More Keurig Green Mountain

I took off my position in Solera Holding (Ticker: SLH) and breaking even on the trade. Solera is currently marketing their loan, but just have to wonder how much the junk market can absorb in this market environment.

I did add to my position in Keurig Green Mountain (Ticker: GMCR) with an average price of $89.43 (currently ~25% of my portfolio). I see this as a relatively low risk arb play… Keurig has already placed their loan to fund the buyout and is waiting for HSR clearance & a rubber stamp shareholder vote. I expect HSR clearance next week (HSR expiration date is 2/18). I have modeled a close by 3/31 with a potential net gain of 2.88% (annualized return of 20.5%). There is a strong possibility that this deal may close at the end of this month.

Some Keurig Green Mountain and Solera Holdings

Now onto my next merger arb plays… I picked up some Keurig Green Mountain (Ticker: GMCR) at an average price of $89.05 (~15% position). This company is being acquired for $92.00 / share in cash by JAB Holding. A good chunk of the loan is being placed in Europe. HSR expires on 02/18 and shareholder vote is 02/24.

I also initiated a small position in Solera Holdings (Ticker: SLH) at $54.39 (~4.5% position). This one is being acquired for $55.85 / share in cash by Vista Equity Partners. The debt marketing started this week so we’ll be hearing shortly in terms of how receptive the market is for their debt. Again, they will be marketing a portion of the debt in Europe.

Both of these merger arb plays offer an annualized return of +20% assuming a close by 03/31. I really like the odds of Keurig Green Mountain and would not hesitate adding at lower prices. I need to keep a close eye on Solera, but I believe this one has a good shot at closing based on the recent high yield loan offerings

Solarwinds = Done Deal

It’s nice to see that Solarwinds (Ticker: SWI) buyout by the PE firms: Silver Lake and Thoma Bravo closed today. I added aggressively to Solarwinds this past week as the annualized return was very attractive based on the anticipated closing date of today. I had ~ 29% of my portfolio in Solarwinds. Even though my net gain was only 1.02%, the annualized return (based on the cash hitting my account by 2/10) will be ~21%. The odds was simply so much in my favor after they placed the loan offering, I just could not resist. In this case I was picking up pennies in front of a stalled steam roller.

January 2016 Performance

Let’s just say that I’m glad January has come and gone… I entered January fairly cautious so my downside was limited. The only real significant arb plays I put on were Dyax and Solarwinds (Ticker: SWI). As you know Dyax just closed and Solarwinds should be completing their merger any day now. I believe I lucked out a bit with Solarwinds as they were able to market their loan just as the junk window closed. I’m staying away from any merger plays associated with private equity at this point. I view the risk is high with a potential private equity deal breaking due to financing failure.

The only long position that is surviving this market decline is Constellation Brands (Ticker: STZ). The strength of this stock really amazes me. I can see this one take off to the races once the market settles down a bit. As I mentioned many times before, I’m going to hold Constellation Brands for a long long time…

Hoping February will be a nicer month…


2016 Performance Year to Date = -5.47% with the running monthly returns as follows:

January -5.47%