Re: Earn 6% in the next 5 months (merger arbitrage)
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given those target prices and a reasonable discount rate (say 8%)
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I think this is the part that's really not getting enough attention. Even if you just call your discount rate something comparable to high yield savings accounts (5.5% APY?) this deal becomes a lot more questionable. You could get 2.3% risk free in that savings account in 5 months, and it goes up to 2.5% if you can find a 6% account. Given that roughly half of the total return could be achieved with 0 risk I think it's hard to justify taking a bet on this merger, especially since there's not a lot of explanation. Maybe you could give some more guidance on why you feel it's nearly a done deal?
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