FORTIVE - AIMC Exchange offer FTV - AIMC Exchange offer
September 05, 2018 - 9:00am EST by
2018 2019
Price: 83.00 EPS 0 0
Shares Out. (in M): 349 P/E 0 0
Market Cap (in $M): 29,000 P/FCF 0 0
Net Debt (in $M): 0 EBIT 0 0
TEV (in $M): 0 TEV/EBIT 0 0

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  • odd lot


This is an odd-lot priority exchange offer idea with expected value of 600-700$ with an investment of ~8k$ in a few weeks. It is not scaleable unless you manage multiple accounts (each person can only participate once). It is very similar to the Lockheed Martin - Leidos Reverse Morris Trust deal that was posted by danconia17 in Aug '16. Main difference is :

  • Pro-forma upside in % terms is smaller: 11% LMT-LDOS vs 7.5% here 
  • Absolute upside 4X smaller 

Document SEC Filing of Exchange Offer


  1. Buy 99 shares of Fortive (FTV) - I recommend waiting until* the ratio is known, 21/9
  2. Tender all shares before 26/09/2018 (I recommend using the fully automated corporate action manager of Interactive Brokers)
  3. Receive 230 shares (pro-forma) of Altra (AIMC) in Reverse Morris Trust transaction
  4. Sell after merger is consummated in October

*Until the ratio is published, the upside is capped but the downside is not (negative convexity). After 24/9, both are fixed.

I published the relevant formulas & current pro-forma profit in this Google Sheet. It is possible this sheet will not be updated in its public form. You can copy paste my formulas in your own Google Sheet.


Fortive does a split-off of its automation & specialty business that will be merged with Altra and let's shareholders elect to convert their shares into this Newco. To incentivize enough shareholders to elect this option, some usual upside is baked into the conversion ratio of the share for share exchange. Specifically, the exchange offer lets Fortive shareholders convert into Newco with a 8% discount to the price Altra is currently trading at (discounting this transaction already). 8% discount is equivalent to 8.7% upside. Usually, this means the offer is oversubscribed. In this case, odd-lot holders (holding 99 shares or less) get priority and do not get pro-rated if this is the case.

The definitive exchange ratio will be based on the VWAP prices of 19, 20 and 21st of September. The ratio will be published on 24/9.

There is one catch, the share-for-share exchange ratio is capped at x2.3203. Based on current prices (supposing current prices for Fortive @83.46 and Altra @38.65 remain the same for the 3 VWAP days) this cap is already limiting the pro-forma upside to 7.5%.

What this means is that until the VWAPs are known, there is limited (exchange) upside but unlimited downside. I therefore recommend reevaluating the upside at the 21st of September (I will keep the board posted) and subscribing to the offer before the deadline of 26th of September.

If many arbitrageurs subscribe to the deal, technical selling pressure is possible after the merger is consummated in October. The new shareholders coming from Fortive will represent 54% of Newco and present Altra holders 46%. This means the selling pressure from 54% of Newco have to be weighed against the current free float of Altra to assess the intensity of selling pressure. One good thing in this case is that free float of Altra is almost 100% of current Altra shares outstanding. 


  • Altra shareholders approved the deal recently.
  • VWAP Calculation on 19/9 ; 20/9; 21/9 (Ratio is officially published 24/9)
  • Deadline for tender 26/9 8AM New York Time
I do not hold a position with the issuer such as employment, directorship, or consultancy.
I and/or others I advise do not hold a material investment in the issuer's securities.


  • Fixing of the exchange ratio at EoD 21/9
  • Reverse Morris Trust merger
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