Resolute Forest Products (RFP), mcap=$1.6bn, price $21.11 vs $20.26

$RFP pitch:
– Merger Arbitrage with CVR.
– RFP is getting acquired by Paper Excellence.
– Currently trades just below the $20.5 cash consideration, additionally, shareholders will receive non-transferable CVR that will payout based on any refunds on lumber duty deposits.
– These duties relate to recurring trade spats between Canada and the U.S. and in the last cycle, 80% were refunded.
– If the current trade dispute plays out similarly, CVR will payout an additional $5.1/share.
– Antitrust approval from US and Canada is still pending, but mostly this looks like a low-risk merger.

$RFP valuation:
– $20.5/share cash consideration + $5.1/share likely CVR payout.
– In case of the merger breaks, the downside is around $15/share.

Exp. gain: +20% to $25/share.

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