Current Price –$100.52
Offer price - $109
Upside – 8.5%
Expiration date – 4th November 2016
This is a bet that Oracle acquisition of NetSuite at $109/share will go through. Since the deal has been announced on the 28th of July, the shares traded close to or even above the offer price. Everyone was sure the deal was going through. But in the last week market's opinion changed dramatically. Oracle's CEO Larry Ellison beneficially owns 40% of NetSuite.
On the 7th of September the largest unaffiliated shareholder T. Rowe Price (18% stake) opposed the transaction essentially arguing that price is too low. Market hoped Oracle will come up with a higher offer, but that did not happen. Quite the opposite - Oracle extended the tender deadline for the second time (as it did not receive sufficient shares) and said this is the final extension - Oracle will walk away from acquisition if majority of unaffiliated shareholders do not tender. Oracle needs 20.4m NetSuite shares tendered for the transaction to go through.
Some more info and background here.
I admit I have no specific insight about this deal, and likely there are many much smarter guys playing this arbitrage. But my bet is that ORCL strategy of scarring NetSuite shareholders into taking the tender will work - these shareholders have already seen 10% drop in their NetSuite holdings over the last two weeks and probably they do not need any further convincing.
This is a tiny position for me due to the obvious risk that I can lose c. 15% if the deal gets cancelled. I do not believe the price will drop all the way to pre-announcement $75/share, as Oracle's interest in NetSuite does not disappear even if the deal fails now.