Merger Arbitrage Mondays – July 30, 2018

Merger activity increased last week with four new deals announced, two pending deals closing and one deal failing. You can find all the active deals listed below in our Merger Arbitrage Tool (MAT) that automatically updates itself during market hours.

Qualcomm’s (QCOM) acquisition of NXP Semiconductors (NXPI) fell through last week nearly 21 months after the deal was announced in October 2016. I participated in the merger briefly and exited the position when it was trading close to the original acquisition price of $110/share. The deal was renegotiated higher to $127.50 in February of this year after the activist firm Elliott Management got involved. Despite numerous extensions, approvals from various regulators and Qualcomm fending off a potential acquisition by Broadcom, the final straw that broke this deal’s back was failure to get approval from Chinese regulators.

The expanding trade war with a bolstered CFIUS and aggressive Chinese regulators will result in fewer cross-border deals. The ones that do are likely to have large spreads that reflect the risk of these deals falling apart and in some instances opportunities for arbitrageurs.

There was one new deal announced in the Deals in the Works section.

Deal Statistics:

Total Number of Deals Closed in 2018 87
Total Number of Deals Not Completed in 2018 7
Total Number of Pending Deals
Cash Deals 41
Stock Deals 17
Stock & Cash Deals 19
Special Conditions 8
Total Number of Pending Deals 85
Total Deal Size $1.03 trillion

New Deals:

  1. The acquisition of LifePoint Health (LPNT) by funds managed by affiliates of Apollo Global Management for $5.6 billion or $65.00 per share in cash. We added LPNT as a potential deal to the Deals in the Works section on July 20, 2017 and the price after the news of the potential deal came out was $47.90.
  2. The acquisition of FCB Financial Holdings (FCB) by Synovus Financial (SNV) for $2.9 billion in an all stock deal. Under the terms of the agreement, FCB shareholders will receive a fixed ratio of 1.055 shares of Synovus common stock for each common share of FCB. We added FCB as a potential deal to the Deals in the Works section on April 13, 2017 and the price after the news of the potential deal came out was $56.25.
  3. The acquisition of Green Bancorp (GNBC) by Veritex Holdings (VBTX) for $1 billion in an all stock deal. Under the terms of the agreement, shareholders of Green will receive 0.79 shares of Veritex common stock for each share of Green common stock.
  4. The acquisition of SUPERVALU (SVU) by United Natural Foods (UNFI) for $2.9 billion or $32.50 per share in cash. We added SVU as a potential deal to the Deals in the Works section on April 7, 2017 and the price after the news of the potential deal came out was $16.75.

Deal Updates:

  1. On July 23, 2018, Farmers Capital Bank Corporation (FFKT) announced that at a special meeting of shareholders, the company’s shareholders voted to adopt and approve the Agreement and Plan of Merger with WesBanco (WSBC).
  2. On July 24, 2018, Web.com Group (WEB) announced that the U.S. Federal Trade Commission granted early termination of the waiting period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, in connection with the Merger.
  3. On July 24, 2018, Civista Bancshares (CIVB) and United Community Bancorp (UCBA) announced that the shareholders of each company approved the proposed merger of United Community into Civista. The merger of United Community into Civista and the merger of United Community Bank into Civista Bank are currently expected to close on September 14, 2018, subject to the satisfaction of other customary closing conditions.
  4. July 25, 2018: According to Reuters, Federal Communications Commission Chairman Ajit Pai said that he stands by the decision to refer Sinclair Broadcast Group’s (SBGI) proposed acquisition of Tribune Media (TRCO) for review by an administrative law judge despite critical comments from U.S. President Donald Trump.
  5. On July 26, 2018, NXP Semiconductors (NXPI) received notice from Qualcomm Incorporated (QCOM) that Qualcomm has terminated, effective immediately, the purchase agreement between NXP and an affiliate of Qualcomm following the inability to obtain the required approval for the transaction from the State Administration for Market Regulation (SAMR) of the People’s Republic of China prior to the end date stipulated by the parties under the purchase agreement.
  6. On July 26, 2018, GGP Inc. (GGP) announced that its common stockholders approved the proposed acquisition of GGP by Brookfield Property Partners (BPY). GGP and BPY expect that the transactions contemplated by the Merger Agreement will be completed by the end of August of this year.
  7. On July 27, 2018, CYS Investments (CYS) announced that at the special meeting of stockholders, its stockholders approved the merger transaction with Two Harbors Investment (TWO). The merger is expected to close on July 31, 2018, subject to customary closing conditions.
  8. On July 27, 2018, Twenty-First Century Fox (FOX) and The Walt Disney Company (DIS) announced that, at separate special meetings, stockholders of the two companies approved all proposals related to Disney’s acquisition of 21st Century Fox.
  9. On July 27, 2018, Cohu (COHU), and Xcerra Corporation (XCRA) announced that on July 26, 2018, the Federal Trade Commission granted early termination of the waiting period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, or HSR, with respect to Cohu’s previously announced acquisition of Xcerra.
  10. July 27, 2018: According to Reuters, Institutional Shareholder Services (ISS) said that Rite Aid (RADinvestors should vote down its merger with Albertsons.
  11. On July 27, 2018, Brookfield Property Partners (BPY) and GGP (GGPannounced the deadline for GGP common stockholders to make their elections is on August 21, 2018. GGP common stockholders can elect to receive for their shares cash and/or equity, and can further elect to receive equity in the form of BPR class A stock or BPY units.
  12. On July 27, 2018, WMIH Corp. (WMIH) and Nationstar Mortgage Holdings (NSMannounced the preliminary results of the elections made by Nationstar stockholders as to the form of merger consideration they desire to receive in the transaction. Holders of approximately 26,249,980 shares of Nationstar common stock, or approximately 84.6% of the outstanding shares of Nationstar common stock, either elected to receive Stock Consideration or were deemed to have made an election to receive Stock Consideration as a result of not making a valid election. Holders of approximately 4,794,325 shares of Nationstar common stock, or approximately 15.4% of the outstanding shares of Nationstar common stock, elected to receive Cash Consideration.

Closed Deals:

  1. The acquisition of Klondex Mines (KLDX) by Hecla Mining Company (HL) on July 23, 2018. It took 126 days for this deal to be completed.
  2. The acquisition of Quality Care Properties (QCP) by Welltower (WELL) on July 26, 2018. It took 91 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
AKRX 04/24/2017 Fresenius Kabi (N/A) $34.00 $18.23 07/31/2018 86.51% 31574.60%
SXE 11/01/2017 American Midstream Partners, LP (AMID) $1.06 $0.78 07/31/2018 35.38% 12915.38%
RAD 02/18/2018 Albertsons Companies, Inc. (N/A) $2.50 $1.94 09/30/2018 28.87% 169.94%
TRCO 05/08/2017 Sinclair Broadcast Group, Inc. (SBGI) $40.92 $33.07 09/30/2018 23.75% 139.79%
GNW 10/23/2016 China Oceanwide Holdings Group Co., Ltd. (N/A) $5.43 $4.61 08/15/2018 17.79% 405.78%
SCG 01/03/2018 Dominion Energy, Inc. (D) $47.67 $40.93 12/31/2018 16.47% 39.05%
ESRX 03/08/2018 Cigna Corporation (CI) $91.89 $79.45 12/31/2018 15.66% 37.12%
RSYS 07/02/2018 Reliance Industries Limited (N/A) $1.72 $1.5 12/31/2018 14.67% 34.76%
SHPG 05/08/2018 Takeda Pharmaceutical Company Limited (TKPYY) $194.74 $170.07 06/30/2019 14.51% 15.80%
STC 03/16/2018 Fidelity National Financial, Inc. (FNF) $51.00 $44.87 06/30/2019 13.67% 14.89%

List of all pending deals:

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

Disclaimer: I hold positions in Radisys (RSYS), SteadyMed (STDY), 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.

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

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