Merger Arbitrage Mondays – November 6, 2017

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

The announcement by Broadcom (AVGO) last week that it intends to move its headquarters to the U.S. from Singapore, caused Brocade’s stock to move up and the spread that was as wide as 9.54% last week immediately narrowed to within 1% of the deal price. The market felt that this removed the final regulatory obstacle for this deal to close as CFIUS approval was much more likely in light of this announcement. Instead of waiting for the last 1%, I closed half my position after this move.

The next day, I placed a limit order to sell the other half but yet another unexpected event caused the stock of Brocade (BRCD) to drop suddenly. As discussed in our Deals in the Works section, Dow Jones was reporting that Broadcom might make a bid for Qualcomm (QCOM). This news caused both Brocade (BRCD) and NXP Semiconductors (NXPI) to drop, as such a deal could put the acquisition of NXPI by Qualcomm at risk. This may turn out to be nothing more than a rumor, but if a deal is announced, it will be interesting to see how all these situations will play out because getting regulatory approval for these plethora of deals will be challenging.

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

Deal Statistics:

New Deals:

1. The acquisition of Capella Education Company (CPLA) by Strayer Education (STRA) for $820.96 million in an all stock deal. Under the terms of the agreement, Capella shareholders will receive 0.875 Strayer shares for each Capella share.
2. The acquisition of CalAtlantic Group (CAA) by Lennar Corporation (LEN) for $9.3 billion in an all stock deal. Under the terms of the merger agreement, each share of CalAtlantic stock will be converted into the right to receive 0.885 shares of Lennar Class A common stock.
3. The acquisition of Advanced Accelerator Applications (AAAP) by Novartis AG (NVS) for $3.9 billion or $82.00 per ADS (each representing 2 ordinary shares).

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