Merger Arbitrage Mondays – December 26, 2016

Merger Activity increased last week with three 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:

Total Number of Deals Closed in 2016 225
Total Number of Deals Not Completed in 2016 20
Total Number of Pending Deals
Cash Deals 50
Stock Deals 19
Stock & Cash Deals 11
Special Conditions 8
Total Number of Pending Deals 88
Total Deal Size $1392.83 billion

New Deals:

  1. The acquisition of Lionbridge Technologies (LIOX) by an affiliate of H.I.G.Capital for $360 million or $5.75 per share in cash.
  2. The acquisition of Eastern Virginia Bankshares (EVBS) by Southern National Bancorp of Virginia (SONA) for $178.3 million in an all stock deal. Under the terms of the agreement, Eastern Virginia common and preferred shareholders will receive a fixed exchange ratio equal to 0.6313 shares of Southern National common stock for each share of Eastern Virginia common stock or preferred stock owned.
  3. The acquisition of Heritage Oaks Bancorp (HEOP) by Pacific Premier Bancorp (PPBI) for $405.6 million in an all stock deal. Under the terms of the definitive agreement, upon consummation of the transaction, holders of Heritage Oaks common stock will have the right to receive 0.3471 shares of Pacific Premier common stock for each share of Heritage Oaks common stock they own.
  4. The acquisition of Allied World Assurance Company Holdings (AWH) by Fairfax Financial Holdings Limited (FFH.TO) for $4.9 billion in a cash plus stock deal. Under the terms of the agreement, shareholders of Allied World will receive cash and stock for a total value of $54.00 per Allied World share. The cash portion of the deal is $10, half of which will be paid as a  pre-closing dividend. The share portion of the deal is worth approximately $44.00 in Fairfax Shares and is subject to collars based on the price of Fairfax. Fairfax also has the option to covert $30 of the share portion into a cash offer. Given the complexity of the deal, we have entered this deal as a “Special Conditions” deal with a value of $54.
  5. The acquisition of Calamos Asset Management (CLMS) by an entity formed by Mr. John Calamos and Mr. John Koudounis for $8.25 per share in cash.
  6. The acquisition of KongZhong Corporation (KZ) by Linkedsee Limited and Wiseman International Limited for $299 million or $7.55 per share in cash.
  7. The acquisition of InvenSense (INVN) by TDK Corporation (TTDKY) for $1.3 billion or $13.00 per share in cash.

We missed adding the LIOX, EVBS, HEOP and KZ deals the week they were announced but our readers were kind enough to let us know about them and so we are including them in this week’s update.

Deal Updates:

  1. On December 16, 2016, The European Commission cleared France’s Danone to proceed with its $10.4 billion purchase of U.S. organic food producer WhiteWave (WWAV), subject to it selling a business in Belgium.
  2. December 16, 2016: Pursuant to the terms of the Merger Agreement between Blue Nile (NILE) and Bain Capital Private Equity, the consummation of the Merger is conditioned upon, among other things, clearance by antitrust authorities in Austria. On December 16, 2016, the Austrian Federal Competition Authority and the Austrian Cartel Attorney provided such clearance. The consummation of the Merger remains subject to approval by Blue Nile’s stockholders and the satisfaction or waiver of customary closing conditions set forth in the Merger Agreement.
  3. On December 19, 2016, The Sherwin-Williams Company (SHW) and The Valspar Corporation (VAL) issued the following statement in response to unfounded market rumors concerning regulatory approvals for the definitive agreement between Sherwin-Williams and Valspar, which was announced on March 20, 2016: ‘Sherwin-Williams and Valspar continue to cooperate fully with the FTC staff and continue to expect the transaction will close by the end of Q1 calendar year 2017. Given the complementary nature of the businesses and the benefits this transaction will provide to customers, Sherwin-Williams and Valspar continue to believe that no or minimal divestitures should be required to complete the transaction.’
  4. On December 20, 2016, Walgreens Boots Alliance (WBA) and Rite Aid Corporation (RAD) announced that they have entered into an agreement to sell 865 Rite Aid stores and certain assets related to store operations to Fred’s (FRED) for $950 million in an all-cash transaction.
  5. On December 20, 2016, Astoria Financial Corporation (AF), the holding company for Astoria Bank, and New York Community Bancorp (NYCB), the holding company for New York Community Bank and New York Commercial Bank, announced that their boards of directors have mutually agreed not to extend the companies’ definitive merger agreement, and to terminate the agreement effective January 1, 2017.
  6. December 21, 2016: Exxon Mobil (XOM)’s offer to raise its bid for InterOil (IOC) to as high as $3.9 billion isn’t enough to pacify the deal’s most prominent opponent.
  7. On December 22, 2016, Prudential Bancorp (PBIP) and Polonia Bancorp (PBCP) jointly announced the determination of the final merger consideration in accordance with the terms of the merger agreement entered into June 2, 2016 by the Company and Polonia. Under the terms of the merger agreement, the initial merger consideration consisting of either 0.7591 of a share of Prudential common stock or $11.28 in cash for each share of common stock Polonia is subject to potential adjustment. Based on Polonia’s consolidated stockholders’ equity as of October 31, 2016 of $36.7 million, as calculated in accordance with the merger agreement, the exchange ratio and per share cash consideration have been adjusted to 0.7460 and $11.09, respectively. Subject to customary closing conditions, the transaction currently is expected to close effective as of January 1, 2017.
  8. December 23, 2016: Based on this press release, we have extended the closing date for the G&K services (GK) merger deal with Cintas Corporation (CTAS) to June 30, 2017.
  9. On December 23, 2016, Humana and Aetna again have extended their self-imposed deadline to complete their acquisition deal to allow time for a federal judge to rule on the proposed transaction. The new deadline for Aetna (AET) to complete its $37 billion acquisition of Humana (HUM) is now end-of-day Feb. 15, 2017.

Closed Deals:

  1. The acquisition of TubeMogul (TUBE) by Adobe Systems Incorporated (ADBE) on December 20, 2016. It took 40 days for this deal to be completed.
  2. The acquisition of Carmike Cinemas (CKEC) by AMC Entertainment Holdings (AMC) on December 21, 2016. It took 293 days for this deal to be completed.

Top 10 deals with largest spreads:

Symbol Announced
Date
Acquiring
Company
Closing
Price
Last
Price
Closing
Date
Profit Annualized
Profit
ALR 02/01/2016 Abbott Laboratories (ABT) $56.00 $40.29 12/31/2016 38.99% 2846.44%
GNW 10/23/2016 China Oceanwide Holdings Group Co., Ltd. (N/A) $5.43 $4.04 06/30/2017 34.41% 67.52%
CI 07/24/2015 Anthem, Inc. (ANTM) $178.63 $138.61 03/31/2017 28.87% 110.93%
ADGE 11/02/2016 Tecogen Inc. (TGEN) $0.36 $0.2856 06/30/2017 25.63% 50.30%
TSL 08/01/2016 Investor consortium comprising Mr. Gao and other entities. (N/A) $11.60 $9.25 03/31/2017 25.38% 97.51%
MON 09/14/2016 Bayer AG (BAYRY) $128.00 $105.26 12/31/2017 21.60% 21.31%
SYT 02/03/2016 ChemChina (N/A) $96.01 $79.55 04/15/2017 20.69% 68.66%
LSCC 11/03/2016 Canyon Bridge Capital Partners, Inc. (N/A) $8.30 $7.24 03/31/2017 14.64% 56.25%
SWC 12/09/2016 Sibanye Gold Limited (SBGL) $18.00 $15.98 06/30/2017 12.64% 24.81%
FGL 11/09/2015 Anbang Insurance Group Co., Ltd. (N/A) $26.80 $23.80 03/31/2017 12.61% 48.43%

List of all pending deals:

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

Disclaimer: I hold long positions in WhiteWave Foods (WWAV), Apollo Education (APOL), Rite Aid (RAD), Syngenta (SYT) and InterOil Corporation (IOC). Please do your own due diligence before buying or selling any securities mentioned in this article. We do not warrant the completeness or accuracy of the content or data provided in this article.

Connect with me on LinkedIn: http://www.linkedin.com/in/asifsuria or follow me on Twitter@asifsuria

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