Merger Arbitrage Mondays – November 21, 2011

Merger activity decreased last week with only two new deals announced. The most interesting development is however the deal that was not announced. There has been speculation that a number of entities are considering a bid for Yahoo (YHOO) including a combination of Alibaba’s Jack Ma and Japanese bank Softbank as well as a potential bid by private equity firm Silver Lake along with Microsoft (MSFT) and others.

Call option activity has spiked over the last couple of weeks. Open interest for $16 December 2011 calls stands at 76,162 contracts and open interest for $16 January 2012 calls is 191,420.  Traders had picked up a large number of calls for the November, December and January expirations and the November calls expired worthless. In that light, the story in the Wall Street Journal last Thursday that Silver Lake is considering a bid was interestingly timed. The stock spiked briefly on Friday morning and eventually gave back those gains. Based on trading activity on Friday, the market appears to be taking these rumors with a pinch of salt.

You can find all the active deals listed below in our Merger Arbitrage Tool that automatically updates itself during market hours.

Deal Statistics:

New Deals:

1. The acquisition of Bluegreen Corporation (BXG) by BFC Financial Corporation (BFCF.PK) in an all stock deal, where shareholders of Bluegreen’s Common Stock will be entitled to receive eight shares of BFC’s Class A Common Stock for each share of Bluegreen’s Common Stock they hold. BFC currently owns approximately 52% of Bluegreen’s Common Stock. This is an interesting transaction given the spread, which is currently 15.15% or 24.8% annualized. Given that this is an all stock deal and that BFC Financial is traded on the pink sheets, shorting the company to capture the spread might be challenging. BFC Financial is an interesting company in its own right. The stock trades well below book value and the company owns a controlling interest in Florida based regional bank BankAtlantic (BBX) as well as a stake in Benihana (BNHN). BankAtlantic has a high Troubled Asset Ratio (TAR) of 82.9 as of Q2 2011 when compared to the national median TAR of 14.3 .
2. The acquisition of Valpey-Fisher Corporation (VPF) by CTS Corporation for $18 million or $4.15 per share in cash.

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