Do the Arbs Like the MW/JOSB Deal?

Men's Wearhouse (MW) has an all cash offer on the table to buy Jos. A Bank Clothiers (JOSB) $57.50 per share. The stock is trading over $56, implying the market likes the deal price.

There are some smart arb trades out there against this deal. One that I like, in particular, is the Feb 55/50 put spread at near $1.00 per contract. With the deal assumed to get done, that is a lot of premium to collect over 40+ days. If the deal gets sweetened, trades could be out earlier. We have to do it as a spread because if it falls apart JOSB will get slammed. An alternative to this trade is to make a bet that the deal price goes higher and buy the Jan/Feb 60 call spread for around $0.125.

Trades: Sell to open JOSB Feb 55 puts at $1.25 buy to open JOSB Feb 50 puts for $0.30.

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At the time of publication, Mark Sebastian held no positions in the stocks or issues mentioned.

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