Fortress Investment Group (FIG) – Merger Arbitrage – 4% upside

Current Price – $7.78

Offer Price – $8.08

Upside – 4%

Expiration Date – 31 Dec, 2017 (might be extended)

This idea was offered by Phil.

 

Softbank is due to acquire FIG for $8.08/share. Merger agreement was signed back in February and for the most of the year shares traded around $8/share with minimal spread as SoftBank usually carries out the deals. However, recently concerns were raised that Softbank might not get CFIUS approval to consummate the transaction. Other SoftBank deals appear to be held by CFIUS as well:

“The list of SoftBank transactions stuck before the Committee on Foreign Investment in the US (Cfius) include its $3.3bn takeover of alternative investment group Fortress and its acquisition of robotics company Boston Dynamics from Google’s parent company Alphabet, according to several people informed on the matter. The third transaction — the transfer of a near 25 per cent stake in the UK’s Arm Holdings to the Japanese group’s technology investment fund — has also been held up, although Cfius approved the chip designer’s $32.4bn takeover by SoftBank last year.”

There are legitimate concerns that CFIUS blocks the deal as FIG has a number of holdings that might be considered to be national security concern, including investment related to high-tech intellectual property, numerous patents as well as lending business that securitizes debt on intellectual property.

On the other hand, this acquisition might be positively viewed by the Trump Administration. Right after the election last year Trump had a seemingly friendly meeting with SoftBanks CEO Mr. Son who promised to invest $50bn in the U.S. and create 50,000 new jobs. As president has a certain discretion on CFIUS decisions, a friendly relation might suffice to push the deal forward.

Merger agreement expires on 31st of Dec. If CFIUS approval is not received by then, then most likely the timeline will be extended.

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