GSI Technologies - Merger Arbitrage With 19% Spread
- With a price spread of 19% GSIT is a very attractive merger arbitrage play. The share price is likely depressed as a result of the previous oversubscribed tender offer.
- The downside appears to be limited to -9%, which is where GSIT traded prior to announcement.
- In light of recent losses and revenues declines at GSIT, the acquisition price seems to be a great deal for GSIT shareholders, who are in turn likely to accept it.
- Merger seems to make sense from fundamental perspective for both companies as they sell complimentary products to a similar client base. Synergies from cost savings and cross-selling are very likely.