Definitive Proxy for Sunair Services

The definitive proxy (click: here) for Sunair Services Corp. (Ticker: SNR) was just posted on the SEC website. The shareholder vote date is set for December 14th and the closing should take place soon after. I think someone was messing around with the stock today. The stock opened sharply lower on unusually high volume. This tells me that someone knew the definitive proxy was going to be posted and wanted to pick up some shares cheaply. That’s my theory to today’s stock action for Sunair Services. In any case, everything looks to be on track…

Sunair Services Arb Play

Who would have thought that I would put $$$ in a pest control company? Well not really, I picked up some Sunair Services Corp. (Ticker: SNR) at $2.69, which is being acquired by Massey for $2.75 in cash. This is a very small deal with the total purchase price of $36 million. I’m expecting this deal to close mid December, which will generate a 2.23% return (~29% annualized). Just keep an eye out for the definitive proxy (click: here), which will indicate the date of the shareholder vote. Closing should occur shortly after shareholders approve the deal.

Definitive Proxy for MTS Medication Technologies

I’ve been slowly building a position in a small risk arb play: MTS Medication Technologies (Ticker: MTSI), which is being acquired for $5.75 in cash. I’m only half way done building a position. It’s very hard to build a position in this company because the stock is so thinly traded. You have to be patient or else you’re going to end up over paying. The company posted its definitive proxy statement today (click: here) and the shareholder vote will take place on December 18th. It’s looking like a December close. Now, I just hope I can get a few more shares at a decent price!

Sold IMS Health

I closed out my risk arb play in IMS Health (Ticker: RX) for a 2.74% (annualized return of 142.48%) gain over a 7 day period. The recent run up in IMS Health can be attributed to rumors of a higher bid. I’m not going to get greedy since this deal is not expected to close t’ill March. I’ll take the quick profit and look for more appealing risk arb plays.

13F-HR and Genzyme

The 13F-HR filing for Carl Icahn was just posted on the SEC website (click: here). What’s interesting is that he started building a stake in Genzyme (Ticker: GENZ). As you have probably heard, the company encountered some setback due to a viral contamination and more recently particulate contamination in some products. The stock took a bit of a hit with the recent contamination news. Ok, back to Carl Icahn… As reported in the 13F-HR, he currently has 1,450,800 shares in Genzyme and I have to believe that he is continuing to build this position. Ralph Whitworth over at Relational Investors has 6,918,087 shares in Genzyme. Both of these guys are activist investors. Ralph Whitworth takes a longer term approach whereas Carl Icahn looks for a quick sale. The pressure is on Genzyme to do something quick to increase shareholder value or else someone else will do it for them.

Note: I have a long position in Genzyme.

13F-HR for Paulson and Whitworth

The 13F-HR filings for John Paulson (click: here) and Ralph Whitworth
(click: here) are out. As you know, I’m a big fan of these guys and it’s a great learning experience to see what they are buying or selling. Carl Icahn’s 13F-HR should be posted next week.

Tax Loss Selling and Another Risk Arb Play

It’s time to pull out the weeds and plant some seeds… I started some tax loss selling to offset some gains for the year. I dumped Sears Holding (Ticker: SHLD) in which I incurred a super 59.7% loss. Fortunately, it was just a small position so nothing major, but a loss never feels good even if it’s a small loss. I also did some repositioning of my portfolio, which I’ll post at another time.

I’m still sniffing around for some decent risk arbitrage opportunities. I just started building a position in MTS Medication Technologies (Ticker: MTSI), which is being acquired by Excellere Partners for $5.75 in cash. This represents a 3.9% spread based on today’s closing price of $5.53. This deal is expected to close by the end of Q4 so you’re looking at a ~ 28% annualized gain. Be careful if you decide to play this deal, it’s very thinly traded and just a few shares can move the price. So use limit orders!

If you want to learn more about the risk arbitrage, I suggest you check out The Deal Sleuth blog (click: here). He also has a free eBook on his site for download (click: here). Check it out...

Closed Out Centennial Communications

I sold out of my risk arb play in Centennial Communications (Ticker: CYCL) at $8.45, which equates to a return of 5.89% over a 7 week period (43.75% annualized return). I used the proceeds from Centennial Communications and picked up some shares of IMS Health (Ticker: RX) around $20.80, which is being acquired by TPG Capital and CPP Investment Board in a private equity deal. Financing is in place and closing is expected by the end of Q1, 2010. It’s not a high risk trade, but can still make a little bit of $$$. I’m expecting a return of ~ 5.7% (~15% annualized return). I usually look for annualized returns of +20%, but with the lack of risk arb plays out there, I’ll take it...