Dear Alpha Plus Members,

We would like to bring to your notice an interesting arbitrage opportunity in the case of

  ***P ****** Ltd (BSE Code: 5*****)

Some insights into the Arbitrage opportunity

On 26th Nov’11, APW President in its letter to Stock Exchanges informed that the company (“APW President”) has received a letter from Schneider Electric South East Asia Ltd, the Promoter and the majority shareholder of the company informing the company of its proposal to voluntarily de-list the equity shares of the company from all the stock exchanges by acquiring up to 1,512,006 equity shares held by the public shareholders representing 25% of the current issued and paid up share capital of the company.

The letter also states that the Delisting proposal has been approved by the Board of Directors of the Promoters at a price not exceeding Rs 195/- per share. (CMP – Rs 155/- per share)

http://www.bseindia.com/xml-data/corpfiling/AttachLive/APW_President_Systems_Ltd_261111.pdf

Some more details

Earlier in Jan’11, Schneider Electric entered into a share purchase agreement with the existing promoters of the APW President Systems Ltd for purchase of the promoter shares and subsequently made an Open Offer in Mar’11 to acquire 1,209,600 shares constituting 20% of the share Capital of APW President Systems Ltd at a price Rs 195/- per share.

Interestingly the shares were tendered at Rs 195/- per share and Schneider Electric could mop up another 20%, increasing their total holding in the company to 75%.

Investment Strategies  

Though the company made the above announcement on 26th Nov’11, however on the last trading day i.e. 25th Nov’11 the stock moved up by 8% to Rs 155/- per share (Insider buying).

At CMP i.e. Rs 155, the floor price of Rs 195/- indicated by the Promoters leaves a room for 25-30% appreciation in the stock. Since the company has already made a Public announcement and since the board meeting is scheduled for 28th Nov’11, we believe the stock will open higher than Rs 155/- per share on the first trading day post announcement i.e. tomorrow 28th Nov’11.

We would suggest all the members to not to chase the stock beyond Rs 170/- per share and book complete profit in the range of Rs 190-200/- per share.

  • Buying price range Rs 155-170/-
  • Profit Booking range  Rs 190-200/-
  • Expected Return 12-15% in 4-5 days
  • Portfolio Allocation Up to 4%

Though we expect the de-listing to go through smoothly and the discovered price to be higher than the floor price of Rs 195 indicated by the Promoters, however it would be more prudent to book complete profit in case the price reaches Rs 195/- within the next few days than waiting for the de-listing process which would span over the next 5-6 months.

Best Regards,
Ekansh Mittal
http://www.katalystwealth.com/
B-47, 1st Floor, Dayanand Colony, Lajpat Nagar – IV, New Delhi 110024 Ph.: 011-41730606, Mob: +91-9818866676
Email: info@katalystwealth.com