This is one of those deals that seems to be destined to close–probably in the fourth quarter.  It’s a deal that makes sense: Pfizer is a large acquirer and there has never been competition for Wyeth since the deal was announced; Pfizer needs to expand their drug pipeline soon and Wyeth meets that need;  they have a definitive agreement and few financing restrictions; and shareholders like the deal.

So why is the spread trading at a premium of 2.16?  I believe its because there is far less hedge fund risk arbitrage capital being put to work this year due to the wealth destruction in the last nine months.  PFE trades 54 million shares per day and WYE does 11 million…there’s simply not as much capital pushing these stocks closer together, so the spread tends to drift up with less effort.

I think this merger is low risk and still offers good yield for the long term hold provides acceptable rotations for short-term (intraday) trading opportunities.

Darryl Van Dyke