WM - Merger Arb Opportunity: Advanced Disposal Services With ~4.9% Merger Spread And Expect To Close In Q2 2020
Risk & Return Analysis
Advanced Disposal Services (ADSW) is being taken private by Waste Management (WM). The current merger spread is 4.9%, and the market is pricing in a 72.5% probability of closing. I estimate there is a ~12.9% downside if the deal breaks, so size the best 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,