Q: CWB up quite a bit today on the news of National's attempt to purchase. Up 70% but if I'm not mistaken there is still 40% on the table. { Please correct me if I am wrong about that 40% } Pundits on the Business channel have been commenting this morning and the consensus seems to be the government is unlikely to quash the deal ..... 40% is a nice arb play if the odds look good. Mind you if it doesn't go through there would likely be a nasty drop ...... What says 5i ? Do you like the arb play here on a risk reward basis ?
5i Research Answer:
We show a 17% arbitrage right now, as the deal is for NA stock, and the price of NA is down on the news. Banking regulators are a tough bunch, and this is not a slam dunk at all. There are already too few banks in Canada. It is a good deal if NA can get it, though. We would consider it an 'OK' arb. In any other sector we would be more interested but banking is such a political hot potato and western influences could object to a 'Quebec' takeover.