Friday, November 17, 2006

Speculating On Takeovers and Buyouts

Private equity has been in full force of late. There has been plenty of mergers and LBO's. I have compiled a list of deals that have been rumored in the media. One way to play these possible takeovers is to go long distant call options. This involves a significant amount of risk, but provides limited downside to your initial investment in the call option premium. I do not know when any of the speculated deals will go through. In many cases the deals might never materialize. If you decide to speculate on takeover candidates with options, remember that options have a declining time value built into the premium.

Possible Deals

Federated Department Stores (FD)- Carl Ichan has expressed some interest.

Harrah's Entertainment (HET)- casino operator already received a potential bid around $83 per share. Bid could be raised.

International Securities Exchange (ISE)- electronic exchange for equity options. Could merge with Nasdaq (NDAQ) or NYSE Group (NYX).

SBAC Communications (SBAC)- cell phone tower operator. Competitor Crown Castle (CCI) recently purchased Global Signal (GSL).

The Tribune Company (TRB)- could go private or sell off its assets. Owner of the Chicago Cubs, TV stations, and newspapers.

United Airlines (UAUA)-further consolidation in the airlines sector makes sense. Could also go private as restructuring has helped curb costs.

Note: I have no position in the above mentioned stocks.


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