ROH, DOW, BUD:Three Arbitrage Opportunities?

Rohm & Haas Co. (ROH) shareholders approved a deal with Dow Chemical (DOW). The offer is apparently going to be an all-cash deal, although there is some risk that the deal's terms may change. I bought 40 shares of ROH yesterday. ROH is selling at around $68/per share, and DOW's offer was to buy them at $78/per share.

Anheuser-Busch (BUD) is another possible arbitrage play, but I have not bought any shares of BUD.

The efficient market hypothesis would say that the lower price is due to the risk that the ROH/DOW deal will not get financing and will collapse; however, in a world of 1% interest rates, that kind of risk should not be providing an arbitrage opportunity of 10% or more. Warren Buffett, of course, hates and disagrees with the efficient market hypothesis. These are interesting times.

Disclosure: ROH; You are responsible for your own due diligence.

Comments

[Andy Singh:]

I wrote recently here at SA and my site about the BUD/In Bev play using Dec 65 call options. Look's like the strategy is paying off today. With credit markets loosening and falling interest rates the market is getting more confident about this deal. Still not to late to play it.

2008 Oct 30 01:16 PM

[OctoberFaith:]

ooh... is this real money too? what call to make in this where one person thinks its a game. and then in the other one where I really am talking to another person who doesn't talk like you so it has real possibility of actually existing the scale of the design?

and you guys keep seeing the second delayed messages now at this point, so other messages keep getting crosswired. I see this in your response.

I see this on OTHER web boards from all the spamming I have been doing on this web page. So it does have actual possibility.

OK sure I'll bite. I love games. I can't get enough of them.

Let us play this game.

Who said the abitrage opportunity was 10%?

2008 Nov 03 04:06 AM

[OctoberFaith:]

ok so why are seeing the mass drop in the market?
Does sending our dollars overseas when "buy in bulk" like this cause the dollars that are here to change in value relative to say... the stock market?

2008 Nov 03 04:22 AM

[weiwentg:]

I bought Anheuser instead, which was a fortuitous decision. With Rohm, I'm confident of the financing, but I'm less certain about the closing date. Dow said they expected to close in early 2009. How do you define early? That could be anywhere from January to May.

2008 Nov 19 09:35 AM