Merger Arbitrage Mondays – February 20, 2017
Merger activity increased last week with five new deals announced and four deals closing. You can find all the active deals listed below in our Merger Arbitrage Tool that automatically updates itself during market hours.
With large gains last week, all three major indexes are near or at all time highs while volatility measured by the VIX is at historical lows. In this environment, it is not surprising to see value-oriented investors turn to strategies like merger arbitrage. The latest 13F filing for Berkshire Hathaway revealed a new position of more than 8 million shares in Monsanto (MON), which is in the process of being acquired by Bayer AG. The deal sports a spread of 17.43% and potential annualized returns of 20.20% if the deal closes by the end of this year. The large spread indicates that the market thinks the risk of the deal falling apart or getting delayed on account of regulatory issues is high but Buffett appears to think otherwise.
Deal Statistics:
| Total Number of Deals Closed in 2017 | 22 |
| Total Number of Deals Not Completed in 2017 | 2 |
| Total Number of Pending Deals |
| Cash Deals | 52 |
| Stock Deals | 23 |
| Stock & Cash Deals | 11 |
| Special Conditions | 8 |
| Total Number of Pending Deals | 94 |
| Total Deal Size | $632.08468 billion |
New Deals:
- The acquisition of ZELTIQ Aesthetics (ZLTQ) by Allergan (AGN) for $2.475 billion or $56.50 per share in cash.
- The acquisition of GigPeak (GIG) by Integrated Device Technology (IDTI) for $250 million or $3.08 per share in cash.
- The acquisition of Fortress Investment Group (FIG) by SoftBank Group for $3.3 billion or $8.08 per share in cash. (link to original SEC)
- The acquisition of Cynosure (CYNO) by Hologic (HOLX) for $1.44 billion or $66.00 per share in cash.
- The acquisition of LMI Aerospace (LMIA) by Sonaca Group for $381.47 million or $14.00 per share in cash.
Deal Updates:
- On February 14, 2017, Aetna (AET) and Humana (HUM) decided to call off a $34 billion deal to combine the two major health insurers after a federal judge, citing antitrust concerns, shot down the deal.
- On February 14, 2017, InterOil Corporation (IOC) announced that shareholders overwhelmingly approved the transaction with Exxon Mobil Corporation (XOM) at the Special Meeting.
- On February 15, 2017, Time Warner (TWX) shareholders voted in unanimous favor of the company’s proposed $85 billion merger with AT&T (T).
- On February 16, 2017, Enbridge (ENB) and Spectra Energy (SE) announced that the U.S. Federal Trade Commission (FTC) has cleared the previously announced proposed combination of the two companies.
- On February 16, 2017, Columbia Pipeline Group and Columbia Pipeline Partners (CPPL) announced that at the reconvened special meeting of CPPL common unitholders held on February 16, 2017, CPPL unitholders voted to approve the previously announced merger of CPPL and a wholly owned subsidiary of CPG, pursuant to the Agreement and Plan of Merger dated November 1, 2016, between CPPL, CPG and certain other related parties thereto. The merger is expected to be completed on February 17, 2017. We have changed the closing date for this deal to February 17, 2017.
- On February 16, 2017, Vascular Solutions (VASC) announced that at the Special Meeting of Shareholders, Vascular Solutions shareholders voted to approve the company’s proposed acquisition by Teleflex Incorporated (TFX). The transaction is expected to close on February 17, 2017, subject to customary closing conditions. We have changed the closing date for this deal to February 17, 2017.
- On February 17, 2017, Universal American (UAM) announced that during a special stockholder meeting, its stockholders voted to approve the adoption of the previously announced merger agreement, dated as of November 17, 2016, providing for the acquisition of Universal American by WellCare Health Plans (WCG).
- On February 17, 2017, First Bancorp (FBNC), the parent company of First Bank, reported that it has received notification from the Federal Reserve Bank of Richmond that the Company’s merger application to acquire Carolina Bank Holdings (CLBH) has been approved.
Closed Deals:
- The acquisition of ARIAD Pharmaceuticals (ARIA) by Takeda Pharmaceutical Company Limited on February 16, 2017. It took 38 days for this deal to be completed.
- The acquisition of Blue Nile (NILE) by Bain Capital Private Equity and Bow Street on February 17, 2017. It took 102 days for this deal to be completed.
- The acquisition of Columbia Pipeline Partners (CPPL) by Columbia Pipeline Group on February 17, 2017. It took 108 days for this deal to be completed.
- The acquisition of Vascular Solutions (VASC) by Teleflex Incorporated (TFX) on February 17, 2017. It took 77 days for this deal to be completed.
Top 10 deals with largest spreads:
Closing
Price |
|---|
| CAB | 10/03/2016 | Bass Pro Shops (N/A) | $65.50 | $45.12 | 06/30/2017 | 45.17% | 126.82% |
| ALR | 02/01/2016 | Abbott Laboratories (ABT) | $56.00 | $40.22 | 03/31/2017 | 39.23% | 367.19% |
| GNW | 10/23/2016 | China Oceanwide Holdings Group Co., Ltd. (N/A) | $5.43 | $3.98 | 06/30/2017 | 36.43% | 102.29% |
| LSCC | 11/03/2016 | Canyon Bridge Capital Partners, Inc. (N/A) | $8.30 | $6.89 | 03/31/2017 | 20.46% | 191.53% |
| MON | 09/14/2016 | Bayer AG (BAYRY) | $128.00 | $109.00 | 12/31/2017 | 17.43% | 20.26% |
| TSL | 08/01/2016 | Investor consortium comprising Mr. Gao and other entities. (N/A) | $11.60 | $10.21 | 03/31/2017 | 13.59% | 127.20% |
| WR | 05/31/2016 | Great Plains Energy Incorporated (GXP) | $60.00 | $53.05 | 06/30/2017 | 13.10% | 36.78% |
| SYT | 02/03/2016 | ChemChina (N/A) | $96.01 | $85.36 | 04/15/2017 | 12.48% | 84.33% |
| MBVT | 10/24/2016 | Community Bank System Inc. (CBU) | $57.83 | $51.85 | 06/30/2017 | 11.53% | 32.37% |
| TWX | 10/22/2016 | AT&T, Inc. (T) | $107.50 | $96.48 | 12/31/2017 | 11.42% | 13.28% |
List of all pending deals:
The list of all pending deals is only available to InsideArbitrage Premium and Plus members.
Disclaimer: I hold positions in WhiteWave Foods (WWAV), Rite Aid (RAD), Syngenta (SYT), InterOil Corporation (IOC), Valspar (VAL), Trina Solar (TSL) and Fortress Investment Group (FIG). 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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