Merger Arb Combination - Example

The following is an example of a merger arb combo:

• Target Company (Buy):                           LU

• Target Company Qty:                             10,000

• Acquirer Company (Sell Short):               ALA

• Acquirer Company NBB:                         $12.20

• Exchange Ratio:                                    0.1952

• Cash Component:                                  $0.50

• Spread:                                                 $.05

Based on this example, the following short sale would be executed first to make sure the short sell tests are met:

Sell Shrt            1,952                ALA                  12.20

We would compute the buy limit price of the target company and next submit the buy order:

$12.20 * 0.1952 = 2.38 + 0.50 = 2.88 – 0.05 = $2.83 (limit price)

Buy                  10,000              LU                    2.83

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