Merger Arbitrage Mondays – November 6, 2017

Merger activity remained unchanged last week with seven new deals announced and five pending deals closing. You can find all the active deals listed below in our Merger Arbitrage Tool (MAT) that automatically updates itself during market hours.

The announcement by Broadcom (AVGO) last week that it intends to move its headquarters to the U.S. from Singapore, caused Brocade’s stock to move up and the spread that was as wide as 9.54% last week immediately narrowed to within 1% of the deal price. The market felt that this removed the final regulatory obstacle for this deal to close as CFIUS approval was much more likely in light of this announcement. Instead of waiting for the last 1%, I closed half my position after this move.

The next day, I placed a limit order to sell the other half but yet another unexpected event caused the stock of Brocade (BRCD) to drop suddenly. As discussed in our Deals in the Works section, Dow Jones was reporting that Broadcom might make a bid for Qualcomm (QCOM). This news caused both Brocade (BRCD) and NXP Semiconductors (NXPI) to drop, as such a deal could put the acquisition of NXPI by Qualcomm at risk. This may turn out to be nothing more than a rumor, but if a deal is announced, it will be interesting to see how all these situations will play out because getting regulatory approval for these plethora of deals will be challenging.

There were four new deals announced in the Deals in the Works section.

Deal Statistics:

Total Number of Deals Closed in 2017 189
Total Number of Deals Not Completed in 2017 11
Total Number of Pending Deals
Cash Deals 40
Stock Deals 20
Stock & Cash Deals 7
Special Conditions 10
Total Number of Pending Deals 77
Total Deal Size $946.05 billion

New Deals:

  1. The acquisition of Capella Education Company (CPLA) by Strayer Education (STRA) for $820.96 million in an all stock deal. Under the terms of the agreement, Capella shareholders will receive 0.875 Strayer shares for each Capella share.
  2. The acquisition of CalAtlantic Group (CAA) by Lennar Corporation (LEN) for $9.3 billion in an all stock deal. Under the terms of the merger agreement, each share of CalAtlantic stock will be converted into the right to receive 0.885 shares of Lennar Class A common stock.
  3. The acquisition of Advanced Accelerator Applications (AAAP) by Novartis AG (NVS) for $3.9 billion or $82.00 per ADS (each representing 2 ordinary shares).
  4. The acquisition of Dynegy (DYN) by Vistra Energy (VST) for $12.3 billion in an all stock deal. Under the terms of the agreement, Dynegy shareholders will receive 0.652 shares of Vistra Energy common stock for each share of Dynegy common stock they own.
  5. The acquisition of Southcross Energy Partners (SXE) by American Midstream Partners (AMID) for $815 million in an all stock deal. Under the terms of the agreement, public unitholders of SXE will receive 0.160 AMID common units for each SXE common unit in a unit-for-unit merger.
  6. The acquisition of Clifton Bancorp (CSBK) by Kearny Financial (KRNY) for $408 million in an all stock deal. Under the terms of the agreement, each outstanding share of CSBK common stock will be exchanged for 1.191 shares of KRNY common stock.
  7. The acquisition of Ocera Therapeutics (OCRX) by Mallinckrodt Public Limited Company (MNK) for $42 million. Under the terms of the agreement, shareholders of Ocera Therapeutics will receive $1.52 per share in cash, plus one Contingent Value Right to receive one or more payments in cash of up to $2.58 per share (up to approximately $75 million) based on the successful completion of certain development and sales milestones.

Deal Updates:

  1. On November 2, 2017, Broadcom Limited (AVGO) announced that it intends to initiate a redomiciliation process to change the parent company of the Broadcom corporate group from a Singapore company to a U.S. corporation.
  2. On November 3, 2017, Sinovac Biotech (SVA) announced that on November 1, 2017, the Company received a delisting determination letter from the Staff of the Listing Qualifications Department of The Nasdaq Stock Market related to the delisting of the Company’s shares.
  3. On November 3, 2017, Four state attorneys general urged the Federal Communications Commission to rejectSinclair Broadcast Group’s (SBGI) proposed $3.9 billion acquisition of Tribune Media (TRCO), marking the latest hurdle for the controversial tie-up.
  4. November 4, 2017: AT&T’s (T) late-stage talks with U.S. officials over the company’s $85.4 billion takeover of Time Warner (TWXare dragging on as the Justice Department’s new antitrust chief takes a hands-on role in the review.

Closed Deals:

  1. The acquisition of Western Refining Logistics (WNRL) by Andeavor Logistics (ANDX) on October 30, 2017. It took 77 days for this deal to be completed.
  2. The acquisition of First South Bancorp (FSBK) by Carolina Financial Corporation (CARO) on November 1, 2017. It took 142 days for this deal to be completed.
  3. The acquisition of Pacific Continental Corporation (PCBK) by Columbia Banking System (COLB) on November 1, 2017. It took 296 days for this deal to be completed.
  4. The acquisition of Level 3 Communications (LVLT) by CenturyLink (CTL) on November 1, 2017. It took 366 days for this deal to be completed.
  5. The acquisition of Dominion Diamond Corporation (DDC) by The Washington Companies on November 1, 2017. It took 107 days for this deal to be completed.

Top 10 deals with largest spreads:

Symbol Announced
Date
Acquiring
Company
Closing
Price
Last
Price
Closing
Date
Profit Annualized
Profit
GNW 10/23/2016 China Oceanwide Holdings Group Co., Ltd. (N/A) $5.43 $3.43 12/31/2017 58.31% 386.96%
MGI 01/26/2017 Ant Financial Services Group (N/A) $18.00 $14.54 12/31/2017 23.80% 157.92%
CBMX 07/31/2017 Invitae Corporation (NVTA) $8.33 $7.05 12/31/2017 18.16% 120.49%
TWX 10/22/2016 AT&T, Inc. (T) $107.50 $93.28 12/31/2017 15.24% 101.17%
SNI 07/31/2017 Discovery Communications, Inc. (DISCK) $90.00 $79.61 03/31/2018 13.05% 32.85%
NXTM 08/07/2017 Fresenius Medical Care (N/A) $30.00 $26.65 06/30/2018 12.57% 19.44%
YUME 09/05/2017 RhythmOne plc (RTHM.L) $4.25 $3.86 03/31/2018 10.08% 25.38%
SXE 11/01/2017 American Midstream Partners, LP (AMID) $2.12 $1.93 06/30/2018 9.84% 15.23%
MON 09/14/2016 Bayer AG (BAYRY) $128.00 $119.87 01/31/2018 6.78% 28.79%
GLBL 03/07/2017 Brookfield Asset Management Inc. (BAM) $5.10 $4.80 12/31/2017 6.25% 41.48%

List of all pending deals:

  Symbol Announced
Date
Acquiring
Company
Deal
Type
Closing
Value
Closing
Price
Last
Price
Volume Closing
Date
Profit Annu.
Profit
+ GNW 10/23/2016 China Oceanwide Holdings Group Co., Ltd. (N/A) All Cash $2.7 billion $5.43 $3.43 2,731,052 12/31/2017 58.31% 386.96%
+ MGI 01/26/2017 Ant Financial Services Group (N/A) All Cash $1.2 billion $18.00 $14.54 1,059,256 12/31/2017 23.80% 157.92%
+ CBMX 07/31/2017 Invitae Corporation (NVTA) Special Conditions $20.22 million $8.33 $7.05 35,515 12/31/2017 18.16% 120.49%
+ TWX 10/22/2016 AT&T, Inc. (T) Special Conditions $108.7 billion $107.50 $93.28 14,766,031 12/31/2017 15.24% 101.17%
+ SNI 07/31/2017 Discovery Communications, Inc. (DISCK) Special Conditions $14.6 billion $90.00 $79.61 1,742,596 03/31/2018 13.05% 32.85%
+ NXTM 08/07/2017 Fresenius Medical Care (N/A) All Cash $1.62 billion $30.00 $26.65 351,394 06/30/2018 12.57% 19.44%
+ YUME 09/05/2017 RhythmOne plc (RTHM.L) Cash Plus Stock $102.36 million $4.25 $3.86 151,258 03/31/2018 10.08% 25.38%
+ SXE 11/01/2017 American Midstream Partners, LP (AMID) All Stock $815 million $2.12 $1.93 136,039 06/30/2018 9.84% 15.23%
+ MON 09/14/2016 Bayer AG (BAYRY) All Cash $63.5 billion $128.00 $119.87 2,332,675 01/31/2018 6.78% 28.79%
+ GLBL 03/07/2017 Brookfield Asset Management Inc. (BAM) All Cash $1.3 billion $5.10 $4.80 52,076 12/31/2017 6.25% 41.48%
+ BRCD 11/02/2016 Broadcom Limited (AVGO) All Cash $5.5 billion $12.75 $12.25 28,935,845 12/15/2017 4.08% 38.20%
+ XCRA 04/10/2017 an affiliate of Sino IC Capital and Unic Capital Management (N/A) All Cash $439.97 million $10.25 $9.86 211,038 12/31/2017 3.96% 26.25%
+ TRCO 05/08/2017 Sinclair Broadcast Group, Inc. (SBGI) Cash Plus Stock $6.6 billion $41.90 $40.55 498,608 12/31/2017 3.33% 22.09%
+ ANCB 04/11/2017 Washington Federal, Inc. (WAFD) Special Conditions $63.9 million $25.75 $24.95 6,610 06/30/2018 3.21% 4.96%
+ WGL 01/25/2017 AltaGas Ltd. (N/A) All Cash $6.4 billion $88.25 $85.54 145,691 06/30/2018 3.17% 4.90%
+ NEWS 10/17/2017 First Eagle Investment Management (N/A) Special Conditions $3.4 billion $12.44 $12.06 357,740 12/31/2017 3.15% 20.91%
+ COL 09/04/2017 United Technologies Corp. (UTX) Special Conditions $30 billion $140.00 $135.93 1,123,305 09/30/2018 2.99% 3.33%
+ FIG 02/14/2017 SoftBank Group Corp. (SFTBY) All Cash $3.3 billion $8.08 $7.87 1,249,093 12/31/2017 2.67% 17.71%
+ AKRX 04/24/2017 Fresenius Kabi (N/A) All Cash $4.75 billion $34.00 $33.15 1,502,216 03/31/2018 2.56% 6.45%
+ HCOM 07/10/2017 Cincinnati Bell (CBB) Cash Plus Stock $650 million $31.07 $30.32 17,770 12/31/2018 2.47% 2.15%
+ AVA 07/19/2017 Hydro One Limited (N/A) All Cash $5.3 billion $53.00 $51.86 306,884 12/31/2018 2.20% 1.91%
+ STRP 05/11/2017 Verizon Communications Inc. (VZ) Special Conditions $3.1 billion $184.00 $180.42 44,416 03/15/2018 1.98% 5.61%
+ BYBK 09/27/2017 Old Line Bancshares, Inc. (OLBK) All Stock $128.6 million $12.08 $11.85 548 06/30/2018 1.94% 3.01%
+ CPN 08/18/2017 Energy Capital Partners (N/A) All Cash $17.3 billion $15.25 $14.98 4,898,678 03/31/2018 1.80% 4.54%
+ DYN 10/30/2017 Vistra Energy Corp. (VST) All Stock $12.3 billion $12.54 $12.37 8,507,206 06/30/2018 1.36% 2.10%
+ RT 10/16/2017 NRD Capital (N/A) All Cash $335 million $2.40 $2.37 435,363 03/31/2018 1.27% 3.19%
+ AAAP 10/30/2017 Novartis AG (NVS) All Cash $3.9 billion $82.00 $80.99 700,344 03/31/2018 1.25% 3.14%
+ SBCP 08/14/2017 CenterState Banks, Inc. (CSFL) All Stock $176.7 million $23.70 $23.41 8,862 03/31/2018 1.24% 3.13%
+ ABCO 08/29/2017 Optum and Vista Equity Partners (N/A) Special Conditions $2.66 billion $54.29 $53.625 776,365 03/31/2018 1.24% 3.12%
+ OA 09/18/2017 Northrop Grumman Corporation (NOC) All Cash $9.2 billion $134.50 $132.87 626,213 06/30/2018 1.23% 1.90%
+ BKMU 07/20/2017 Associated Banc-Corp (ASB) All Stock $482 million $10.61 $10.50 56,588 03/31/2018 1.08% 2.72%
+ SSNI 09/18/2017 Itron, Inc. (ITRI) All Cash $712 million $16.25 $16.09 572,451 03/31/2018 0.99% 2.50%
+ SPA 07/07/2017 Ultra Electronics Holdings (N/A) All Cash $308.13 million $23.50 $23.29 22,934 01/08/2018 0.90% 5.22%
+ BCR 04/23/2017 Becton, Dickinson and Company (BDX) Cash Plus Stock $24 billion $336.86 $333.86 620,597 11/30/2017 0.90% 13.68%
+ PBNC 04/27/2017 TowneBank (TOWN) All Stock $323.7 million $57.96 $57.46 1,641 12/31/2017 0.87% 5.77%
+ ENZY 10/29/2017 Frutarom (N/A) All Cash $156.88 million $11.90 $11.80 189,654 03/31/2018 0.85% 2.13%
+ RIC 09/11/2017 Alamos Gold Inc. (AGI) All Stock $455.53 million $8.82 $8.75 141,685 11/15/2017 0.83% 33.58%
+ CSBK 11/02/2017 Kearny Financial Corp. (KRNY) All Stock $408 million $17.63 $17.49 203,940 04/15/2018 0.78% 1.78%
+ CBF 05/04/2017 First Horizon National Corp. (FHN) Cash Plus Stock $2.2 billion $41.07 $40.80 344,752 12/31/2017 0.67% 4.47%
+ PLPM 10/26/2017 Fintrax Group (N/A) All Cash $184.93 million $4.50 $4.47 461,325 12/31/2017 0.67% 4.45%
+ NMRX 08/02/2017 Sierra Wireless, Inc. (SWIR) All Stock $107 million $3.94 $3.92 13,826 12/31/2017 0.56% 3.72%
+ CAA 10/30/2017 Lennar Corporation (LEN) All Stock $9.3 billion $48.34 $48.09 4,186,134 03/31/2018 0.52% 1.30%
+ FGL 05/24/2017 CF Corporation (CFCO) All Cash $1.835 billion $31.10 $30.95 634,839 12/31/2017 0.48% 3.22%
+ SNBC 06/30/2017 OceanFirst Financial Corp. (OCFC) Cash Plus Stock $640.73 million $25.07 $24.95 9,232 01/31/2018 0.47% 1.99%
+ OME 10/06/2017 Cooke Inc. (N/A) All Cash $520.88 $22.00 $21.90 327,708 01/31/2018 0.46% 1.94%
+ VWR 05/05/2017 Avantor (N/A) All Cash $6.4 billion $33.25 $33.10 460,629 12/31/2017 0.45% 3.01%
+ DMTX 10/03/2017 Ultragenyx Pharmaceutical Inc. (RARE) All Cash $151 million $6.00 $5.975 17,643 12/31/2017 0.42% 2.78%
+ WFBI 05/16/2017 Sandy Spring Bancorp, Inc. (SASR) All Stock $489 million $35.12 $34.99 4,251 12/31/2017 0.38% 2.51%
+ MSFG 07/25/2017 First Financial Bancorp. (FFBC) All Stock $1 billion $37.81 $37.68 21,758 03/31/2018 0.34% 0.86%
+ PMC 08/03/2017 KKR & Co. L.P. Unit (KKR) All Cash $1.39 billion $29.25 $29.15 198,762 05/01/2018 0.34% 0.71%
+ XBKS 05/22/2017 Union Bankshares Corporation (UBSH) All Stock $701.2 million $32.44 $32.33 21,110 01/15/2018 0.34% 1.77%
+ LMOS 02/20/2017 EQT Infrastructure investment strategy (N/A) All Cash $950 million $18.00 $17.94 81,633 11/07/2017 0.33% 122.07%
+ CPLA 10/30/2017 Strayer Education, Inc. (STRA) All Stock $820.96 million $82.16 $81.90 358,680 09/30/2018 0.32% 0.36%
+ TESO 08/14/2017 Nabors Industries Ltd. (NBR) All Stock $157.23 million $4.01 $4.00 605,190 12/31/2017 0.30% 1.99%
+ ONVI 10/05/2017 Project Diamond Intermediate Holdings and Deltek (N/A) All Cash $70 million $9.00 $8.975 908 12/31/2017 0.28% 1.85%
+ RICE 06/19/2017 EQT Corporation (EQT) Cash Plus Stock $8.2 billion $28.53 $28.45 7,537,599 12/31/2017 0.28% 1.83%
+ SNAK 10/26/2017 Utz Quality Foods, LLC (N/A) All Cash $165 million $4.00 $3.99 158,513 12/31/2017 0.25% 1.66%
+ BSF 08/22/2017 Arvest Bank (N/A) All Cash $391 million $10.28 $10.26 7,675 03/31/2018 0.19% 0.49%
+ SFR 08/10/2017 Invitation Homes Inc. (INVH) All Stock $7.36 billion $36.86 $36.80 1,830,933 12/31/2017 0.17% 1.15%
+ BSFT 10/23/2017 Cisco (CSCO) All Cash $1.9 billion $55.00 $54.95 1,405,984 03/31/2018 0.09% 0.23%
+ EXA 09/28/2017 Dassault Syst�mes (N/A) All Cash $400 million $24.25 $24.24 91,737 12/31/2017 0.04% 0.27%
+ RATE 07/03/2017 Red Ventures (N/A) All Cash $1.4 billion $14.00 $14.00 1,167,527 12/31/2017 0.00% 0.00%
+ SNC 07/26/2017 Markel Corporation (MKL) All Cash $919 million $21.00 $21.00 155,548 12/31/2017 0.00% 0.00%
+ PSTB 04/27/2017 South State Corporation (SSB) All Stock $690.8 million $12.58 $12.59 45,320 12/31/2017 -0.09% -0.58%
+ RBPAA 01/30/2017 Bryn Mawr Bank Corporation (BMTC) All Stock $127.7 million $4.49 $4.50 6,767 12/31/2017 -0.12% -0.79%
+ CCC 09/21/2017 Kuraray (N/A) All Cash $1.3 billion $21.50 $21.55 451,171 12/31/2017 -0.23% -1.54%
+ BOBE 09/19/2017 Post Holdings, Inc. (POST) All Cash $1.53 billion $77.00 $77.27 174,362 03/31/2018 -0.35% -0.88%
+ HSNI 07/06/2017 Liberty Interactive Corporation (QVCA) All Stock $2.6 billion $37.04 $37.20 212,163 12/31/2017 -0.42% -2.81%
+ EXAC 10/23/2017 TPG Capital (N/A) All Cash $625 million $42.00 $42.20 190,925 03/31/2018 -0.47% -1.19%
+ DEL 10/23/2017 Potlatch Corporation (PCH) All Stock $1.18 billion $93.33 $94.10 153,256 06/30/2018 -0.82% -1.27%
+ IXYS 08/28/2017 Littelfuse, Inc. (LFUS) All Cash $655 million $23.00 $23.20 180,010 03/31/2018 -0.86% -2.17%
+ ARCX 08/29/2017 Zenith (N/A) All Cash $632.96 million $16.50 $16.75 63,007 01/31/2018 -1.49% -6.33%
+ GIMO 10/26/2017 Elliott Management (N/A) All Cash $1.6 billion $38.50 $39.55 1,593,038 03/31/2018 -2.65% -6.68%
+ SVA 06/26/2017 Sinovac Limited and Sinovac Amalgamation Sub Limited (N/A) All Cash $437.59 million $7.00 $7.25 200,828 12/31/2017 -3.45% -22.88%
+ NXPI 10/27/2016 QUALCOMM Incorporated (QCOM) All Cash $38 billion $110.00 $115.02 25,602,976 12/31/2017 -4.36% -28.96%
+ OCRX 11/02/2017 Mallinckrodt Public Limited Company (MNK) Special Conditions $42 million $1.52 $1.69 2,014,924 12/31/2017 -10.06% -66.76%
+ GNCMA 04/04/2017 Liberty Ventures (LVNTA) Special Conditions $2.68 billion $32.50 $41.03 90,886 12/31/2017 -20.79% -137.97%

Disclaimer: I hold positions in Fortress Investment Group (FIG), CombiMatrix (CBMX), Brocade Communication Systems (BRCD) and NewStar Financial (NEWS). 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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