The slump in Pacific Century CyberWorks shares has created a potential money-making opportunity for investors willing to gamble its merger with Cable & Wireless HKT will succeed. CyberWorks - which ended last week at HK$14.50 - would rally sharply if the deal proceeds. Core Pacific-Yamaichi values the merged entity at $22 to $23 a share. 'If it succeeds in merging, the price would jump to around $20 or even higher,' Core Pacific-Yamaichi research director Alex Tang Yee-yuk said. Cautious investors could make smaller gains from the merger by buying into HKT at its current price of $18.35. 'Conservative investors should go for HKT,' Mr Tang said. If the merger failed due to another bidder entering the market, HKT would rise anyway. 'If another bidder emerged, then [HKT's] share prices would certainly go higher,' Mr Tang said. CyberWorks has slumped nearly 45 per cent from its peak of $26.35 in mid-February when the market learnt of its bid for HKT and investors were buying Internet stocks. The weakness of CyberWorks' share price, which fell to $12.95 last Wednesday, sparked concern the merger could be jeopardised. The value of CyberWorks shares is crucial to the deal as the merger is based largely on the exchange of the two companies' paper. HKT shareholders have been offered 1.1 CyberWorks shares or 0.7116 CyberWorks shares and $7.23 in cash for each HKT share. The cash and share offer is worth more than the outright share offer after the share price slump but still values HKT at a 4.37 per cent discount to last week's closing price of $18.35. Some confidence the merger would go ahead appeared to return on Friday as CyberWorks shares jumped 7.8 per cent while HKT's fell 1.6 per cent to $18.35. If the merger fails, HKT's share price holds less downside risk due to its strong recurring earnings from telecommunications. Yet CyberWorks could slump further if the merger fell apart and investors continued to shun Net stocks. 'When the tide goes out all the boats go down regardless of how seaworthy they are,' an analyst at a European brokerage said. The gap between the two companies' share prices could widen as investors flock to safer companies such as HKT if tension flares between the mainland and Taiwan in the run-up to the inauguration of the island's president-elect Chen Shui-bian. There are also concerns in the market about further increases in interest rates in the United States, which could pull stocks down. 'We have a big element of uncertainty in May . . . and HKT may be steadier in terms of price movement,' Mr Tang said. Although there is still a lot of uncertainty, analysts believe the CyberWorks merger was the most likely outcome and the rumoured offer from Rupert Murdoch and Singapore Telecommunications (SingTel) was unlikely. 'The fact that SingTel bowed out so quickly after CyberWorks made their announcement suggests they didn't have the stomach for a contested situation,' said the analyst at the European brokerage. Some analysts said Mr Murdoch's News Corp had yet to show investors it understood how to generate value for shareholders from telecommunications and Internet businesses. CyberWorks can extract the most value from the assets of HKT as its staff are more familiar with the company than any potential rival bidder, according to the analyst. 'They can extract the value on the spot,' he said. Whether investors share such confidence in the CyberWorks bid remains to be seen.