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The Deal: Trading Berry Petroleum's Puzzling $2.9 Billion Merger with LinnCo

One approach to trying to capture some of that spread has been to short a comparable security, such as the Alps Alerian MLP ETF, ticker AMLP, which correlates well to LinnCo, an arb said.

There have been some concerns about LinnCo accounting, but that looks like water under the bridge and accountants have signed off on the deal, an arbitrageur said. When the proxy clears the Securities and Exchange Commission and a date is set for the shareholder meeting, the spread should narrow, he said. Having a more certain end date, which means holding a synthetic short for a limited time, will encourage arbs to look for ways to trade the deal, the arbitrageur said.


At a spread of $5, just going long Berry has some prospects, another arb said. LinnCo shares would have to decline about $4, or 9%, between now and the deal close before being long Berry produced a loss, the arb said.

At its current price, LinnCo offers about a 7% dividend yield, which should offer support to the shares, he said.

Written by Scott Stuart in New York

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