Merger Arbitrage Mondays – April 04, 2011

  • April 3, 2011

Merger activity increased last week with six new deals announced and four deals closing.

I received an email over the weekend from someone who was new to the Merger Arbitrage strategy and wanted to learn more about it. I pointed him to my article on the Pfizer – Wyeth deal, which provides an introduction to the strategy for the uninitiated. I would also recommend reading the article John Paulson On The “Risk” In Risk Arbitrage by the folks at market folly.

Deal Statistics:

Total Number of Deals Closed in 201143
Total Number of Deals Not Completed in 20111
Total Number of Pending Deals
Cash Deals46
Stock Deals21
Stock & Cash Deals13
Special Conditions1
Total Number of Pending Deals81

New Deals:

  1. The acquisition of Verigy (VRGY) by Advantest (ATE) for $1.1 billion or $15.00 per share in cash. Verigy announced the Advantest offer in December but the deal was finalized last week.
  2. The acquisition of Rural/Metro Corporation (RURL) by Warburg Pincus for $17.25 per share in cash. I had traded Rural a couple of times over the last year based on insider purchases by the CEO as you can see here.
  3. The acquisition of GSI Commerce (GSIC) by eBay Inc. (EBAY) for $2.4 billion or $29.25 per share in cash
  4. The acquisition of Spectrum control (SPEC) by API Technologies for $270 million or $20.00 per share in cash
  5. The acquisition of Technology Research (TRCI) by Coleman Cable (CCIX) for $51.5 million or $7.20 per share in cash
  6. The acquisition of GS Financial Corp (GSLA) by Home Bancorp (HBCP) for $26.2 million or $21.00 per share in cash


Deal Updates:

  1. Mentor Graphics (MENT) board rejects Icahn’s bid, says strategic plan is better for shareholders.
  2. On April 3, 2011 RAE Systems announced a revised higher offer of $1.88 per share by Vector Capital, a 7.4% increase from the previous offer of $1.75 per share. The revised offer was precipitated as a result of a competing offer of $1.90 per share by Battery Ventures, which was not determined to be a “superior offer”  by the board.
  3. The Nasdaq (NDAQ) and ICE have made a joint offer for NYSE Euronext (NYX) that was worth $43 as of Friday’s close. Since NYX has not officially called off its merger with Deutsche Börse, the table below has not been updated to reflect the Nasdaq offer.


Closed Deals:

  1. The acquisition of Rome Bancorp (ROME) by Berkshire Hills Corporation (BHLB) on April 01, 2011
  2. The acquisition of Mercer Insurance Group (MIGP) by United Fire & Casualty Company on March 28, 2011
  3. The acquisition of Herley Industries (HRLY) by Kratos Defense & Security Solutions (KTOS) on March 31, 2011
  4. The acquisition of Qwest (Q) by CenturyLink (CTL) on April 1, 2011.


Top 10 Deals with largest spreads:

SymbolAnnounced
Date
Acquiring

Company

Closing

Price

Last
Price
Closing
Date
ProfitAnnu.
Profit
TAM01/19/2011LAN Airlines S.A. (LFL)$23.61$20.2912/31/2011

16.35%

22.02%
TLCR06/07/2010Grifols (GRF.MC)$30.52$26.9406/30/2011 13.27% 55.69%
CASB03/04/2011Opus Bank (N/A)$0.45$0.4206/30/2011

7.14%

29.97%
DNBK01/20/2011People's United Financial Inc. (PBCT)$23.00$21.4906/30/2011 7.03% 29.48%
RAE01/18/2011Vector Capital (N/A)$1.88$1.7606/30/2011 6.82% 28.61%
TGE03/21/2011Dawson Geophysical Company (DWSN)$8.41$7.8708/15/2011 6.80% 18.67%
VRGY03/28/2011Advantest (ATE)$15.00$14.0812/31/2069 6.53% 0.11%
SHMR10/15/2010Essilor (N/A)$14.50$13.7106/30/2011 5.76% 24.17%
HYC11/17/2010Verifone Systems (PAY)$12.55$11.9709/30/2011 4.82% 9.82%
AAI09/27/2010Southwest Airlines (LUV)$7.75$7.4606/30/2011

3.89%

16.31%

List of all pending deals:

The list of all pending deals is only available to InsideArbitrage Premium and Plus members.