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Merger activity decreased 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 was an interesting situation with ChemChina’s acquisition of Syngenta (SYT) last week where the stock dropped well below ChemChina’s $92.94 acquisition price (ex-dividend) after the tender offer concluded. The spread on the deal last Tuesday had increased to 5% or 58% annualized. Arbitrageurs were worried that since this was not a domestic acquisition, a second-step merger may not be as simple as it is for U.S. listed companies where the acquiring company automatically pays out shareholders who did not tender their shares.
There were several concerns including a large withholding tax for shareholders who had not tendered their shares if ChemChina did not acquire as much as 98% of Syngenta stock before the deal closed. Some of these risks were discussed in detail in this article. I called Syngenta’s investor relations and on the recommendation of a friend also wrote to the information agent on the tender offer to understand the structure of the second-step merger. The information agent (Georgsson LLC) got back to me within an hour indicating that they will issue a final press release with information about the results of the tender offer and the form of the second-step transaction.
The press release was issued early Wednesday morning indicating that 94.7% of the shares had been tendered and that ChemChina would “acquire further shares through market purchases or in off-market transactions” and “If the level of participation remains below 98 percent, ChemChina re-affirmed its intention to proceed to a squeeze-out merger.”
The spread immediately narrowed again on Wednesday but has not yet approached the $92.94 acquisition price. This was an unusual case of a merger providing multiple arbitrage opportunities and I was lucky enough to participate in it both times.