Torotel (TTLO) – Merger Arbitrage – 4.5% Upside

Current Price: $7.43

Offer Price: $7.77

Upside: 4.5%

Expected Closing: March 31st, 2020

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This is a short note as the idea is time sensitive and the upside can melt down quickly. Liquidity is limited.

Standex International is acquiring Torotel, magnetics products manufacturer for aerospace and defense for $7.77/share in cash ($48m in total). Shareholder approval has been received last month and the closing is expected by the 31st of March. However, downside risk to pre-announcement price is huge, potentially 85% loss.

Shares used to trade with a tight spread until 5th of March when the spread widened to 9% without any news (likely due to the overall drop in the stock markets). TTLO has rebounded by a bit since then, but I expect that the spread is going to be eliminated shortly as there seems to be no apparent hurdles left that could derail the transaction.

3 COMMENTS

  1. Ilja

    Merger got terminated due to COVID-19 situation. As the premium offered was quite large, TTLO shares have dropped tremendously. Idea resulted in -82% in 3 weeks.

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