Merger Arbitrage Mondays – September 26, 2016
Merger activity decreased last week with six new deals announced and four deals closing. We had a new deal with the highest premium I have ever seen since we started tracking this data. The acquisition of Tobira Therapeutics (TBRA) by Allergan (AGN) discussed below led to a jump of 721% in the stock of Tobira because just the cash portion of the deal at $28.35 was several times higher than the Tobira’s closing price of $4.74 the previous day. The deal also includes a Contingent Value Right (CVR) that could pay up to $49.84 per share if certain conditions are met. Given the complexity of the deal, we have entered it as a “Special Conditions” deal and will publish a follow-up article explaining how we came up with our rough estimate of $40.89 per share for the deal.
The acquisition of Hutchinson Technology (HTCH) by TDK appears to be nearing completion and you can read a blow-by-blow account of my experience with this deal in a new article called A Wild Ride With Hutchinson Technology And The Case For Diversified Portfolios that is a follow-up to our earlier article Collecting Pennies in Front of a Bulldozer.
You can find all the active deals listed below in our Merger Arbitrage Tool that automatically updates itself during market hours.
Deal Statistics:
| Total Number of Deals Closed in 2016 | 168 |
| Total Number of Deals Not Completed in 2016 | 12 |
| Total Number of Pending Deals |
| Cash Deals | 59 |
| Stock Deals | 17 |
| Stock & Cash Deals | 10 |
| Special Conditions | 7 |
| Total Number of Pending Deals | 93 |
| Total Deal Size | $1142.79 billion |
New Deals:
- The acquisition of Isle of Capri Casinos (ISLE) by Eldorado Resorts (ERI) for $1.7 billion in a cash or stock deal. Under the terms of the agreement, Eldorado will acquire all of the outstanding shares of Isle of Capri for $23.00 in cash or 1.638 shares of Eldorado common stock. Elections are subject to proration such that the outstanding shares of Isle common stock will be exchanged for aggregate consideration comprised of 58% cash and 42% Eldorado common stock. We are treating this deal as a cash deal.
- The acquisition of Infoblox (BLOX) by Vista Equity Partners for $1.6 billion or $26.50 per share in cash.
- The acquisition of DTS (DTSI) by Tessera Technologies (TSRA) for $850 million or $42.50 per share in cash.
- The acquisition of WCI Communities (WCIC) by Lennar Corporation (LEN) for $809 million in a cash plus stock deal. Under the terms of the agreement, upon closing, WCI stockholders would receive $11.75 in cash and a fraction of a share of Lennar Class A common stock with a value of $11.75, based on the volume weighted average price of Lennar’s Class A common stock on the New York Stock Exchange over the 10 trading days preceding the closing of the merger. The receipt of Lennar stock by WCI stockholders as a result of the merger is expected to be tax free. However, Lennar has the option of increasing the cash portion of the merger consideration, including paying the full $23.50 in cash. We are treating this as a cash deal.
- The acquisition of Tobira Therapeutics (TBRA) by Allergan (AGN) for $1.695 billion. Under the terms of the merger agreement, a subsidiary of Allergan will commence a cash tender offer to purchase all of the outstanding shares of Tobira common stock for $28.35 per share, plus one Contingent Value Right (CVR) to receive up to $49.84 per share in future payments based on the successful completion of certain development, regulatory and commercial milestones. We are entering this deal as a “Special Conditions” deal and our estimate of $40.89 per share is a very rough estimate. The estimate is based on a model we built to calculate the present value of the CVR based on probabilities of various events occurring over a period of 12 years.
- The acquisition of Chemtura Corporation (CHMT) by LANXESS AG for $2.5 billion or $33.50 per share in cash.
Deal Updates:
- On September 21, 2016, Anthem (ANTM) and Cigna (CI) accused one another of violating the terms of their merger agreement, according to a legal filing by the Justice Department, which is suing to block the health-insurance deal on antitrust grounds.
- On September 22, 2016, Hutchinson Technology Incorporated (HTCH) announced that the U.S. Federal Trade Commission has granted early termination of the waiting period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976. The merger is currently expected to close no later than October 5, 2016, and remains subject to other customary closing conditions set forth in the merger agreement.
- On September 23, 2016, Alaska Air Group (ALK) and Virgin America (VA) have agreed to give U.S. antitrust officials more time to review their $2.6 billion deal after the government raised concerns that the combination may undermine competition in some markets.
- On September 23, 2016, Randstad North America announced that its wholly-owned subsidiary, Merlin Global Acquisition has extended its previously announced tender offer for any and all outstanding shares of common stock of Monster Worldwide (MWW), at a price of $3.40 per share in cash, without interest thereon and less any applicable withholding taxes. In order to facilitate completion of the European Commission’s regulatory review, the Offer has been extended and is now scheduled to expire on October 28, 2016, unless further extended.
Closed Deals:
- The acquisition of FEI Company (FEIC) by Thermo Fisher Scientific (TMO) on September 20, 2016. It took 116 days for this deal to be completed.
- The acquisition of Fairchild Semiconductor International (FCS) by ON Semiconductor (ON) on September 20, 2016. It took 307 days for this deal to be completed.
- The acquisition of E-Commerce China Dangdang (DANG) by Dangdang Holding Company Limited and Dangdang Merger Company Limited on September 21, 2016. It took 113 days for this deal to be completed.
- The acquisition of Starwood Hotels & Resorts Worldwide (HOT) by Marriott International (MAR) on September 23, 2016. It took 312 days for this deal to be completed.
Top 10 deals with largest spreads:
Closing
Price |
|---|
| APOL | 02/08/2016 | A consortium of investors including The Vistria Group, LLC, funds affiliated with Apollo Global Management, LLC and and Najafi Companies (N/A) | $10.00 | $7.58 | 12/31/2016 | 31.93% | 121.39% |
| ALR | 02/01/2016 | Abbott Laboratories (ABT) | $56.00 | $43.24 | 12/31/2016 | 29.51% | 112.20% |
| CI | 07/24/2015 | Anthem, Inc. (ANTM) | $168.60 | $131.00 | 03/31/2017 | 28.71% | 56.33% |
| HUM | 07/03/2015 | Aetna Inc. (AET) | $221.84 | $175.55 | 12/31/2016 | 26.37% | 100.26% |
| MON | 09/14/2016 | Bayer AG (BAYRY) | $128.00 | $103.50 | 12/31/2017 | 23.67% | 18.74% |
| CHMT | 09/26/2016 | LANXESS AG (N/A) | $33.50 | $28.18 | 06/30/2017 | 18.88% | 24.88% |
| SCTY | 08/01/2016 | Tesla Motors (TSLA) | $22.82 | $19.24 | 04/30/2017 | 18.60% | 31.44% |
| FGL | 11/09/2015 | Anbang Insurance Group Co., Ltd. (N/A) | $26.80 | $23.20 | 12/31/2016 | 15.52% | 59.00% |
| CVT | 04/18/2016 | affiliates of Vista Equity Partners (N/A) | $36.00 | $31.32 | 09/30/2016 | 14.94% | 1363.51% |
| LXK | 04/19/2016 | consortium of investors led by Apex Technology Co., Ltd. (Apex) and PAG Asia Capital (PAG) (N/A) | $40.50 | $35.99 | 12/31/2016 | 12.53% | 47.64% |
List of all pending deals:
The list of all pending deals is only available to InsideArbitrage Premium and Plus members.
Disclaimer: I hold long positions in Apollo Education (APOL), Monster Worldwide (MWW) and Hutchinson Technology (HTCH). Please do your own due diligence before buying or selling any securities mentioned in this article. We do not warrant the completeness or accuracy of the content or data provided in this article.
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