Monday, February 09, 2015

Hospira Arb Play

Not much action in the special situations / merger arb space… I initiated a position in Hospira (Ticker: HSP), which is being acquired by Pfizer (Ticker: PFE) for $90.00 in cash. I’m playing this deal via Short Puts. I sold the August 2015 $80 Puts at an average price of $1.00. The companies anticipate the deal closing in the second half of this year. It too early to narrow down the closing time frame, but I don’t see any anti-trust concerns. Pfizer is essentially buying a specialized generic drug company. So for the moment, this is the only merger arb play in my portfolio (besides the Casa Ley CVR received from Safeway deal).


At February 10, 2015, Anonymous Anonymous said...

interesting - why did you decide to structure the trade that way? How big a notional position is it (roughly)?

At February 10, 2015, Blogger Money Turtle said...

It's ~ 7% position for now. I looked at various ways to play it, the spread was not wide enough to play via common. I could have played the August dated calls, but always the risk of a delay. I chose the $80 Puts (could have gone with the $85 as well). I get to pocket some premium, while waiting for this to close.

I did some more research into this and getting more confident that this will close fairly smoothly. Only potential overlap is Hospira's Celltrion, which can easily divest if required. Needs only US and EU antitrust approval. China / MOFCOM approval likely not needed (they can take forever). I can see this closing late June / July.


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