In addition to the time value of money previously mentioned, you have a few other factors:
1. The justice department anti-trust folks have been fairly aggressive since 2008. There has been some rumblings of anti-trust concerns on this deal. I suspect those will get resolved, but the threat of material divesment of assets and corresponding price adjustments will hang over any deal involving a company as large and dominant as Google.
2. A severe economic contraction can cause parties to reconsider a "done deal". You may want to Google Dow Chemical/Rohm and Hass for a bit of history in that regard. That deal ultimately closed, but not before a lot of court time and a $20 swing in ROH's stock. In that regard, you may want to read the Material Adverse Effect clause in the merger agreement.
I am not saying either of these events will materialize in this case, but with the economy in the dooldrums and the general anti-business tone of the Justice Department, you can certainly see why a 5% premium remains on this deal.
Good post. My post explains why a 5% premium exists on what looks like a sure deal. As indicated in my previous post, I not saying anti-trust or economic issues will kill this deal. However, since 2008, arb's need to be a bit more careful when analyzing a deal. You did your homework, but a lot of rookie arb's think this is free money. I had significant money in Rohm and Hass and Sun. Until you lived through deals that experience problems, you don't appreciate the risk. The deal likely closes at $40, but folks should do their homework before trading arb deals.