On 16th January 2012, Khazanah Nasional, the sovereign wealth fund for Malaysia, announced that it will divest its entire stake 42.74% in Proton Holdings Berhad to DRB HICOM for $5.50 a share. As the stake is more than 33%, DRB HICOM is required to make a mandatory general offer for the rest of Proton Holdings shares at the same price.
The current price for Proton Holdings is $5.47. This reflects that there is only 0.54% in the deal which I believe roughly equates to interest rates in Malaysia. Usually there will be traders who would do the carry trades on deals that are certain to happen. As an example, say the trader can borrow money at 0.5% and will be able to earn 1% after all transaction cost, this equates to a net profit of 0.5% for the trader. If the trader can use leverage and lever it up x 10, he can make 5% on this trade alone.
Sometimes in Mandatory General Offers, where the acquirer has no plans to delist the target and wishes to keep the target listed, the price of the target might even go above the offer price. I would usually try to get borrow and short these stocks. In reality, these cases happen very rarely but they do prove that market can sometimes be inefficient/irrational.
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