Livewire Exclusive: Bringing merger arbitrage into the mainstream

We recently discussed a takeover transaction in Vitalharvest Freehold Trust (ASX: VTH) that offered a favourable risk/reward scenario that has since gone on to deliver returns far in excess of what was anticipated at the outset. At times throughout that transaction, shares have traded in the market at a premium to the highest consideration offered and yet, with the benefit of hindsight, has made sense to do so. It seems counter-intuitive to think of purchasing shares only to tender them into a lower offer as a winning strategy, but key to any merger arbitrage strategy is assessing risk. Sometimes that risk remains to the upside, even if it means paying a premium today.

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