In the MergerArb model, manager Atlas Capital looks for potential takeover targets and, depending on their liquidity and share price, considers adding them to the model. This week they added two positions. The first was Lions Gate Entertainment Corp (NYSE: LGF). For months, Lions Gate has been attempting to merge with indebted studio Metro Goldwyn Mayer. At the same time, investor Carl Icahn has been attempting to takeover Lions Gate. It seems that the attempted merger between Lions Gate and MGM is an attempt by Lions Gate to dilute the stake that Icahn already has in the company. LGF’s stock price has seen a bit of a surge over recent months. On August 19th it closed at $6.34 but, more recently, on October 6th it closed at $7.39.
The second position that MergerArb added this week was McAfee Inc (NYSE: MFE). In August, Intel Corp (NASDAQ: INTC) acquired MFE. The deal was for about $7.7 billion. Before the merger was announced on August 19th, MFE closed at $29.93 (August 18th). On August 19th, MFE closed at $47.01—the last time it had closed at $40 or more was on April 27th when it closed at $40.09. The stock has gained even more since then, closing at $47.22 on October 6th. INTC shares fell, possibly as a result of the merger. INTC closed at $19.59 on August 18th and fell to $18.90 on August 19th, the date the merger was announced. Shares seem to be rising again, INTC closed at $19.31 on October 6th.
