Arena (ARNA) Takeover From Pfizer (PFE)
Shares of Arena (ARNA) are up over 80% today to around 92 on news that Pfizer (PFE) is seeking to acquire the company for $6.7 billion in cash. The implied takeout price is 100 a share.
Etrasimod is the main asset (ulcerative colitis, Crohn’s Disease, etc.) that Pfizer is after. This is why we have owned the stock. The strategic importance is likely that Pfizer can have some new revenue streams coming online when Covid-related products are expected to trail off (think 2-5 years out). Shares of PFE are trading up around 3.5% today on the news.
With shares of ARNA trading around 92 the market is discounting the actual takeout price (100) by 8%-9%, likely based on regulatory risk and potential that ARNA shareholders won’t approve the deal.
I suspect this deal will go through. Our choices are to hold the position in hopes that a better deal comes through, that Pfizer is asked to increase its price, or that ARNA trades up to the actual takeout price. If we sell now for around 92 our gain on this position will be roughly 135%.
The risk of not selling is that this deal falls apart and shares of ARNA retreat, potentially back near where they closed Friday (at 50).
I suggest we sell half our stake today to take advantage of this pop, then hold the rest for a few days to see if there is any chatter about a higher price.
We have been extremely patient with this position and I’m glad to be able to take a partial profit for around 135% today. SELL HALF, HOLD HALF