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MR - Buy Montage Resources Senior Notes With 8.1% Yield To Call Ahead Of Takeover By Southwestern Energy
Montage Resources Corporation
Risk and Return Analysis
Montage Resources (MR) is merging into Southwestern Energy (SWN) via a stock deal. Montage's senior notes are pricing in 85.0% deal closing. I estimate there is a ~21.9% downside if the deal breaks, so size the bet according to your risk limit. A summary is provided in the table below:
Probability of Closing - This is a standard probability of closing in merger arb. See below for a graphical illustration. The idea is that the closer the current price is to the deal price, the higher probability of closing is priced