By Zachary R. Mider
Sept. 16 (Bloomberg) -- Merrill Lynch & Co. shares are due to rise relative to Bank of America Corp.'s as traders seeking to profit from a merger of the companies exploit yesterday's late sell-off in financials, said John Orrico, president of Water Island Capital LLC.
The CHART OF THE DAY shows that the gap between Merrill shares and the value of Bank of America's takeover offer jumped to 34 percent from 25 percent in the last 10 minutes of regular New York Stock Exchange composite trading yesterday.
``You had a lot of investors that were just reducing or eliminating their exposure to financials. They're indifferent to the merger,'' said Orrico, a merger arbitrage trader who manages more than $200 million in New York. ``That was more than the arb community could absorb.''
The spread, representing the potential profit to traders who buy Merrill and sell Bank of America short, will probably narrow to 20 percent in the coming days, Orrico said.
The acquisition of New York-based Merrill, valued at $50 billion when it was announced, fell to about $40 billion yesterday because of a decline in Charlotte, North Carolina-based Bank of America's shares.
To contact the reporter on this story: Zachary R. Mider in New York at zmider1@bloomberg.net
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