US/Europe Event-Driven Analyst

John DeMasi

CFA, CPA (New York State, status: inactive) with 20+ years on buyside (PM & analyst) at numerous hedge funds and proprietary trading desks in NYC and London, covering North American and European event driven investments.

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Event-Driven

On June 25, 2019, <a href="https://www.smartkarma.com/entities/abbvie-inc" target="_blank" data-smartkarma-citation="entities:1135:1" rel="noopener">Abbvie Inc (ABBV US)</a> announced its acquisition of Botox-maker <a href="https://www.smartkarma.com/entities/allergan-plc" target="_blank" data-smartkarma-citation="entities:867:1" rel="noopener">Allergan Plc (AGN US)</a> in a $63 billion cash and stock deal in which AGN holders will receive a fixed ratio of 0.866 shares of ABBV + $120.30 cash in exchange for each AGN share.
In the two-plus months since the deal’s announcement the arbitrage spread has widened from $14.76 on the day of the announcement to $17.51 on August 30, and had traded in the $18+ range recently. The discount at which AGN trades compared to the value of the deal has gone from 8.3% on June 25, 2019 to nearly 10% on Friday, August 30th. Due to the time value of money one would expect the spread and discount to slowly diminish over time. So what would explain the opposite occurring over the past two months and how attractive is this trade to merger arbitrage/event-driven investors?
I explore these questions and others in this piece below.

On June 25, 2019, Abbvie Inc (ABBV US) announced its acquisition of Botox-maker Allergan Plc (AGN US) in a $63 billion cash and stock deal in which AGN holders will receive a fixed ratio of 0.866 shares of ABBV + $120.30 cash in exchange for each AGN share.
In the two-plus months since the deal’s announcement the arbitrage spread has widened from $14.76 on the day of the announcement to $17.51 on August 30, and had traded in the $18+ range recently. The discount at which AGN trades compared to the value of the deal has gone from 8.3% on June 25, 2019 to nearly 10% on Friday, August 30th. Due to the time value of money one would expect the spread and discount to slowly diminish over time. So what would explain the opposite occurring over the past two months and how attractive is this trade to merger arbitrage/event-driven investors?
I explore these questions and others in this piece below.

Allergan Plc Acquisition by AbbVie Inc. – A Botox Deal with Some Wrinkles