IndexIQ has announced the mergers and acquisitions (M&A) deals which investors can gain exposure to through the IQ Merger Arbitrage ETF (MNA).
MNA, which launched on 17 November 2009, has more than four years of live performance, while its underlying index, the IQ Merger Arbitrage Index, has more than six years of live performance, having launched on 31 October 2007.
As of 4 August 2014, the deals that were added to MNA ETF are:
Bell Aliant-BCE
Corio NV-Klepierre SA
Family Dollar Stores-Dollar Tree
International Game Technology-GTECH SpA
Lorillard, Inc-Reynolds American, Inc
QR Energy, LP-BreitBurn Energy Partners LP
Rockwood Holdings, Inc-Albemarle Corp
Sky Deutschland AG-British Sky Broadcasting Group Plc
Time Warner Inc-21st Century Fox, Inc
T-Mobile US, Inc-Iliad SA
Trulia, Inc-Zillow, Inc
TRW Automotive Holdings Corp-Zeppelin-Stiftung der Stadt Friedrichshafen
URS Corporation-AECOM Technology Corp
And the deals that were removed from the MNA ETF are:
Roland Corporation-Taiyo Pacific Partners LP
Emeritus Corporation-Brookdale Senior Living Inc
David Jones Limited-Woolworths Holdings Ltd
Fusion-io, Inc-SanDisk Corp
Rautaruukki Oyj-SSAB AB
MICROS Systems, Inc-Oracle Corp
Wing Hang Bank, Limited-Oversea-Chinese Banking Corp Ltd
Bull SA-ATOS SE
Dixons Retail plc-Carphone Warehouse Group Plc
Foster Wheeler AG-AMEC Plc
Max Age
Goodman Fielder Limited-Goodman Fielder Ltd/Private Group
Ziggo NV-Liberty Global Plc
MNA was designed to provide capital appreciation by investing in global companies for which there has been a public announcement of a takeover by an acquirer, a strategy generally known as “merger arbitrage.” This strategy generally seeks to take advantage of the price differential, where it exists, between the current trading price of a stock and the price of that stock at the time the deal is completed.
“Historically, investors have not had broad access to capitalise on mergers and acquisitions activity in an ETF,” says Adam Patti, chief executive officer at IndexIQ. “The Merger Arbitrage ETF is a hedged strategy designed to take advantage of price disparities that exist in merger activity and strengthen investor portfolios by buying below the target price and realizing the capital appreciation if the deal closes at or above the target price. As such a strategy had not historically been accessible in an ETF before the launch of MNA more than four years ago, we are very excited about providing investors with this liquid, transparent, low cost, and easily tradable product.”
Merger arbitrage funds typically have the potential to benefit from buying target companies below the target price. The “spread” in price, the difference between the target price and market price, can be quite lucrative for investors, especially if there are competitive bids for a company. Given today’s relatively low corporate valuations and the significant amount of cash on corporate balance sheets, industry experts forecast a rapid increase in M&A activity.
