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Author: azurefox Big red star, 1000 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 213834  
Subject: OT: arbitrage Date: 5/20/2001 6:49 PM
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Thanks, by the way, to everyone who chimed in with the websites
listing merger activity. Fascinating stuff.

While on the subject, what is up with RAL? That looks like a
16-23% annual rate of return, and a slam-dunk. No?

Anybody buying RAL as an arb deal these days?
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Author: exilion Big gold star, 5000 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 47997 of 213834
Subject: Re: OT: arbitrage Date: 5/20/2001 7:50 PM
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azurefox,
I only DRiP RAL monthly (I also have NSRGY in a DRiP too). Could you elucidate how you arrived at 16-23%? I certainly don't mean to be clueless, but I would appreciate a further explanation.

Thanks for your time.

exilion

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Author: PhoolishPhilip Big red star, 1000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 48000 of 213834
Subject: Re: OT: arbitrage Date: 5/20/2001 8:27 PM
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I believe that azurefox is basing his estimated rate of return on the time it would take to realize income from a purchase of RAL at its present price of $30.67 until the Nestle deal closes at $33.50. An investor can expect to earn 9.23% based on the present price of $30.67 ($2.83/$30.67). Your annualized return, however, depends on the time it takes for the deal to close. If the deal closes by the end of the year, as Nestle says it will, then one can expect to earn an annualized return of ~19%. If the deal takes longer to close, then your rate of return diminishes. You also need to factor taxes into the equation to get your real rate of return. Oh yeah, the danger is that the deal blows up and your stuck holding shares of RAL at the pre-deal price of ~$24 (ouch!).

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Author: PhoolishPhilip Big red star, 1000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 48001 of 213834
Subject: Re: OT: arbitrage Date: 5/20/2001 8:39 PM
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azurefox,

You are absolutely right! The present price offers a 9% return, and would be a 19% annualized return if the deal closes by years end as Nestle predicts it will. There must be something wrong with the deal or people would be snapping up the shares, especially in a decling interest rate environment. I'm right, ain't I? What could be wrong with the deal, I asks myself? Is the EU going to nix it based on monopoly concerns? Is Nestle po'd at the recent results? I dunno?!? In fact, I was getting skittish and thinking that I should sell my long position in RAL and park the money in a moneymarket. On the other hand, Nestle just reaffirmed their view that the deal will close by years end. Besides, where else am I going to get a guaranteed 15-20% on my money over the next six months! I may have to double down on Monday. Or sell.

PhoolishPhilip

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Author: Gotsumpin4U Two stars, 250 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 48014 of 213834
Subject: Re: OT: arbitrage Date: 5/21/2001 1:31 AM
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Because I already owned RAL - for me it is a wait until my RAL becomes a LT gain at the end of July and then if I wait till they close it is another 6% (or much more annualized if closed soon). I almost hope they don't close until January of 2002 so my Uncle Sam does not get his cut for about another year from then and I'd have the opportunity to get another return (or loss) from a new investment using the float of his deferred payment. Or with RAL would that be a de-furred payment.

Here is a link back to the starts of RAL threads on this board a while back:

http://boards.fool.com/Message.asp?mid=14112507

http://boards.fool.com/Message.asp?mid=14187486



-GOT-



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