No More SkyTerra, But More IMS Health

I exited my risk arb play in SkyTerra (Ticker: SKYT.OB) today @ $4.88. My gain from this risk arb play is a big fat zero… The small cap risk arb plays make me nervous and something about this deal doesn’t feel right. I moved the proceeds from the SkyTerra sale into more IMS Health (Ticker: RX) @ $20.93. Some are now looking at an early February close for IMS Health. If that’s the case, you’re looking at a very nice annualized return of ~ 40% and a worse case scenario of ~ 19% annualized return for an end of March close. That's a good risk reward risk arb play.

Almost There for Sun Microsystems

All I can say is that it’s a big sigh of relief that the EU is coming to their senses on Oracle’s (Ticker: ORCL) acquisition of Sun Microsystems (Ticker: JAVA). Sun Microsystems jumped 11% on the news that Oracle and EU are on more friendly terms now. It would not surprise me if we see a December close on this deal. I have a good size risk arbitrage position in Sun Microsystems. What I learned from this deal is to diversify among my risk arbitrage plays and to put in some hedges if I go in big. I would have taken a good hit if this deal fell apart. As I say, you learn and move on… Wiping the sweat off my head now!

Recent Arb Trades

On 12/8, I closed out a small risk arb play on Sunair Services (Ticker: SNR) @ $2.71 generating a net gain of 0.74% over a 2 week period (19.33% annualized). I sold Sunair Services because I found a more rewarding arb play in SkyTerra Communications (Ticker: SKYT.OB), which is going private for $5.00 in cash. I picked up a few shares at $4.88 on 12/10. Management states that they expect the deal to close in late 2009 or early 2010.

I also got back into IMS Health (Ticker: RX) today at $19.88. The stock sold off today based on a potential health care bill proposal that can restrict some of their right to access script data. After doing some quick digging, the consensus is that the bill has a very low probability of passing. Even if it passes, the effect on earnings will be minimal. My bet is that this deal goes through at $22.00 by March. This is a good risk / reward arb play.

Closed Out MTS Medication Technologies

I closed out my risk arb play in MTS Medication Technologies (Ticker: MTSI) today generating a 2.52% (~65% annualized return) gain over a two week period. I wanted to lower my leverage just a bit so I wouldn’t get caught up on any unexpected surprises (the academics call this systemic risk). This game is all about risk and reward. I’m not looking to hit a home run, but a single here and there… Greed is good sometimes, but not now.