Entrust, Inc. Thomas Bravo Merger

Today, Thomas Bravo, Inc, a private equity firm based out of Chicago, offered to acquire Entrust Inc. for $1.85/share in cash. Pursuant to the merger agreement, Entrust is allowed to solicit potential suitors over the next 30 days. In my opinion, the cash consideration is very low, a situation which could potentially cause a bidding war between interested parties (if there are any). Nonetheless, Thomas Bravo has demonstrated is capacity to pay through a combination of equity and debt commitments. I suspect the equity commitment will be internally funded by Thomas Bravo (the company recently raised approximately $800M). Thomas Bravo, should also have relatively little problems integrating the business given that the company specializes in acquiring technology based companies. Therefore, should the deal be approved, the close should go rather smoothly (absent shareholder litigation). A long/short hedge fund based out of Connecticut, however, owns a large stake in Entrust, which may complicate approval of the merger. The transaction should close relatively quickly given that it is an all cash deal (i.e. no registration statement must be filed for the issuance of securities). Moreover, shareholder approval is only required by Entrust. Consequently, the transaction should close in about 1-2 months. Downside risk is around $0.20 (stock traded around $1.60 pre-announcement). The stock currently trades for $1.80. Therefore, assuming an 85%-90% chance of success, the RAAR is approximately 4.22%-8.45%, which represents a significant premium to 3-month T-Bills. I will await the filing of Form 8-K and the Definitive Proxy.