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Merger Arbitrage Mondays – August 02, 2010

  • August 1, 2010

Mergers continued to lose steam last week with only two new deals announced. However the number of deals that closed jumped up with six pending deals closing last week.

The Charles River Laboratories (CRL) and Wuxi Pharma Tech (WX) deal fell apart last week following opposition from investors like hedge fund Jana Partners and proxy advisory firms. The New York Times has a good obituary of this troubled deal including links to the letter Jana Partners wrote to Charles River. The fact that Wuxi was trading at pre-merger prices for a few weeks now and the huge spread on the deal indicated market skepticism about the deal closing and the market was right this time.

Rental car company Avis is at war with Hertz to acquire Dollar Thrifty (DTG) with an offer than values DTG at $46.50 when compared to the Hertz (HTZ) deal that values DTG under $41. Dollar Thrifty closed at $49.87 on Friday, reflecting optimism that the deal value is likely to head higher before one of these companies emerges the winner. Since DTG’s board is yet accept the offer by Avis (CAR), the merger arbitrage table still includes the details of the Hertz deal. We will update the Merger Arbitrage Tool as we get additional information.

LB Foster (FSTR) extended its tender offer for Portec Rail Products (PRPX) through August 16 as only 64.41% of outstanding PRPX shares were tendered as of the previous deadline of July 29. The stock inched closer to the $11.70 tender price and closed trading on Friday at $11.61.

The new deals announced last week include the acquisition of Health Grades (HGRD) by an affiliate of the private equity firm Vestar Capital for $8.20 per share in cash and the acquisition of American Oil & Gas (AEZ) by Hess Corp. (HES) in an all-stock deal, where Hess will issue 0.1373 shares of its stock for each outstanding share of American Oil & Gas.

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