Summary
- I sold out of Tiffany but will make the case for a hold or even a buy.
- The deal isn't very attractive in the light of other special-situations and M&A events that are going on.
- However, the risk-adjusted return looks extremely attractive.
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I used to play competitive chess as a kid and I really hated the endgames. I thought it was really boring and tedious to mate someone with a few pieces lumbering around the nearly empty board. It could also be nerve-wracking because a wrong move, induced by a lapse of concentration, could turn a lock of a position into a stupid loss or draw.
The final stages of an M&A deal sometimes remind me of that.
I wrote a brief note yesterday about exiting Tiffany's (TIF) but need to expand on that. I don't think my sale was bad because at the time(yesterday), there wasn't confirmation of the deal by Tiffany and the terms weren't laid out. They are laid out now and I think it is a hold and in some circumstances a buy.
Before diving into the current situation I'll quickly go over some of the crazy backstories of this deal
I first looked at Tiffany on November 7, 2019 in There's Room For An Improved Tiffany's Bid. The gist of that piece:
This currently looks like an attractive spot to enter a small speculative position to me.
The bid was at $120 with the stock trading at $124.69. Ultimately the bid was taken to $135.
On March 18, 2020 I wrote this:
If Arnauld ever wanted to walk away from a deal it should be this one.
I'm not sure walking away from a deal in THIS CRISIS would even hurt your long term reputation that much.
I'm leaning towards thinking Arnauld will look through this crisis but I'm not nearly as confident about this merger as I feel towards the Allergan (AGN) deal for example.
and I wrongly figured the MAD's could give him an out at that time. I changed my mind about that later on.
