According to the latest spreads by Sin Letter, there are currently some huge M&A arbitrage opportunities in the market. However, the bigger the spread, the bigger the risk – and a large spread is often an indication of market skepticism that the deal will ultimately go through.
The largest spread in the market Monday is the 122 percent spread in the price of Williams Companies Inc WMB, which agreed to a buyout at $43.50 by Energy Transfer Equity LP ETE in a deal expected to close by the end of June.
The massive spread indicates that the market has its doubts about the deal’s completion. So far in 2016, there have been 65 M&A deals closed, and just three that have been terminated.
One of the three deals that fell through recently was the massive potential merger between Pfizer Inc. PFE and Allergan plc Ordinary Shares AGN, which would have been the largest pharmaceutical merger in history.
In addition to the Williams-Energy Transfer deal, Staples, Inc. SPLS's potential buyout of Office Depot Inc ODP, Halliburton Company HAL's potential acquisition of Baker Hughes Incorporated BHI, a consortium of investors led by The Vistria Group’s potential deal for Apollo Education Group Inc APOL, and Abbott Laboratories ABT’s potential buyout of Alere Inc ALR round out the top five largest M&A spreads in the market.
Disclosure: The author is long HAL and BHI.
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