Algokid

M & A ARBRITRAGE. OPPORTUNITY - LOBLAWS/SHOPPER DRUG MART

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For those of you watching the TSX ( not many I suppose) Loblaws, a major grocery story offer to buy Shoppers Drug Mart for 12.4 Billions dollars. Loblaws was surprisingly up 5.43 % vs. 24.1 % for Shoppers Drug Mart. For me . this represent a great merger and acquisition arbitrage opportunity. I already checked the fundamentals of both company.

I don't expect the Shoppers Drug Mart stock to move higher, but I do expect Loblaws to come down. They currently have 689 millions in cash and 10.92 billions in debt. ( meaning they will need to borrow some cash)

For this reason I'm short Loblaws and Long Shoppers Drug Mart. As you can see the ratio between the two is absolutely insane right now. Hoping for a quick return to the mean

The deal would still need to be approved by regulators and the government.

Cheers

Algo
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