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I'll resurrect this thread just to comment that at one point this afternoon the arb had closed to below 2%. R1 was offered to buy at below 311p (I bought some) xrate was $1.34 YuMe was quoted at $4.67 So I calculated the theoretical purchase price under the R1 agreement as $4.75 a share vs the actual price of $4.67, a difference of less than 2% despite the hurdles of regulatory approval and YuMe shareholder vote, plus the fact that the $4.75 is a long way below the headline price in the announcement. Rather than close part of my own position by selling some YuMe shares I decided to leave it open hoping for a rapid bounce back by R1. The YuMe position also gives me a bit of a hedge against R1 being forced to sweeten its offer or indeed a counter-offer arriving, both of which I think are low (but not zero) probability events.

Don't think I haven't thought about it! Is the fall just a risk-off move for London stocks on the tube incident or is there any other news behind it, does anyone think?

Long-term value notwithstanding, I decided to bank some profit as the share price once again approaches £4.

Arbitrage on offer is much reduced this afternoon, so perhaps some hope that an end may be in sight to arbitrage-driven downwards pressure on R1 shareprice. With R1 at 34.50p bid, YuMe at $4.74 and £1=$1.3195 I make it less than 6% available. i.e. the actual price of YuMe shares at $4.74 is less than 6% lower than the price under the merger terms, which I make $5.03. This may still be enough of a spread to make it worthwhile for the institutional arb players, but for those of us who have to pay forex markups it's looking much less attractive now.

Well it looks to me like there's some arb trades this afternoon with R1 falling and YuMe rising. So rather than a "riskless" arb trade this time I've bought some more YuMe (at $4.69), but don't want to sell R1 at 35.5p while it's under what I think is this arb selling pressure. Arb is about 9% at those prices before transaction costs. So I think I will wait until Monday morning on the assumption that when one market is closed there should be less arb pressure - so I would hope R1 will rise Monday morning, all other things being equal, before perhaps coming under more arb pressure when the US market opens. No advice intended of course. Posting just for discussion purposes.

One other thought on this. Again thanks to the liquidity position, should one of the big pro-deal players on either side think that there is a serious risk of the YuMe shareholders rejecting the deal, a relatively small bit of sustained buying of R1 by them should be enough to bring the R1 price up quite sharply and so increase the apparent attractiveness of the deal to YuMe shareholders. Toscafund would be limited by the 30% ceiling but the YuMe activists and other R1 shareholders would have no such constraint. It does seem too good to be true though...so perhaps there's another angle somewhere.

I'm also thinking of increasing my arb position. I'm not sure there's enough liquidity in R1 for the normal arb players to get involved to the extent they'd want to. i.e. how many shares can they borrow to do the short side of the trade. It's annoying that this deal doesn't fall under something like the UK takeover code with its daily dealing notifications, so we could see who's playing, but on the other hand perhaps that helps to keep the opportunity open. It is a real option for any existing shareholders of R1 and in particular I would be surprised if Toscafund weren't looking at it, at least at the margin. The issue for them though is that they would have to give a holdings notice if they went below 29%, which might be a concern because of the message it would send. I guess if they did do that they would explain what they were doing to the YuMe big holders and tell them that it didn't lessen their commitment to the deal.

Usually the arb spread reflects the risk to deal completion. The price of the target remains below the theoretical acquisition price provided the risk of loss in value of target on deal failure outweighs the upside of a counter-offer coming in. In this case I would have thought regulatory risk to completion is very low. However there is a real risk in my opinion that YuMe shareholders fail to vote through the deal if the R1 price is significantly below the deal reference value at the time of the vote. Logically they would only do this if they thought there was a better option out there for them, which ought to be good for the YuMe position, but realistically I think the immediate impact of voting down the deal would be a significant fall in the YuMe shareprice.

Correction - in the example I gave, the arb gap does close a bit when the arb buys YuMe. The missing element that I think may cause the net fall on both sides is that the impact of seeing R1 price fall further below the deal reference value is to make some YuMe shareholders nervous that the deal's not going to happen and at the margin some sell, which offsets the impact of the arb buying.

Agree on the arb opportunity and have taken advantage by selling R1 and buying YuMe in the deal ratio (approx. 7:1). I did it when the arb gap was about 10% and it does seem to have widened since then. I had to front up the extra cash since there is the cash element to the deal (i.e. x/7 YuMe shares cost more than is raised by selling x R1 shares because of the $1.70 cash element). I've posted about this on another site, but without much reaction. My concern is that the relative illiquidity of R1 means this sort of arbitrage may actually drive down the price of both companies in a bit of a vicious circle. Arb sells R1 -> price goes down -> price of YuMe goes down because of deal linkage -> Arb buys YuMe -> price of YuMe goes up, but not by as much as R1 went down because of relative liquidity -> Net result is that arb becomes even wider encouraging more arb selling of R1...

That's me out at 19.25p. I don't like the fact that we still haven't seen any 8.3's from the arb players buying and I think the wording of the last rns still leaves open the possibility of a last minute challenge from the Germans.

I can only speak for myself. I sold 1/3 of my holding this morning at just under 19p but kept the rest hoping to get over 19p. I am a bit surprised we're still trading below 19p but I wonder if that's down to the recent history of surprises and some disbelief that it could all finish so quickly in the end. A few bigger trades coming through this afternoon so perhaps that's a sign that the arbitrage institutions are getting involved again on the buy side. Have to wait for tomorrow's 8.3's to see. The one risk I do still see is some sort of challenge from the Germans, although personally I put this as a relatively low risk. I notice this morning's rns talks about "the parties have concluded" without defining, as far as I can see, who "the parties" are. i.e. if "the parties" include the German authorities then I would be more relaxed than if "the parties" are only Sepura and Hytera. I suspect "the parties" does include only Sepura and Hytera because of the subsequent statement that "the parties intend to move forward with the completion...". So is there a possibility that Sepura and Hytera are calling the Germans' bluff and trying to close without having formal confirmation that the Germans don't want to run a public interest review? If so, could the Germans try to get an injunction to prevent the deal closing? Low risk I think, which is why I'm still holding most of my shares in the hope of 19p plus in the coming days. As always on SEPU in particular, do your own research.

Only just noticed the rns. Excellent news.

Apologies. Wrong board.

Only just noticed the latest rns. Excellent news. I hope it does the trick and gets us somewhere close to the 20p.

Sorry - Tony Quested not David Quested.

Pointed comment in David Quested's latest article: "Sepura is making no additional comment on the matter." I wonder if that's in response to his previous article which hinted that Sepura saw the German hurdle as "minor". I can't see where else (but a Sepura source) the "minor hurdle" comment would have come from and perhaps it caused Sepura/Hytera some embarrassment in whatever negotiations may be ongoing with the Germans. "While the German authorities, which originally said the acquisition fell below their radar, has now decided to take another look at the deal Sepura can negotiate its way round that minor hurdle once the UK clearance is obtained." (from 9th May article)

Yes, I'm surprised it hasn't opened higher. Perhaps too much suspicion that Friday's rns sounded too good to be true given all the twists in the story so far. It would be nice to see them come out today and confirm that they have managed to defer the covenant tests until the end of the month.

Yes, I wouldn't be surprised to see a further RNS tomorrow, possibly even at 7am. Friday's (at 18:12) has the feel of something rushed out and perhaps they weren't really expecting the result of the consultation to be published on Friday. In terms of the end of May date, that has to be taken in the context of the original scheme document which was published on 16th January and showed an expected effective date of 20th February (only 11 days after the expected date of the court meeting & shareholders' general meeting). So they have a track record of woefully underestimating the time needed to do regulatory stuff. But I agree that talking about an end-May date in Friday's rns gives a strong impression that they know this will happen in the near-term and it's just a question of thrashing out any remaining detail. So if that isn't what they meant they may well want to correct the impression sooner rather than later, and if that is what they meant then they will probably want to flesh it out anyway. I hope the arb institutions will be back buying in the market tomorrow providing depth of market for those wanting to sell out at something close "enough" to 20p, although apart from an indication in terms of volume and price we won't get the confirmation of that until the 8.3's are published on Tuesday. It should certainly be an interesting open.

This is clearly interpretation on my part but I think the implication is that Hytera and the Germans have agreed in principle to some sort of undertakings, along the lines of the UK solution - so Hytera will undertake to keep maintaining existing Sepura kit in use by German states and perhaps supplying new kit for a period of time. Perhaps also restrictions on who can access any information/technology deemed "classified" by the Germans. In this scenario the reason they expect to complete about the end of May is they have to negotiate the precise details of the undertakings. I also think there is an implication that the lenders have agreed to defer the covenant tests until at least the end of May. So it could still go wrong if the negotiations go badly but Hytera has shown in the UK undertakings that it is prepared to accommodate (presumably) similar concerns for the UK government so I would have thought they are pretty confident of success. I suppose if you wanted to spin things negatively you could suggest that they only put the end of May in the rns because they think the lenders will pull the rug if they haven't done a deal by then so they have to get it done by then, even though they still don't know whether the Germans are going to insist on a formal and lengthy review. But I really think that would be stretching things a bit - and very close to the line of deception. Absent any new information I would be surprised if it doesn't open fairly close to 20p on Monday.