Today Luminex announced that it has increased its bid for Nanosphere with 26% from $1.35/share to $1.70/share as a result of an unsolicited third party offer at $1.50/share. When you enter the merger arbitrage game you don’t expect to make huge gains, but the fact that there is a small probability of a very favorable outcome like this acts nicely as a partial balance for the fact that there is also a small probability of a very negative outcome when the deal fails. Pre-market the stock is up to $1.67 which means that the spread also has narrowed to just 1.8%. But maybe some market participants are now hoping for a bidding war, although with the increase in the breakup fee that’s probably not very likely:
In response to the events described under Item 7.01 of this Current Report on Form 8-K, on May 22, 2016, the Company, Merger Subsidiary and Nanosphere entered into a First Amendment to the Merger Agreement (the “Amendment”) that (A) corrected scrivener’s errors such that the Offer would expire at 12:01 a.m. Eastern Daylight time on the 21st Business Day after commencement; (B) increased the per share Offer Price to $1.70 per Share; and (C) increased the Break-up Fee to $3,000,000.
Author is long Nanosphere