Just before the end of the year I exited my position in WSP Holdings. Since the (already extended) deadline for the merger agreement was 31 December 2013 I thought it was prudent to exit my position. I do think it’s more likely than not that the merger will be completed, but if there would have been a time for bad news it would have been yesterday. With the passing of the merger deadline both parties could have walked away if they wanted without paying a breakup fee. This didn’t happen, and instead the company told in a press release that both parties were in discussions to extend the deadline once again.
The share price did drop a couple percentage points yesterday, and at my entry price of $2.66/share I stand to make a 18.4% return if the merger is completed at $3.20/share. Given the multiple delays so far I do think it’s obvious that this transaction is risky, because something isn’t progressing as planned. But I do think that both parties have the intention to complete the deal, and if the intention is still there they can probably find a way to make it work. With a possible return of 20% I do think I’m getting paid enough for whatever risk it is I’m taking, but this is certainly not a big position (at the moment).
Long WSP holdings (again)