Venoco-Possible Merger Arbitrage

by hihih222

Venoco Inc. is being taken over by its CEO, Timothy Marquez, for 12.50 per share. It currently trades at 9.95…so far it has shareholder approval by a large majority and everything seemed ready to go, but the CEO has been delaying the merger due to problems getting financing. He extended the financing date to July 20th, so we’ll see what happens, but it seems like this has a lot of potential upside. the CEO just sent a letter(http://investor.venocoinc.com/phoenix.zhtml?c=193733&p=irol-newsArticle&ID=1706815&highlight=) saying he is confident he will get financing, and as this whole thing was his idea and he owns 50% of the stock, its really in his interest to do so.

In any case, I think due to the CEO’s interest in getting the deal done, now that we have shareholder approval, it’s likely that the merger will go through soon if financing can be found. If financing isn’t found, though you risk it going down to around 7.5 or 8….so upside is 2.5(25%) and downside is 2.5(25%), for a merger arbitrage deal, not bad.

Also, there are tradable options for the stock. You could buy a put spread at strikes $10 and $7.5 for roughly $1 so your downside would be $1 and your upside would be $1.50…

Any thoughts?

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