Merger Arbitrage Mondays – June 11, 2018

Merger activity increased last week with one new deal announced and four pending deals closing. The biggest news related to M&A came over the weekend, when the Committee on Foreign Investment in the United States (CFIUS) completed its review of the Genworth (GNW) acquisition in the midst of a growing trade war. The market had pretty much assumed this deal would get blocked by CFIUS and this was reflected by the fat spread on the deal, which had increased to over 100% in April as you can see from the chart below. The trend in the spread over the last month was probably the canary in the coal mine regarding the prospects of this deal. I expect the spread to narrow significantly on Monday but it is not a done deal yet as it requires other regulatory approvals before the deal can close.

Genworth Spread History

Genworth Spread History

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.

Deal Statistics:

Total Number of Deals Closed in 2018 64
Total Number of Deals Not Completed in 2018 6
Total Number of Pending Deals
Cash Deals 37
Stock Deals 15
Stock & Cash Deals 18
Collars 1
Special Conditions 9
Total Number of Pending Deals 79
Total Deal Size $970.87 billion

New Deals:

  1. The acquisition of AV Homes (AVHI) by Taylor Morrison Home Corporation (TMHC) for $963 million. Under the terms of the agreement, AV Homes stockholders will have the option to receive, at their election, consideration per share equal to (i) $21.50 in cash, (ii) 0.9793 shares of Taylor Morrison Class A common stock or (iii) the combination of $12.64 in cash and 0.4034 shares of Taylor Morrison Class A common stock, subject to an overall proration of approximately 60% cash and 40% stock. We have added this as an all cash deal.

Deal Updates:

  1. On June 4, 2018, AmTrust Financial Services (AFSI) announced that it intends to adjourn to June 21, 2018, the Special Meeting to be held to approve the adoption of the merger agreement between the Company and Evergreen Parent.
  2. On June 6, 2018, XL Group (XL) announced that its common shareholders have approved an agreement for AXA to acquire 100% of XL Group.
  3. On June 6, 2018, Marathon Petroleum Corporation (MPC) and Andeavor (ANDVcompleted the submission of their pre-merger notification filings under the Hart-Scott-Rodino Antitrust Improvements Act of 1976 and also submitted applications for approval of the merger to the Competition Bureau of Canada. The parties continue to expect the transaction to close in the second half of 2018, subject to customary closing conditions including regulatory and shareholder approvals.
  4. On June 6, 2018, TriCo Bancshares (TCBK) and FNB Bancorp (FNBGannounced the receipt of regulatory approval from the Board of Governors of the Federal Reserve System to move forward with the merger of FNB with and into TriCo. The closing of the merger transactions is scheduled for July 6, 2018.
  5. On June 6, 2018, AmTrust Financial Services (AFSI) announced that it has entered into an amendment to the merger agreement with Evergreen Parent.  Under the terms of the amended agreement, Evergreen will acquire the approximately 45% of the Company’s shares of common stock that the Karfunkel-Zyskind Family and certain of its affiliates and related parties do not already own or control for $14.75 per share in cash. This represents an increase of $1.25 per share, or 9.3%, in cash consideration to AmTrust public stockholders.
  6. On June 7, 2018, Brookfield Property Partners (BPY) announced that in connection with BPY’s previously announced agreement to acquire GGP (GGP), Brookfield Asset Management, has provided the Toronto Stock Exchange with written consent confirming that it is in favor of the Transaction.
  7. June 7, 2018: According to Reuters, the U.S. Department of Justice is examining how the proposed merger between T-Mobile (TMUS) and Sprint (S) could affect prices for smaller wireless operators.
  8. On June 8, 2018, Qualcomm Incorporated (QCOM) announced that Qualcomm River Holdings, has extended the offering period of its previously announced cash tender offer to purchase all of the outstanding common shares of NXP Semiconductors (NXPI). The tender offer is now scheduled to expire on June 15, 2018, unless extended or earlier terminated.
  9. On June 8, 2018, NICE (NICE) announced that it has extended the expiration of its tender offer to acquire all of the outstanding shares of Mattersight Corporation’s (MATR) common stock and 7% Series B Convertible Preferred Stock. The tender offer is being extended to allow additional time for the satisfaction of the conditions to the offer. The parties have not yet received the clearance of the Committee on Foreign Investment in the United States (CFIUS). The tender offer is now scheduled to expire on Thursday, June 21, 2018, unless it is further extended or earlier terminated.
  10. On June 9, 2018, China Oceanwide Holdings Group and Genworth Financial (GNW) announced that the Committee on Foreign Investment in the United States (CFIUS) has completed its review of their proposed transaction and concluded that there are no unresolved national security concerns with respect to the proposed transaction. The closing of the transaction remains subject to other conditions, including the receipt of required regulatory approvals in the U.S., China and other international jurisdictions.

Closed Deals:

  1. The acquisition of Jacksonville Bancorp (JXSB) by CNB Bank & Trust  on June 5, 2018. It took 138 days for this deal to be completed.
  2. The acquisition of General Cable Corporation (BGC) by Prysmian Group on June 6, 2018. It took 184 days for this deal to be completed.
  3. The acquisition of Monsanto Company (MON) by Bayer AG (BAYRY) on June 7, 2018. It took 631 days for this deal to be completed.
  4. The acquisition of Orbital ATK (OA) by Northrop Grumman Corporation (NOC) on June 7, 2018. It took 262 days for this deal to be completed.

Top 10 deals with largest spreads:

Symbol Announced
Profit Annualized
AKRX 04/24/2017 Fresenius Kabi (N/A) $34.00 $14.6 06/30/2018 132.88% 2552.63%
RAD 02/18/2018 Albertsons Companies, Inc. (N/A) $2.50 $1.7 09/30/2018 47.06% 154.74%
GNW 10/23/2016 China Oceanwide Holdings Group Co., Ltd. (N/A) $5.43 $3.81 07/01/2018 42.52% 775.98%
SHPG 05/08/2018 Takeda Pharmaceutical Company Limited (TKPYY) $194.74 $160.96 06/30/2019 20.99% 19.95%
ESRX 03/08/2018 Cigna Corporation (CI) $92.03 $78.39 12/31/2018 17.40% 31.28%
SCG 01/03/2018 Dominion Energy, Inc. (D) $41.88 $36.15 12/31/2018 15.85% 28.50%
TRCO 05/08/2017 Sinclair Broadcast Group, Inc. (SBGI) $41.84 $36.29 09/30/2018 15.30% 50.31%
CTWS 03/15/2018 SJW Group (SJW) $73.71 $64.15 12/31/2018 14.90% 26.80%
S 04/29/2018 T-Mobile US, Inc. (TMUS) $5.93 $5.17 06/30/2019 14.66% 13.94%
GGP 03/26/2018 Brookfield Property Partners (BPY) $23.50 $20.67 07/31/2018 13.69% 99.95%

List of all pending deals:

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

Disclaimer: I hold positions in SteadyMed (STDY), WGL Holdings (WGL), GGP Inc. (GGP), magicJack VocalTec (CALL), Rite Aid (RAD) and Southcross Energy Partners (SXE). 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.

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