Bought Sogou shares @ USD 8.25 per ADR. 6% position.
This is a merger arb with 8% spread over 5 months. While I focus on finding long term investments in high-quality businesses, I just cannot resist myself when short-term investment opportunity with good risk-reward arise.
Tencent is privatising Sogou with an offer price of USD 9 per ADR. This deal has reached a definitive merger agreement in Sep 2020 and hence the spread completely disappeared.
In Dec 2020, Sogou announced that they amended the merger termination date from 29/03/2021 to 29/07/2021 due to the need for antiregulatory filing and subsequent clearance from Chinese regulators.
“In late November 2020, THL and Parent made an antitrust filing with relevant PRC regulatory authorities in connection with the Sohu Share Purchase and the Merger. Considering the time needed for the clearance of such filing, the parties decided to extend the termination date under the Sohu Share Purchase Agreement and the Merger Agreement. On December 1, 2020, (i) Sohu.com, Sohu Search, and Parent executed an Amendment No. 1 to Share Purchase Agreement, to extend the termination date under the Sohu Share Purchase Agreement from March 29, 2021 to July 31, 2021, and (ii) the Company, THL, Parent and TML executed an Amendment No. 1 to Agreement and Plan of Merger, to extend the termination date under the Merger Agreement from March 29, 2021 to July 31, 2021.”
I am confident that Sogou deal will get approved by Chinese regulators because:
1. Tencent is not dominant in search
2. Sogou is very important to WeChat commerce ecosystem that Tencent will go out of its way to make Sogou deal happen
I expect them to get approval before 29/07/2021 and hence the expected time to completion of 5 months.