Current Price----- $29.5
Merger price------ $34
Potential return-- 15%
Annualized return- 36% assuming the transaction is completed by the end of the year
The transaction comprises of two steps first, the tender offer, which has already been completed and second, the merger in which the shares will be purchased for $34 per share. The transaction is expected to be completed by the fourth quarter. If the Merger does not close by January 1, 2008, this amount will be increased at an annualized rate of 8% from January 1, 2008 to the closing.
The preliminary proxy is out but completion of the deal rests on FCC approval and then when the definitive proxy is out, the shareholder vote. The reason for the wide spread is probably caused by the declining operating results at Tribune. It looks like Sam Zell (the acquirer) and the company are to far into the deal for them to easily walk away from the table. The merger looks fine but the risk is that if the merger is canceled the stock could fall because of the softening operating results at Tribune.
Note: The author has an investment in Tribune.