Merger Whispers, Suspicious Trades and Lies

The boom in corporate mergers is creating concern that illicit trading ahead of deal announcements is becoming a systemic problem.

An analysis of the nation’s biggest mergers over the last 12 months indicates that the securities of 41 percent of the companies receiving buyout bids showed abnormal and suspicious trading in the days and weeks before those deals became public.

There can be many reasons for unusual trading in advance of a deal, many of them perfectly innocuous. But the study, conducted for The New York Times by Measuredmarkets Inc., an analytical research firm in Toronto, identified companies from a wide range of industries whose pre-merger trading activity was not easily explained by corporate announcements or mentions in the media.

Among the companies identified as having abnormal trading activity were Amegy Bancorp, the subject of a $1.7 billion takeover announced last September by Zions Bancorp, the large Utah bank; CarrAmerica Realty, a real estate investment trust acquired for $5.6 billion by the private investment company Blackstone Group after a March announcement, and Dex Media, a directory publisher whose $9.5 billion purchase by the R. H. Donnelley Corporation was disclosed in October.

http://dealbook.blogs.nytimes.com/?p=6762