New Premium Post: A Special Opportunity With a Special Conditions Deal

Merger and acquisitions that include collars tend to increase uncertainty for arbitrageurs and depending on the complexity of the deal, we sometimes classify these deals as “Special Conditions” deals. These are either all stock or cash plus stock kinds of deals where the stock portion of the deal is not a fixed ratio and can vary based on the price of the acquiring company. Every once in a while these kinds of deals offer an attractive opportunity and that is why I am writing another premium post just a day after publishing one on Sunday. A reader reached out to me last Friday asking for my opinion about United Technologies’ (UTX) acquisition of Rockwell Collins (COL). I noticed that it was a special conditions deal that pays out $93.33 per share in cash and $46.67 in shares of UTX common stock, subject to a 7.5 percent collar centered on UTX’s August 22, 2017 closing share price of $115.69. I did not get a chance to complete my research over the weekend but I pulled up the merger agreement this morning and found the following information about the collar in Appendix A-4 of the merger agreement. “Exchange Ratio” shall mean (i)...

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