Jacek_Sopotnicki
Give a man a fish and you will feed him for a day. Teach a man to arbitrage and you will feed him forever.
-Warren Buffett
Last year, fashion powerhouse Tapestry, Inc. (TPR) struck a deal to buy
Capri Holdings: Up To 64% Merger Arbitrage Upside As Flimsy FTC Trial Begins
Summary
- Capri Holdings offers a 64% potential return, with the current stock price under $35 and a deal price of $57.
- The FTC's trial to block the merger starts today in Manhattan. I believe the FTC's arguments against the merger are unusually weak.
- This trial is not 50/50. Tapestry should win the case 80% or more of the time.
- My back-of-the envelope expected value calculations suggest Capri stock is undervalued at $35, making it an attractive buy even including renegotiation risks.
Author and entrepreneur. My articles typically cover macroeconomic trends, portfolio strategy, value investing, and behavioral finance. I like to profit from the biases and constraints of other investors.You can read some more of my work for free here.
Analyst’s Disclosure: I/we have a beneficial long position in the shares of CPRI either through stock ownership, options, or other derivatives. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.
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