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Praise for
The First Edition
“Never in history have there been so many mergers and takeovers
like those in the late ‘90s! Keith Moore’s Risk Arbitrage: An
Investor’s Guide is the first systematic attempt to break the silence
around the secrets of the investment and trading strategy that
exploits these corporate restructurings: risk arbitrage. This is not
just a book about the secrets of risk arbitrage but a real textbook
and investor’s guide on how to trade the risk arbitrage special
situations and about the risk arbitrage industry including hedge
funds.”
—GabrielBurstein,
HeadofSpecializedEquitySalesandTrading
DaiwaEurope,London
“I am delighted that Keith Moore has been able to write a book
describing the business of risk arbitrage in such a user-friendly
way. This is a work that will prove useful to investors ranging
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from novices to professionals and should be especially helpful to
those teaching finance courses at our colleges and universities.
Congratulations, Keith, on accomplishing what none of your
predecessorscould.”
—GeorgeA.Kellner,CEO,
Kellner,DiLeo&Co.
“This book fills a surprising void on the subject of arbitrage at a
time that could not be more propitious. It is written clearly and
comprehensively andshouldbehelpfultoallwhoareinterestedin
thesubject,regardlessofexperience.”
—AlbertB.Cohen,
AlbertB.CohenPartners,LP
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Risk Arbitrage,
Second Edition
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Founded in 1807, John Wiley & Sons is the oldest independent publishing
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Risk Arbitrage,
Second Edition
An Investor’s Guide
KEITH M. MOORE
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Copyright©2018byJohnWiley&Sons,Inc.Allrightsreserved.
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LibraryofCongressCataloging-in-PublicationDataisAvailable
Names:Moore,KeithM.,1952–author.
Title:Riskarbitrage:aninvestor’sguide/KeithM.Moore.
Description:Secondedition.|Hoboken,NewJersey:JohnWiley&Sons,Inc.,
[2018]|Series:Wileyfinanceseries|Includesindex.|
Identifiers:LCCN2018010499(print)|LCCN2018011704(ebook)|ISBN
9781118233856(epub)|ISBN9781118220139(pdf)|ISBN9780470379745
(cloth)
Subjects:LCSH:Arbitrage.
Classification:LCCHG6041(ebook)|LCCHG6041.M6552018(print)|DDC
332.64/5—dc23
LCrecordavailableathttps://lccn.loc.gov/2018010499
CoverDesign:Wiley
CoverImage:©Simfo/iStockphoto
PrintedintheUnitedStatesofAmerica.
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In memory of James M. Gallagher.
Jim, you gave me my start in this business and
continue to help me every day.
God Bless you, Jim.
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Contents
AbouttheAuthor xi
CHAPTER1
Introduction 1
CHAPTER2
WhatIsRiskArbitrage? 9
CHAPTER3
TheRiskArbitrageIndustry 27
CHAPTER4
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EstimatingtheReturnonaRiskArbitragePosition 33
CHAPTER5
EstimatingtheRiskofArbitrageTransactions 61
CHAPTER6
EstimatingtheProbabilityofaTransaction’sOccurrence 83
CHAPTER7
TheRiskArbitrageDecisionProcess 107
CHAPTER8
HostileTakeovers 117
CHAPTER9
TradingTactics 149
CHAPTER10
PortfolioManagement 173
CHAPTER11
TheExcitingWorldofRiskArbitrage 201
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x CONTENTS
APPENDIXA:TenderOfferDocument 215
APPENDIXB:Airgas/AirProducts—TextofCourtDecision 281
APPENDIXC:WholeFoodsMarkets—ExcerptsfromProxyStatement 291
APPENDIXD:StraightPathCommunications—ExcerptsfromProxy
Statement 299
APPENDIXE:StraightPathCommunications—ExcerptsfromSTRP’s8-K
FiledonApril13,2017 329
Acknowledgments 337
Index 339
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About the Author
K
eith M. Moore heads up FBN Securities Event-Driven group. Prior to
joining FBN Securities, Keith served as Kellner DiLeo & Company’s
Co-Chief Investment Officer, Portfolio Manager of the KDC Merger
Arbitrage Fund and Director of Risk Management. In addition to being
the author of Risk Arbitrage: An Investor’s Guide, he has authored the
Mergers & Acquisitions chapter for Corporate Finance, published by the
CFA Institute as well as a number of academic journal articles. Keith’s
arbitrage career spans research, trading and portfolio management at
Neuberger & Berman (1975–1983 and 1989–1996), Donaldson Lufkin &
Jenrette(1983–1989)andJupiterCapital(1997–2006).AformerAssistant
Professor of economics and finance at St. John’s University and Adjunct
ProfessorattheUniversityofRhodeIslandandNewYorkUniversity,Keith
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has earned numerous academic awards and honors. He holds a B.S. and a
Ph.D. from the University of Rhode Island and an MBA from New York
University.
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