Hi all can anyone explain why mergers usually have some arbitrage amount in them?
eg
IDFC - IDFC FIRST BANK still trades with 5%
HDFC - HDFCBANK traded with arbitrage for a long time.
Any reason why these arise?
Maybe because the actual merger date is well into the future and no one knows the exact date.
I wanted to buy Tata Steel and instead bought Tinplate India ltd as at that time it was to be merged with Tata Steel. By buying Tinplate india, I got a price advantage instead of directly buying Tata Steel. As I buy and hold I did not care as to when the actual merger would happen, It was to my advantage.
IDFC LTD and IDFC bank also had caught my eye. But did not buy till date.
Same with HDFC and HDFC Bank.
The video explains the Merger Arbitrage along with some other kinds of Arbitrage. It is in the context of the US market, but the reason is the same.
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