Short Term Arbitrage Play: Rohm & Haas (ROH) ~ market folly

Monday, October 20, 2008

Short Term Arbitrage Play: Rohm & Haas (ROH)

Todd Sullivan over at Value Plays has just posted up an excellent idea for a short-term arb play. He writes,

"Dow Chemical will purchase Rohm & Haas (ROH) for $78 a share and the deal will close in early 2009.

Berkshire Hathaway (BRK.A) is investing $3b in the deal and it is an all-cash transaction. Currently shares trade at $70 a share under the current credit environment. Purchasers of shares today will get a 10% 4 month return (30% annualized). Downside is minimal.

What could go wrong?
Kuwait, who is buying 1/2 Dow's commodity business for $9.5b could back out of the deal. That cash is being used for funding the ROH transaction. How likely is this? Well, when one considers that the newly formed JV is in the process of hiring personnel and setting up shop in Michigan, not very.

Berkshire could back out. Again, can anyone come up with a scenario when this has happened? Me either."

Overall, it looks like this could be a solid play in terms of risk/reward. Head over to Value Plays to read the rest of his post.

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