Merger Arbitrage Mondays – April 26, 2010

  • April 25, 2010

The Merger and Acquisition front last week saw three new deals and two deals that closed.

The three new deals include the acquisition of Qwest Communications International(Q) by CenturyTel (CTL) for $5.71 per share in an all stock deal that is expected to close more than a year later. Qwest Communications, a company tainted by insider trading by it’s guilty Ex-CEO Joe Nacchio, inched up just a little following the merger announcement and dropped on Friday on concerns that the deal may face regulatory approval issues and that CenturyTel may have a difficult time integrating this acquisition. The 8.19% spread on this deal is also the largest of the new merger announcements from last week. An arbitrage position that includes buying Qwest and shorting CenturyTel has to take into account the fact that CenturyTel’s dividend yield of 8.4% is larger than Qwest’s 6.1% yield, thereby reducing the spread to 5.89% after taking dividend payments on the short position into account.

The two other new deals include the acquisition of CyberSource (CYBS) by Visa (V) for $26 per share in cash and the acquisition of Cornell Companies (CRN) by The GEO Group (GEO) for a closing price of $27.82. Under the terms of the definitive agreement, stockholders of Cornell will have the option to elect to receive either

  • 1.3 shares of GEO common stock for each share of Cornell common stock or
  • An amount of cash consideration equal to the greater of (i) the fair market value of one share of GEO common stock plus $6.00 or (ii) the fair market value of 1.3 shares of GEO common stock.

The deals that closed were the acquisition of Lodgian (LGN) by LoneStar on April 20, acquisition of Facet Biotech (FACT) by Abbott (ABT) on April 21 and acquisition of Chordiant Software (CHRD) by Pegasystems (PEGA).

Update: The closing price for ADG was originally specified as $6. This was a mistake and the actual closing price is $7.25 as specified in the details section (clicking on the + sign) and in previous blog entries.

SymbolAnno.

Date

Acquiring

Company

Closing

Value

Closing

Price

Last

Price

Closing

Date

ProfitAnnu.

Profit

+ADG1/19/2010Chemring Group Plc$59 million$7.255.825/31/201024.57%256.23%
+AYE2/11/2010FirstEnergy$8.5 billion25.0221.573/31/201115.99%17.43%
+SSE2/23/2010Naugatuck Valley Financial Corp$19.5 million7.256.678/16/20108.70%28.85%
+Q4/22/2010Century Link$10.6 billion5.715.286/30/20118.14%7.01%
+ARD4/4/2010SandRidge Energy Inc.$1.6 billion39.7137.659/30/20105.47%12.97%
+STBK3/18/2010Roma Financial Corp$14.7 million2.522.398/16/20105.44%18.05%
+SWWC3/3/2010Institutional Investors$275 million1110.585/17/20103.97%69.00%
+PINN2/24/2010Investor Group lead by Scotia Waterous (USA)$11 million0.340.335/17/20103.03%52.67%
+SII2/19/2010Schlumberger$7.5 billion50.6349.159/30/20103.01%7.14%
+BNE2/24/2010RR Donnelley$481 million11.511.29/30/20102.68%6.35%
+MAM3/12/2010Emera Inc.$75.7 million454412/31/20102.27%3.39%
+ORCD3/16/2010eMusic$12.77 million2.052.018/16/20101.99%6.60%
+ME4/15/2010Apache$2.7 billion26.5326.039/30/20101.92%4.55%
+RCNI3/5/2010Abry$1.2 billion1514.729/30/20101.90%4.51%
+CRN4/19/2010GeoGroup$685 million27.8227.319/30/20101.87%4.43%
+WEL4/9/2010Halliburton Company$240 million32.959/30/20101.69%4.02%
+DCP4/12/2010Cerberus Capital Management$1.5 billion17.5517.2911/15/20101.50%2.76%
+CYBS4/21/2010Visa Inc.$2.0 billion2625.639/30/20101.44%3.42%
+RISK3/1/2010MSCI$1.55 billion22.9622.717/16/20101.10%5.02%
+RBI3/15/2010affiliate of Oncap Management Partners L.P.13.5513.418/16/101.04%3.46%
+PFWD4/16/2010Oracle Corp.$685 million1716.836/30/20101.01%5.76%
+SKIL2/12/2010consortium of private equity funds$1.2 billion11.2511.155/31/20100.90%9.35%
+MIR4/12/2010RRI Energy In.$1.6 billion11.5411.4412/31/20100.87%1.30%
+MIL3/1/2010Merck$6 billion107106.229/30/20100.73%1.74%
+DCAI4/14/2010U.S. Renal Care$112 million11.2511.215/31/20100.36%3.72%
+NADX4/5/2010GDC Holdings Inc.$100 million1716.956/30/20100.29%1.68%
+BELM3/29/2010Avnet$252 million76.996/30/20100.14%0.82%
+TWLL3/22/2010Intersil Corp.$400 million18.518.485/17/20100.11%1.88%
+WEDC3/30/2010Microsemi Corporation$100 million776/27/20100.00%0.00%
+CXG3/22/2010Consol Energy Inc.$363 million38.2538.265/5/2010-0.03%-1.06%
+PRPX2/17/2010L.B. Foster Co.$112 million11.7111.746/30/2010-0.26%-1.46%
+BWY3/29/2010Madison Dearborn Partners, LLC (MDP)$915 million2020.078/16/2010-0.35%-1.16%
+SMMX4/5/2010Accelrys Inc.$186 million5.665.686/30/2010-0.35%-2.01%
+NGA4/1/2010AZZ Inc.$125.6 million7.57.578/31/2010-0.92%-2.70%
+CFL1/18/2010Tyco International$2.9 billion42.542.936/26/2010-1.00%-6.09%
+ZNT2/18/2010Fairfax Financial Holdings$I.4 billion3838.415/17/2010-1.07%-18.55%
+IUSA3/8/2010CCMP$460 million88.176/30/2010-2.08%-11.87%
+TUTR3/26/2010Thoma Brava$141 million5.65.767/31/2010-2.78%-10.67%
+CKR3/1/2010Thomas H. Lee$928 million11.0512.855/17/2010-14.01%-243.47%
+CCE2/25/2010The Coca-Cola Company$12.3 billion28.2510/1/2010-100.00%-235.48%