On June 28, 2012, Fushi Copperweld's (ticker: FSIN) BOD and Special Committee entered into a definitive, binding proposal with the Company's Chairman Li Fu and Abax Global Capital (Hong Kong) Limited to take the Company private in an all-cash offer at $9.50/share. The deal valued at under $300m is expected to close in December this year.
The deal has cleared most of the required hurdles (Preliminary 14A schedule filed August 13 and approved by the SEC October 19, 2012). The last pending hurdle is the shareholder vote which is set for December 11, 2012 which should also be cleared by shareholders. There is no financing condition to completing the merger and Mr. Fu and Abax have secured fully committed debt financing from China Development Bank Corporation, HK, to finance the transaction. (www.fushicopperweld.com/en/investor-rela...)
Unlike Chairman Fu's earlier offers which were non binding (recall that this management buyout saga has been on going for 2 years now) and financing now fully in place, there is almost no risk left on the table for investors. Short sellers too seem to have lost interest with shares shorted being reduced from about 4.3m shares end June to 2.6m currently. (www.nasdaq.com/symbol/fsin/short-interest)
An investor buying shares of Fushi Copperweld today could earn a premium of 2.04% gross (closing price as of Friday, November 23- $9.31) or 47% annualized over a 20 day holding period. I don't expect the shares of the Company to trade for more than a couple trading sessions post the December 11 special shareholder meeting and the annualized premium is calculated with a December 14 closing date.
Alternately, one could buy December 21 $7.50 calls (Open Interest 3,243) at $1.85 and earn $0.15 for a gross premium of over 8%
Not a bad return for holding an investment for less than a month with virtually no risk!