Merger Arbitrage Mondays – June 19, 2017

Merger activity remained steady last week with four new deals announced and five deals closing. You can find all the active deals listed below in our Merger Arbitrage Tool (MAT) that automatically updates itself during market hours.

There were two new deals announced in the Deals in the Works section.

Amazon’s (AMZN) acquisition of Whole Foods (WFM) for $42/share in cash was a big surprise on Friday and Whole Foods’ stock ended the day at $42.68 after hitting an intra-day high of $43.45. The reason for the enthusiasm was a $48 price target from Barclays and a $45 price target by Oppenheimer, on expectations that another bidder might emerge. When we added Whole Foods to our Deals in the Works section in April, it was on account of rumors of interest by Albertsons. It is also possible that activist investor Jana Partners, with its 8.8% stake in Whole Foods, may hold out for a higher price.

Whether there is any substance to these rumors and whether a higher bid materializes remains to be seen but this deal does appear to be a game changer for both Amazon and in some ways traditional retailers. In the words of Wall Street Journal’s Financial Editor Dennis K. Berman,

“Amazon did not just buy Whole Foods grocery stores. It bought 431 upper-income, prime-location distribution nodes for everything it does.”

Deal Statistics:

Total Number of Deals Closed in 2017 95
Total Number of Deals Not Completed in 2017 4
Total Number of Pending Deals
Cash Deals 54
Stock Deals 23
Stock & Cash Deals 12
Special Conditions 8
Total Number of Pending Deals 97
Total Deal Size $806.94 billion

New Deals:

  1. The acquisition of First South Bancorp (FSBK) by Carolina Financial Corporation (CARO) for $162 million in an all stock deal. Under the terms of the merger agreement, First South shareholders will receive 0.52 shares of Carolina Financial common stock for each share of First South’s common stock.
  2. The acquisition of Wolverine Bancorp (WBKC) by Horizon Bancorp (HBNC) for $88.9 million in a cash plus stock deal. Under the terms of the merger agreement, shareholders of Wolverine will receive 1.0152 shares of Horizon common stock and $14.00 in cash for each share of Wolverine common stock.
  3. The acquisition of Rightside Group (NAME) by Donuts for $213 million or $10.60 per share in cash.
  4. The acquisition of Whole Foods Market (WFM) by Amazon (AMZN) for $13.7 billion or $42.00 per share in cash.

Deal Updates:

  1. On June 12, 2017, Baker Hughes Incorporated (BHI) and General Electric (GE) announced today that they have reached an agreement with the Department of Justice that would allow the parties to complete their proposed transaction under U.S. law. Since this deal will result in the creation of a new company, we have not entered it in our database.
  2. June 12, 2017: BASF SE (BASFY) and Syngenta AG (SYT) are among companies that have submitted preliminary bids for assets that Bayer AG (BAYRY) plans to sell in order to get regulatory approval for its $66 billion takeover of Monsanto (MON).
  3. On June 12, 2017, Mead Johnson Nutrition (MJN) announced that the final regulatory approval has been received in order to complete its acquisition by Reckitt Benckiser Group. The transaction is expected to close on June 15, 2017, subject to the satisfaction of customary closing conditions at such time.
  4. On June 14, 2017, Norsat International (NSAT) announced that the Special Committee comprising all of the Independent Directors of the Board of Directors, in consultation with the Company’s legal and financial advisors, have reviewed and considered an updated unsolicited proposal from Privet Fund Management to acquire the Company for cash consideration of US$11.50 per share. The Independent Directors have determined that the Privet Subsequent Acquisition Proposal constitutes a “Superior Proposal” as defined in the Amended Arrangement Agreement. Norsat has delivered written notice to Hytera of the determination of the Independent Directors.
  5. On June 15, 2017, Syneron Medical (ELOS) announced that its shareholders have approved the previously announced definitive agreement under which an affiliate of funds advised by Apax Partners will acquire all of the outstanding shares of Syneron Candela. The acquisition is expected to be completed in mid-July, subject to the satisfaction of the remaining closing conditions.
  6. On June 15, 2017, Qualcomm Incorporated (QCOM) announced that the Taiwan Fair Trade Commission has given regulatory clearance to the pending acquisition by Qualcomm River Holdings of NXP Semiconductors (NXPI).
  7. On June 15, 2017, Tribune (TRCO) shares were up sharply following a federal court ruling that greatly improves chances that the broadcast chain’s suitor, Sinclair Broadcast Group (SBGI), would be allowed to go through with their planned merger.
  8. On June 16, 2017, Norsat International (NSAT) announced that the Special Committee comprising all of the Independent Directors of the Board of Directors, in consultation with the Company’s legal and financial advisors, have received, reviewed and considered an offer from Hytera to amend the terms of the existing Amended Arrangement Agreement. The amended offer is to acquire the Company for cash consideration of US$11.50 per share and to increase both the Norsat and Hytera termination fees from US$2.5 million to US$3.0 million, respectively. The Independent Directors have determined that based on the amended offer from Hytera, the Privet Subsequent Acquisition Proposal ceases to be a Superior Proposal.

Closed Deals:

  1. The acquisition of Jive Software (JIVE) by ESW Capital, LLC on June 12, 2017. It took 42 days for this deal to be completed.
  2. The acquisition of Mead Johnson Nutrition Company (MJN) by Reckitt Benckiser Group on June 15, 2017. It took 125 days for this deal to be completed.
  3. The acquisition of Span-America Medical Systems (SPAN) by Savaria Corporation on June 15, 2017. It took 45 days for this deal to be completed.
  4. The acquisition of BNC Bancorp (BNCN) by Pinnacle Financial Partners (PNFP) on June 16, 2017. It took 144 days for this deal to be completed.
  5. The acquisition of GenVec (GNVC) by Intrexon Corporation (XON) on June 16, 2017. It took 143 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
RAD 10/27/2015 Walgreens Boots Alliance, Inc. (WBA) $6.50 $3.00 07/31/2017 116.67% 1013.89%
GNW 10/23/2016 China Oceanwide Holdings Group Co., Ltd. (N/A) $5.43 $3.6500 06/30/2017 48.77% 1618.18%
DEST 12/20/2016 Orchestra-Premaman S.A. (KAZI.PA) $6.34 $4.61 06/30/2017 37.59% 1247.45%
LSCC 11/03/2016 Canyon Bridge Capital Partners, Inc. (N/A) $8.30 $6.67 06/30/2017 24.44% 810.89%
WR 05/31/2016 Great Plains Energy Incorporated (GXP) $60.00 $53.6400 06/30/2017 11.86% 393.43%
MON 09/14/2016 Bayer AG (BAYRY) $128.00 $117.88 12/31/2017 8.59% 16.07%
TWX 10/22/2016 AT&T, Inc. (T) $107.50 $99.2000 12/31/2017 8.37% 15.66%
CAB 10/03/2016 Bass Pro Shops (N/A) $61.50 $57.13 09/30/2017 7.65% 27.11%
HUN 05/22/2017 CLARIANT N (CLN.VX) $25.78 $24.01 12/31/2017 7.38% 13.81%
TRCO 05/08/2017 Sinclair Broadcast Group, Inc. (SBGI) $43.07 $41.08 12/31/2017 4.85% 9.08%

List of all pending deals:

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

Disclaimer: I hold positions in Whole Foods (WFM), Cabela’s (CAB), Rite Aid (RAD) and Fortress Investment Group (FIG). 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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