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Biggest Merger Of The Year Tastes A Little Skunky To Merger Arb Players

Meet the hedge funds that want no part of the AB InBev/SABMiller deal.
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Really, it's supposed to taste like that.

Merger arb players aren’t exactly lining up to toast the Anheuser-Busch-SABMiller marriage with any of their terrible products.

“It is a very long journey” until the deal is completed, said Lionel Melka, co-manager and head of research at Paris-based hedge-fund firm Bernheim, Dreyfuss & Co., pointing to the “length of the regulatory timetable” and the risk of regulatory intervention….It’s those concerns that are currently keeping some hedge funds at bay. That’s despite a sizeable gap– known by hedge funds as the spread–of around 9% between the AB InBev’s proposal and SAB’s share price. Wider spreads suggest eroding investor confidence that a deal will close, but are also more attractive, while narrower spreads mean there is less profit for arbs to extract.

The current spread is “justified” and “does not look that attractive,” said Mr. Melka.

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