Cabela's Trading At A 'Pretty Big Discount' To Bass Pro's Take-Out Price

Shares of Cabelas Inc CAB are surging more than 14.5 percent after Bass Pro Shops announced a $5.5 billion buyout of its retail competitor. The privately-held Bass Pro Shops will be paying $65.50 per share in cash for Cabelas.

On Monday’s PreMarket Prep, Dennis Dick discussed the risk arbitrage opportunities surrounding the deal.

“There is usually a little bit of a discount that the risk arbs will put on there in case the deal doesn’t go through,” Dick explained. “I don’t know if I see any antitrust issues here in retail. I don’t think they’re blocking very many deals.”

Related Link: Cabela's, Bass Pro Shops Announce Landmark Merger Valued At $5.5 Billion

Antitrust action may be unlikely, but Cabela’s stock was trading under $63 Monday, roughly 4 percent short of its buyout price. Dick was surprised by the relatively large discount.

“That’s a pretty big discount,” Dick noted. “Usually on these cash deals, it’s only a buck, so I’m not sure why $2.50. That’s pretty steep.”

Cabela’s and Bass Pro Shops are the two largest hunting and fishing retailers in the US. The market seems to think the two companies have enough of a dominant position to raise some antitrust eyebrows.

Prior to the deal, Cabela’s shares were up 17.2 percent in 2016.

PreMarket Prep is a daily trading ideas show that focuses on technical analysis and actionable short term trades. You can listen to the show live every morning from 8-9 a.m. ET here, or catch the podcast here.