Arbitrage opportunity>?? (MXX and TSX)
Join Date: Nov 2007
Posts: 13
As some of you may be aware, the TSX (Toronto Stock Exchange) is planning to merge with the MXX (Montreal Exchange), to form the TMX Group.
The deal is effective on May 1st and shareholders have the option to receive $39/share, or roughly 0.7 shares of TSX stock for every MXX share.
My question is based on the fact that MXX isa currently trading at 33.63. If the deal is going through next week for $39/share, why is there such a discount placed on the shares?? Could this be due to the chance that the deal may not go through? Thanks.
Join Date: May 2005
Posts: 17,592
tsx is currently trading at 39 so that x 0.7 = 27 and mxx is trading at 34. Something is weird.
Join Date: Aug 2005
Posts: 6,306
i'm assuming this makes a difference. basically there are caps on the cash and equity, so you are getting a mix of the tsx shares (worth less than $34) and cash ($39)....
Pursuant to the terms of the amalgamation agreement, MX shareholders are entitled to elect to receive either 0.7784 of a common share of TSX Group or $39 in cash, without interest, for each MX common share, subject to pro-ration as provided in the amalgamation agreement. MX shareholders who do not make an election will be deemed to have elected the cash alternative, subject to pro-ration.
The amalgamation agreement provides that the maximum number of TSX Group common shares issuable to MX shareholders under the amalgamation is 15,346,000, and the maximum amount of cash payable to MX shareholders under the amalgamation is $428.2 million.
Join Date: May 2005
Posts: 17,592
smbruin, that makes alot of sense.
No free lunch here!
Join Date: Nov 2007
Posts: 13
So then cash is the better option here?
Join Date: May 2005
Posts: 17,592
well clearly but the point is you cant accept all cash because there is not enough of it to go around to all the shareholders
