Question about Buffett "arbitrage"
Reading Buffettology and it talks about how Buffett would invest in a company that was going to be acquired for a higher price so that he could pocket the difference between the acquisition price and the market price. However, it says to be sure of this, he always waited till AFTER the acquisition was stated. I was wondering if someone would help me verify the risk involved in this 'arbitrage' investment.
Today Transatlantic turned down Berkshire's offer to buy it for 52 per share because it thought it could solicit a higher offer from others. However, would it be safe to assume that because of this, Transatlantic's shares should be valued at at least 52 dollars per share, and that investing in it at current market price, 48.5, would yield me a profit of AT LEAST 7.2%?