RE:RE:RE:Veresen Deal Questions...
The price drop is very normal. In almost all acquisition cases thebuyer's share price will drop and the shares of the one being acquired will go up. This creates an opportunity for arbitrage.... whereby quick-acting investors can lock in a small profit due to mispricing of the stocks involved. Right now that gap has already closed and that opportunity has passed....
Upon announcement of the deal, sophisticated investors would have shorted PPL and used the proceeds to buy VSN, knowing full well that upon the closing of the deal, their VSN shares would become PPL shares, which then they can use to cover their short position. If you acted quickly you could have shorted PPL around $43.50+ and bought VSN shares below $18.65. The resulting profit would be risk-free, except if the deal falls apart....
Based on the share swap ratio of 0.4287, and VSN trading around $18.13, the equilibrium point for PPL shares is now around $42.30... PPL closed around $42.05...
If VSN stays around this level... PPL will not go above $42.30... If VSN starts trading higher, around $18.65 (the max price set for the deal's closing -- if the deal goes thtough) then PPL's price should go up but nor not go beyond $43.50... otherwise anything over that, hedgies would jump in and short PPL which would bring the price back down again.... Unless things go haywire, we should see this tight trading range maintained until the deal closes.
There's a little bit of further complication to take into account. It comes as a result of the fact that PPL is offering a mixture of cash and shares: i.e. as much as $4.85 in cash and 0.3172 PPL shares for each VSN shares owned... This will help limit new shares to be issued to 99.5 million shares in order to minimize dilution.
If every VSN shareholder opts for this feature and ask for some cash.... PPL's total outstaning shares would reach 499,488,551 shares....
They also said this deal pegs the enterprise value of the combined companies around $33 Billion.... I am sure that incudes their debt... Without any debt, this would translate into a per share enterprise value of $67... I am not sure what their total debt would be but this should give you an idea....
Hope this helps...