Arbs Lay Off Knight-Ridder
Is Knight Ridder (KRI) a good merger arbitrage play? Several traders at hedge funds doubt the deal will materialize and say they're in no hurry to take a bet.
Shares of the newspaper publisher rose 1% to $60.93 Thursday after The Wall Street Journal reported that three private equity firms, Blackstone Group, Providence Equity Partners and Kohlberg Kravis Roberts, were considering a joint bid for the company.
The muted reaction partly reflects Knight-Ridder's 15% run since late October, when several large shareholders started agitating for a sale of the company. But the current price is 13% below the 52-week high of just below $70, hit in early March.
For now, merger arbitragers, who bet on takeovers, aren't embracing the stock, which presumably would be taken out for a price above the current level."I don't like to play pre-deals. It's too risky," says Nancy Havens, founder of merger arbitrage hedge fund Havens Advisors. "If the market goes down, you go down twice as much. We
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