The two giant pharma mergers between Pfizer and Wyeth and Merck and Schering present an intriguing arbitrage play. Pfizer and Merck are two acquirers and will be the surviving companies after the merger closes. I judge both opportunities to have a high probability of closing.
I have constructed a spreadsheet calculates the arbitrage opportunity in real time.
The strategy requires that you buy the stock of the acquired company (Wyeth and Schering) and hold till the merger is complete. Sell the any stock of the merged company as soon you get it. Annualized return are 20 to 12% if merger completes.
If the mergers go as planned you end up pocketing the arbitrage.