Here is an interesting stock to watch, Allegheny Energy, Inc. (AYE).
From a technical standpoint the stock is prime to make a decent move higher after gapping up and looking to breakout of the wedge. Should this trend continue look for an initial price target of $24 followed by $27.
Now here is the somewhat interesting kicker to the whole trade… The gap up was due to a merger between Allegheny Energy, Inc. and FirstEnergy (FE).
Under the terms of the agreement, Allegheny shareholders will receive 0.667 shares of FirstEnergy common stock in exchange for each share of Allegheny they own. Based on the closing stock prices for both companies on February 10, 2010, Allegheny shareholders would receive a value of $27.65 per share, or $4.7 billion in the aggregate, yet the stock still sits at around $23.
FirstEnergy will also take on about $3.8 billion of Allegheny’s net debt. Following the completion of the merger, it is anticipated that FirstEnergy shareholders would own approximately 73% and Allegheny shareholders would own approximately 27% of the combined company. The companies expect to complete the transaction within 12-14 months. Following completion of the merger, the combined company would retain the FirstEnergy name and be headquartered in Akron, Ohio.
As of today there are investigations going on as to whether any shady business took place, but I think that is just more certain parties trying to prevent such a merger from happening.
Certainly there is some risk involved here. Keep stops tight, as this trade could pay off should this deal get finalized but could also just as easily fill the gap should the deal not happen.