Marvel & Disney Merger

Big news this morning in the entertainment industry. Disney is acquiring Marvel Entertainment for a total of around $4bn in cash and stock. Marvel (MVL) shareholders will get $30 and .745 of Disney (DIS) stock for every share for MVL. Based on this and market inefficiencies, I have made an interesting trade that theoretically is risk free.

At the time of the trade, DIS is trading at 26.51 and MVL at 48.96. I have bought 50 shares of MVL and sold 50 of DIS.

Let us take a look at some math here. If every MVL shareholder is to get $30 + .745 DIS, how much is MVL worth according to these prices? 30 + .745*(26.51) = 49.75
This basically means that there is mispricing in either the DIS or the MVL stock. MVL should be trading at 49.75 or DIS should be at 25.44.

Over time, the market inefficiency will be eliminated (or nearly eliminated) and whether DIS goes down or MVL goes up does not matter to me. If inefficiency is not eliminated, I will get my $30 + .745 DIS which will be worth more than my short sale position and I can walk away with a small profit.

Edit:
After doing further calculations, I realize that I could have made this trade better by trading a better MVL to DIS ratio. As of now, it is obviously a 1:1 ratio. But according to the math below, this ratio should be 50:27

Here is why: If you can buy and sell the correct ratio, you are essentially buying and selling the same thing and should technically not have any cash outlay. Also, the movements in price will be more in sync.

To come up with the ratio, you figure out how much DIS stock you want to sell. I picked 50 arbitrarily. If you sell 50 DIS, you will receive $1325.50. Simply figure out how many MVL you can buy, in terms of DIS. I hope the below calculation will make clearer what I mean.

MVL Stocks to Buy = Cash from selling DIS/(.745*DIS Price + 30)
MVL Stocks to Buy = 1325.50/(.745*26.51+30) = 26.6=27

So, I SHOULD have sold 50 DIS stocks and bought 27 MVL stocks. That really messed up my trade, but I am still making profit looking at current prices ( I did adjust my trade and sold off 20 MVL shares for a small loss).

Of course there is only a profit margin of about 4-5% on this trade. But it is essentially risk free and has very low margin requirements (technically speaking none because MVL = DIS). Can you say arbitrage?