Rational Speculation

I thought I’d present a couple of arbitrage opportunities that I noticed have been flying under the radar. Both companies are being taken private.

The first is AirNet Systems, Inc. (ANS)

AirNet Systems, Inc. provides time-critical air transportation services (express delivery) for small package shippers and banking customers to more than 100 cities nationwide. They are a premium transportation service provider for industries that require immediate turn-time and specialized handling: international financial institutions, organs for transplant, blood products, media and tapes for distribution, aircraft parts, security sensitive material, even charter service for vacationing families, surgical teams, or corporate professionals.

The stock price has been performing poorly over the last year due to a variety of factors, including the banking credit crunch and escalating oil prices. However, that all changed on March 31st of this year when ANS announced that it entered into a definitive merger agreement to be acquired by an affiliate of Bayside Capital, Inc. for $2.81 per share in cash.

I won’t go into the minutia of the merger agreement or the fundamentals of the company, but a very small profit opportunity could be had based on Friday’s closing price of $2.67, without having to lay out a large amount of cash while waiting for closure.

The second is National Atlantic Holdings Corporation (NAHC)

Simply put, National Atlantic Holdings Corporation and its subsidiaries provide property and casualty insurance and insurance-related services to individuals, families and businesses in the State of New Jersey.

NAHC was a company that I previously presented on my old blog. It’s stock price has performed poorly over the past year basically because of what I mentioned about it previously: poor management. IMO, their downfall started when NAHC “required” it’s “independent” agents to become shareholders of the company in order to sell it’s products. I believe most of their problems can be attributed to this one management error in judgment.

Regardless, the stock price has dropped far enough for Palisades Safety and Insurance Association to find value in NAHC. On March 13th of this year, NAHC entered into a definitive merger agreement to be acquired by a subsidiary of Palisades Safety and Insurance Association, a New Jersey licensed insurance exchange. Under the terms of the agreement, each outstanding share of common stock of NAHC will be canceled and converted into the right to receive $6.25 in cash per share.

Like ANS, a small (but better) profit opportunity could be had based on Friday’s closing price of $5.84, without having to lay out a large amount of cash while waiting for closure. Details of their merger can also be followed through the SEC website.