Merger Arbitrage Mondays – May 10, 2010

  • May 9, 2010

Given the turn in the market last week and the fear of sovereign defaults, I expected deal activity to slow down or spreads to increase for existing deals. However we saw the same number of deals last week as in the week prior with 6 new deals announced and one deal that closed. As for the increase in spreads, we saw the spread widen for the acquisition of The Allied Defense Group (ADG) by Chemring. The 40% discount that ADG is trading to the original offer price of $7.25 indicates that the market is assuming that this merger will not succeed in its current form. ADG has once again moved the special meeting of shareholders to approve the Chemring offer to June 1, 2010 after Chemring indicated it needs more time to complete its review of ADG.

The spread in the acquisition of WuXi PharmaTech (WX) by Charles River Labs (CRL) also appeared to increase to 17.4% on no particular news. However the deal of $11.25 in cash plus $10 in Charles River stock was subject to a collar described in the merger announcement as follows “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”. Since the deal has breached the low end of the collar, the total deal price dropped to $19.44 and the spread is only 7.4% now.

The six new deals announced include the acquisition of inVenitv Health (VTIV) by Thomas H. Lee Partners for $26.00 per share in cash, the acquisition of Interactive Data Corporation (IDC) by Investment firms Silver Lake and Warburg Pincus for $33.86 per share in cash, the acquisition of Stanley (SXE) by the CGI Group for $37.50 per share in cash, the acquisition of SenoRx (SENO) by Bard for $11.00 per share in cash, the acquisition of HealthTronics (HTRN) by Endo Pharmaceuticals for $4.85 per share in cash and the acquisition of Continental Airlines (CAL) in an all stock merger with United (UAUA) in which Continental shareholders will receive 1.05 shares of United common stock for each Continental common share they own.

The deal that closed was the acquisition of White Electronic Designs (WEDC) by Microsemi Corporation, which closed on May 03, 2010.

+ADG1/19/2010Chemring Group Plc$59 million7.255.166/30/201040.50%295.68%
+AYE2/11/2010FirstEnergy$8.5 billion23.3919.953/31/201117.24%19.61%
+Q4/22/2010Century Link$10.6 billion5.55.084/21/20118.27%8.85%
+SSE2/23/2010Naugatuck Valley Financial Corp$19.5 million7.256.758/16/20107.41%28.16%
+WX4/26/2010Charles River Laboratories$1.6 billion19.4418.112/31/20107.40%11.70%
+STBK3/18/2010Roma Financial Corp$14.7 million2.522.3748/16/20106.15%23.38%
+SWWC3/3/2010Institutional Investors$275 million1110.465/17/20105.16%269.19%
+SII2/19/2010Schlumberger$7.5 billion43.7941.889/30/20104.56%11.89%
+DCP4/12/2010Cerberus Capital Management$1.5 billion17.5516.811/15/20104.46%8.81%
+BNE2/24/2010RR Donnelley$481 million11.511.019/30/20104.45%11.60%
+RCNI3/5/2010Emera Inc.$1.2 billion1514.379/30/20104.38%11.43%
+CFL1/18/2010Tyco International$2.9 billion42.540.726/26/20104.37%34.69%
+ME4/15/2010Apache$2.7 billion23.7422.759/30/20104.35%11.35%
+VTIV5/6/2010Thomas H. Lee Partners$1.1 billion26259/30/20104.00%10.43%
+ORCD3/16/2010eMusic$12.77 million2.051.98018/16/20103.53%13.42%
+IDC5/4/2010Silver Lake & Warburg Pincus$3.4 billion33.8632.729/30/20103.48%9.08%
+PINN2/24/2010Investor Group lead by Scotia Waterous (USA)$11 million0.340.335/17/20103.03%158.01%
+MAM3/12/2010 $75.7 million4543.7512/31/20102.86%4.51%
+CKR3/1/2010Apollo Management VII$694 million12.5512.215/17/20102.78%145.20%
+WEL4/9/2010Halliburton Company$240 million32.949/30/20102.04%5.32%
+BWY3/29/2010Madison Dearborn Partners, LLC ("MDP")$915 million2019.618/16/20101.99%7.56%
+CYBS4/21/2010Visa Inc.$2.0 billion2625.59/30/20101.96%5.11%
+SXE5/7/2010CGI Group$904 million37.536.799/30/20101.93%5.03%
+ATSI4/29/2010Medtronic$350 million43.939/30/20101.78%4.64%
+PFWD4/16/2010Oracle Corp.$685 million1716.716/30/20101.74%12.67%
+RISK3/1/2010MSCI$1.55 billion22.1921.847/16/20101.60%8.86%
+RBI3/15/2010affiliate of Oncap Management Partners L.P. 13.5513.348/16/101.57%5.99%
+PRPX2/17/2010L.B. Foster Co.$112 million11.7111.566/30/20101.30%9.47%
+TUTR3/26/2010Thoma Brava$141 million5.65.537/31/20101.27%5.70%
+SENO5/5/2010Bard$200 million1110.879/30/20101.20%3.12%
+CRN4/19/2010GeoGroup$685 million26.3426.049/30/20101.15%3.00%
+IUSA3/8/2010CCMP$460 million87.916/30/20101.14%8.31%
+MIL3/1/2010Merck$6 billion107105.819/30/20101.12%2.93%
+SKIL2/12/2010consortium of private equity funds$1.2 billion11.2511.135/31/20101.08%18.74%
+HTRN5/5/2010Endo Pharmaceuticals$223 million4.854.87/31/20101.04%4.69%
+BELM3/29/2010Avnet$252 million76.936/30/20101.01%7.37%
+TWPG4/26/2010Stifel Financial$300 million7.257.186/30/20100.97%7.12%
+CAL5/3/2010United$1.2 billion18.7818.6112/31/20100.91%1.44%
+ARD4/4/2010SandRidge Energy Inc.$1.6 billion32.3632.089/30/20100.87%2.28%
+NGA4/1/2010AZZ Inc.$125.6 million7.57.458/31/20100.67%2.21%
+DCAI4/14/2010U.S. Renal Care$112 million11.2511.185/31/20100.63%10.88%
+ZNT2/18/2010Fairfax Financial Holdings$I.4 billion3837.825/17/20100.48%24.82%
+PONE4/26/2010GTCR$828 million15.515.436/30/20100.45%3.31%
+CXG3/22/2010Consol Energy Inc.$363 million38.2538.135/5/20100.31%-22.97%
+NADX4/5/2010GDC Holdings Inc.$100 million1716.966/30/20100.24%1.72%
+PALM4/28/2010Hewlett – Packard$1.2 billion5.75.77/31/20100.00%0.00%
+SMMX4/5/2010Accelrys Inc.$186 million5.475.536/30/2010-1.08%-7.92%
+MIR4/12/2010RRI Energy In.$1.6 billion10.3810.512/31/2010-1.14%-1.81%
+DTG4/26/2010Hertz$1.2 billion4148.0112/31/2010-14.60%-23.07%
+CCE2/25/2010The Coca-Cola Company$12.3 billion 25.8410/1/2010-100.00-258.87%