Merger Arbitrage Mondays – November 26, 2012

Merger activity decreased last week with two new deals announced and two deals closing.

You can find all the active deals listed below in our Merger Arbitrage Tool that automatically updates itself during market hours.

Deal Statistics:

New Deals:

1. The acquisition of Outdoor Channel Holdings (OUTD) by InterMedia Outdoors Holdings, LLC for $8.00 per share in a cash or stock deal. Shareholders can elect to either received $8 per share or they can receive one share in the new merged entity called IMOH that will be listed on the Nasdaq. Since IMOH is not yet listed, we are treating this as an all cash deal. According to the press release, the Company’s board has also approved a 25 cent per share special dividend which will be paid on or about December 7, 2012 to stockholders of record as of the close of business on November 27, 2012.
2. The acquisition of BioMimetic Therapeutics (BMTI) by Wright Medical Group (WMGI) for approximately $380 million, or $12.97 per share. This is a complex deal with a cash component, a stock component and milestone-based contingent value rights (CVR). According to the press release, “Each share of BioMimetic common stock will be converted into the right to receive an upfront payment of $1.50 in cash and 0.2482 shares of Wright common stock. The upfront payment values BioMimetic at approximately $190 million, or $6.47 per share, based on Wright’s closing stock price on November 16, 2012. Each BioMimetic share will also receive one tradable Contingent Value Right (CVR), which entitles its holder to receive additional cash payments of up to $6.50 per share, which are payable upon receipt of FDA approval of Augment® Bone Graft and upon achieving certain revenue milestones. Any contingent milestone payments will be paid in cash. The CVR payments to BioMimetic shareholders are structured as follows:
   
   
   i) $3.50 per share upon FDA approval of Augment® Bone Graft;
   ii) $1.50 per share upon the achievement of $40 million in trailing twelve month sales for all products contributed by BioMimetic;
   iii) $1.50 per share upon the achievement of $70 million in trailing twelve month sales for all products contributed by BioMimetic.”

   Based on the closing price of $21.24 for Wright Medical Group (WMGI), the deal is valued at $6.77 without taking the CVR into account. Essentially the market is placing a value of just 26 cents for the CVR that could be worth as much as $6.50 provided all milestones are met.

   We have not yet included this deal in our database. If you have any thoughts on how to value this deal (assign probabilities to each milestone and discount back to current value?), I would love to hear from you.

Only plus or premium subscribers can access this post. Subscribe today.