iKang Believe It!

On Monday I initiated a position in iKang Healthcare Group (Ticker: KANG), which is going private for $20.55 ($20.60-0.05 ADR fee). The shareholder vote is scheduled for August 20^th. This appeared to be a low risk arb play from my initial research. Yesterday after the market close, the company announced that it had received a notice of objection from ~ 32% of the total issued and outstanding shares. This basically means that these shareholders are seeking appraisal rights under the Cayman Island law, which is where the company is incorporated. The merger agreement contains a condition that the holders of no more than 15% of the total issued and outstanding shares can seek appraisal rights. The company will need the Parents blessing to waive this condition. I was totally blindsided by this news. Apparently lots of institutional investors are now going this route to obtain a higher take out price after recent successes in extracting higher prices with companies incorporated in the Cayman Islands. Bottom line, Not Good… I thought this one would be smooth sailing with an easy approval vote and closing by the end of September. That’s no longer the case. I bailed out today generating a loss of ~ 10% (this was a ~ 7% position). It’s been really challenging with the merger arb plays lately! To say the least...