Merger Arbitrage Mondays – May 03, 2010

  • May 3, 2010

We saw twice as many Merger and Acquisition announcements last week when compared to the prior week with six new deals announced. One deal closed and CKE scrapped the THL deal to accept Apollo’s takeover bid for $12.55 per share. The deal that closed was the acquisition of Techwell (TWLL) by Intersil Corporation on April 28.

Amongst the newly announced deals, the acquisition of Thomas Weisel Partners Group (TWPG) by Stifel Financial for $7.82 per share was at a very large premium of almost 80% over the previous day’s closing price. The deal for this San Francisco based investment bank is a stock-for-stock merger using a fixed exchange ratio of 0.1364 shares of Stifel common stock for each share of Thomas Weisel Partners common stock.

Another high profile deal was the acquisition of Dollar Thrifty Automotive Group (DTG) by Hertz for $41 per share, a 5.5 percent premium over Friday’s closing price of $38.85, the offer consists of 80% cash and 20% Hertz stock. I am still getting over the sticker shock of having rented a car at the Portland, Oregon airport for nearly $100/day a few weeks ago and this consolidation is probably going to push prices even higher.

It had become abundantly clear that smartphone maker PALM would not survive as an independent company following lackluster sales of the Palm Pre line of phones and rumors of an acquisition finally came to fruit last week when Hewlett-Packard announced the acquisition of Palm (PALM) for $5.7 per share in an all cash deal.

The acquisition of ATS Medical (ATSI) by Medtronic for $4.00 per share in a cash deal, the acquisition of Protection One (PONE) by GTCR for $15.5 per share in a cash deal and the acquisition of WuXi Pharmatech (WX) by Charles River Laboratories in a cash and stock transaction round out the six new deals. WuXi PharmaTech ADS holders will receive $11.25 in cash and $10.00 of Charles River common stock determined by an exchange ratio. This exchange ratio will be determined by dividing $10.00 by the weighted average Charles River common stock closing price as reported on the New York Stock Exchange for the 20-day trading period ending on the second business day prior to closing (Charles River Average Price). However, if the Charles River Average Price is equal to or greater than $43.1726, then the exchange ratio will be fixed at 0.2316, and if the Charles River Average Price is equal to or less than $37.1486, then the exchange ratio will be fixed at 0.2692.

Isn’t it great that you can leave these calculations to us and use the following table to figure out the spreads between the announced closing price and the current price?

 SymbolAnno.
Date
Acquiring
Company
Clo.
Value
Clo.
Price
Last
Price
Clo.
Date
ProfitAnnu.
Profit
+ADG1/19/2010Chemring Group Plc$59 million7.255.345/31/201035.77%466.26%
+AYE2/11/2010FirstEnergy$8.5 billion25.2621.783/31/201115.98%17.78%
+WX4/26/2010Charles River Laboratories$1.6 billion21.2519.212/31/201010.68%16.37%
+Q4/22/2010Century Link$10.6 billion5.685.236/30/20118.60%7.53%
+SSE2/23/2010Naugatuck Valley Financial Corp$19.5 million7.256.768/16/20107.25%25.69%
+ME4/15/2010Apache$2.7 billion25.1423.889/30/20105.28%13.10%
+STBK3/18/2010Roma Financial Corp$14.7 million2.522.48/16/20105.00%17.72%
+SII2/19/2010Schlumberger$7.5 billion49.7547.769/30/20104.17%10.35%
+ARD4/4/2010SandRidge Energy Inc.$1.6 billion38.3836.939/30/20103.93%9.75%
+MAM3/12/2010 $75.7 million4543.500112/31/20103.45%5.29%
+SWWC3/3/2010Institutional Investors$275 million1110.675/17/20103.09%80.63%
+PINN2/24/2010Investor Group lead by Scotia Waterous (USA)$11 million0.340.335/17/20103.03%79.00%
+ORCD3/16/2010eMusic$12.77 million2.051.998/16/20103.02%10.68%
+BNE2/24/2010RR Donnelley$481 million11.511.189/30/20102.86%7.11%
+WEL4/9/2010Halliburton Company$240 million32.939/30/20102.39%5.93%
+RCNI3/5/2010Emera Inc.$1.2 billion1514.699/30/20102.11%5.24%
+DCP4/12/2010Cerberus Capital Management$1.5 billion17.5517.211/15/20102.03%3.87%
+CKR3/1/2010Apollo Management VII$694 million12.5512.345/17/20101.70%44.37%
+CFL1/18/2010Tyco International$2.9 billion42.541.946/26/20101.34%9.20%
+CYBS4/21/2010Visa Inc.$2.0 billion2625.689/30/20101.25%3.09%
+BWY3/29/2010Madison Dearborn Partners, LLC ("MDP")$915 million2019.788/16/20101.11%3.94%
+RBI3/15/2010affiliate of Oncap Management Partners L.P. 13.5513.418/16/101.04%3.70%
+PFWD4/16/2010Oracle Corp.$685 million1716.836/30/20101.01%6.47%
+MIL3/1/2010Merck$6 billion107106.159/30/20100.80%1.99%
+SKIL2/12/2010consortium of private equity funds$1.2 billion11.2511.175/31/20100.72%9.34%
+RISK3/1/2010MSCI$1.55 billion22.5922.447/16/20100.67%3.34%
+ATSI4/29/2010Medtronic$350 million43.989/30/20100.50%1.25%
+ZNT2/18/2010Fairfax Financial Holdings$I.4 billion3837.825/17/20100.48%12.41%
+DCAI4/14/2010U.S. Renal Care$112 million11.2511.215/31/20100.36%4.65%
+WEDC3/30/2010Microsemi Corporation$100 million76.986/27/20100.29%1.94%
+PONE4/26/2010GTCR$828 million15.515.476/30/20100.19%1.24%
+BELM3/29/2010Avnet$252 million76.996/30/20100.14%0.92%
+NADX4/5/2010GDC Holdings Inc.$100 million1716.986/30/20100.12%0.75%
+CRN4/19/2010GeoGroup$685 million27.5327.59/30/20100.11%0.27%
+SMMX4/5/2010Accelrys Inc.$186 million5.455.456/30/20100.00%0.00%
+NGA4/1/2010AZZ Inc.$125.6 million7.57.58/31/20100.00%0.00%
+CXG3/22/2010Consol Energy Inc.$363 million38.2538.275/5/2010-0.05%-9.54%
+IUSA3/8/2010CCMP$460 million88.016/30/2010-0.12%-0.80%
+TWPG4/26/2010Stifel Financial$300 million7.827.856/30/2010-0.38%-2.45%
+TUTR3/26/2010Thoma Brava$141 million5.65.657/31/2010-0.88%-3.67%
+PRPX2/17/2010L.B. Foster Co.$112 million11.7111.826/30/2010-0.93%-5.96%
+MIR4/12/2010RRI Energy In.$1.6 billion11.5411.6612/31/2010-1.03%-1.58%
+PALM4/28/2010Hewlett – Packard$1.2 billion5.75.817/31/2010-1.89%-7.85%
+DTG4/26/2010Hertz$1.2 billion4143.9912/31/2010-6.80%-10.42%
+CCE2/25/2010The Coca-Cola Company$12.3 billion 27.7310/1/2010-100.00%-246.62%