If you don't know the modus operandi of the arbitrage hedge fund then you have something to learn.
Granted, they may not be as prevalent as they were pre the GFC when there was an avalanche of M&A but I am sure they are still around.
Schlomo knows what he is talking about - I remember him being very active in the takeover of Allegiance Mining by Zinifex which went exactly the same way as this will go with the money from the hedge funds controlling the play.
As he says, the bid is underwritten by BHP at $1.30, so the fund buys up as much as it can at 1.26 or there abouts. Lie everything there are risks - the biggest that everything falls over, the next scenario that no other bidders come in and that the fund walks away with their 3% margin, the next best for them when they go and tap BHP on the shoulder and say, we have a significant stake of 15%, if you up your offer to $1.40 unconditional we will give you our shares tomorrow and of course the last scenario that other entrants come into the game and they sell into a bidding war.
besides hedge funds I would think BHP would be a buyer. I have not read the fine print but usually they would be entitled to buy all they could up to the offer price of $1.30. If they wanted to pay over that then they would have to revise their offer.
Me personally, I had a small holding that I have let go today, so say good luck to all holders. my tip is you'll get more then $1.30 but for my small amount it was not worth hanging onto.
UMC Price at posting:
$1.27 Sentiment: None Disclosure: Not Held
