal will be based on the decision from MOFCOM (China’s Ministry of Commerce). I’ve seen analysts factor in a 5-month review by MOFCOM. There is also a second request for additional info from the US DOJ. Just something to keep an eye on…


At August 03, 2011, Anonymous DCFrancis said...

you could also look at Blackboard (BBBB)

At August 03, 2011, Blogger Money Turtle said...

Yeah, I'v been keeping an eye on Blackboard and Kinetic Concepts. Both are down after announcing their merger with private equity. I may get back in as their annualized returns are starting to look favorable.


Post a Comment

<< Home