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Merger Arbitrage, 2nd Edition by Thomas Kirchner

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Exercises

CHAPTER 1

  1. Using the framework in Table 1.1, explain what types of arbitrage are presented by the following scenarios:
    1. A holder of metal inventory sells inventory in the spot market and goes long a future contract that is at an extreme contango.
    2. A bond dealer trades a negative net basis in bond future contract.
    3. A high frequency trader purchases a stock on one electronic trading venue and hits a bid on another exchange simultaneously.
    4. A Hungarian homebuyer takes out a mortgage denominated in Swiss francs.
    5. Bonus points: What is the name of the equivalent hedge fund trade to (d) above?

CHAPTER 2

Consider this merger announcement and review the recent trading activity.

  1. Estimate a closing date.
  2. Estimate a downside.
  3. Calculate a spread.
  4. Annualize the spread.

Item 1.01. Entry into a Material Definitive Agreement.

Business Combination Agreement and Plan of Merger

  1. On August 10, 2015, Terex Corporation (“Terex” or the “Company”) entered into a Business Combination Agreement and Plan of Merger (the “BCA”) with Konecranes Plc, a Finnish public company limited by shares (“Konecranes”), Konecranes, Inc., a Texas corporation and an indirect wholly owned subsidiary of Konecranes (“Kone, Inc.”), Konecranes Acquisition Company LLC, a Delaware limited liability company and a newly formed, wholly owned subsidiary of Kone, Inc. (“Merger Sub”). The combined company that will result from the transaction will be called Konecranes Terex Plc.
  2. Pursuant to the BCA, Terex shareholders ...

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