Anheuser-Busch Still a Bargain

Anheuser-Busch (BUD, $66.69, down $0.46) has been trading 5%-10% below its takeover price of $70 a share and I wanted to point out what this means. In late June and early July, this was a hot topic for the blog and many of you did well with some of the option trades I profiled. Having said that, although there are no option trades that I would recommend right now, BUD is perhaps one of the best risk arbitrage plays out there in the market. InBev has agreed to purchase the shares of Anheuser-Busch for $70 per share and typically, until an acquisition is completed, the stock of the target typically trades below the purchase price. An arbitrageur (love that word) is someone who buys the stock of the targeted company and makes a gain if the acquirer ultimately buys the stock. Brazilian antitrust regulators have already approved without restrictions the sale of Anheuser-Busch to InBev so there’s a really good chance that the $70 a share will happen. The stock traded as low as $63.50 last Wednesday and Thursday and if we can get back to those levels, I think you should pull the trigger on a stock trade. Rick Rouse Rick@OptionsMentoring.com]]>

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