Why is PF trading for less than the terms of the deal?
PF down, HSH up. Doesn't make sense to me. There should be an arbitrage that tracks them together.
@ 11.42 HSH is 36.80, PF 34.44 36.80/2= 18.40 + 18 cash = $36.40 should be the value of PF.
PF is discounted $1.96 = 5.4% Why such a deep discount?
I have another idea as to the price. The market is looking at the chart for HSH and seeing a decline back to $32 and below as newly minted HSH shares flood the market.
Your options are to bet on the deal being completed and sell HSH shares short now before the decline, or sell call options on PF for September or December in the price range of $36 or more. The options are usually thinly traded with wide spreads between the bid and asked prices. So selling the option can be risky and if they are exercised you pay another commission reducing any profit. Selling the HSH shares short is even more risky as if HSH gets a better offer you will not get them for PF shares.
Holding for the HSH offer to go through is a safe bet. If the merger works, HSH should be worth more after the initial sell off is over.
The price is 18 + 1/2 share of HSH per share of PF. That's 18 + 18.13 right now. That will change as time goes by. I would say that some PFers would rather take their money and run, albeit .at an apparent discount.
After the breakup fees were announced, PF shares started to be sold off. The market probably does not think that the breakup fees were high enough to hold the deal. It looks like around a dollar a share as the cost for HSH to walk away from the deal. Any accounting errors, or other bids could derail the merger. Also, the market is going up. It is likely that after the merger you will be stuck with shares with limited upside as the post merger sell off kicks in to gear. At that point other stocks might still be rising.
Little bit more actually because PF will pay a 21 cent dividend in June, whereas Hillshire pays only .175 dividend between now and September, only half of which impacts the stock equation. So $36.23 ($18+$18.29) plus .123 or $36.41 for each PF share. 7% arb play between now and September with possibility of sweetened offer. On the downside, if the market implodes, even if HSH falls to $30 (20% drop), PF holders would still receive $18+$15+.12= 33.12, only 2.6% downside from current price. And most likely since the value of the HSH portion (their stock currency) is worth less, they would probably have to sweeten the deal in some way. I think PF is down today on profit taking, represents a legitimate arb opportunity IMHO.
Notice I got thumbs down for telling the truth. NOW, do you see why I said what is posted above? If not, you is very dumb. Dumb as a down thumb. Lol. If you sold, great for you, if you are baffled because HSH is being bought by Pilgrim Pride and as terms for the deal, PF and HSH deals is KAPUT except for an exit charge to HSH. Thumb me down, dumb, down thumbers. Oh, yes, I already own HSH, so I still get the money. More, money this way.