Merger Arbitrage Mondays – Two New Acquisitions At Huge Premiums

Merger activity remained unchanged last week with two new deals announced and seven 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 three new deals announced in the Deals in the Works section.

Deal Statistics:

Total Number of Deals Closed in 2019 133
Total Number of Deals Not Completed in 2019 9
Total Number of Pending Deals
Cash Deals 45
Stock Deals 17
Stock & Cash Deals 12
Special Conditions 6
Total Number of Pending Deals 80
Aggregate Deal Consideration $1.14 trillion

New Deals:

  1. The acquisition of Alder BioPharmaceuticals (ALDR) by H. Lundbeck A/S for $1.95 billion. Under the terms of the agreement, Alder stockholders will be offered an upfront payment for USD 18.00 per share in cash, along with one non-tradeable Contingent Value Right (CVR) that entitles them to an additional USD 2.00 per share upon approval of the migraine prevention drug eptinezumab by the European Medicines Agency (EMA), representing a total potential consideration of USD 20.00 per share. The cash portion of the deal represents a 79% premium to the closing price of Alder before the announcement. Because of the uncertainty about the value of the CVR, we are going to treat this as a “Special Conditions” deal worth $18/share in our Merger Arbitrage Tool (MAT).
  2. The acquisition of SemGroup Corporation (SEMG) by Energy Transfer (ET) for $5.1 billion in a cash plus stock deal. Under the terms of the agreement, SemGroup shareholders will receive $6.80 per share in cash and 0.7275 of an ET common unit for each SemGroup share. ET is paying a premium of 65% to SemGroup’s closing share price of $10.28 on September 13, 2019, and an 87% premium to SemGroup’s 20 day volume weighted average price (VWAP) as of the same date.

Deal Updates:

  1. On September 16, 2019, The Federal Communication Commission approved the acquisition of Tribune Media Company (TRCO) by Nexstar Media Group (NXST).
  2. On September 17, 2019, EU antitrust regulators cleared Global Payment’s (GPN) proposed purchase of Total Systems Services (TSS).
  3. On September 17, 2019, Versum Materials (VSM) announced that Versum has received notice from the Committee on Foreign Investment in the United States (“CFIUS”) stating that CFIUS has completed its review of the previously announced proposed acquisition of Versum by Merck KGaA, Darmstadt, Germany and has concluded that there are no unresolved national security concerns with respect to the transaction.
  4. On September 19, 2019, Sotheby’s (BID) announced that all regulatory approvals required for the acquisition of the Company by BidFair USA, have been obtained. The closing date of the merger is expected to be on October 3, 2019, subject to the satisfaction of customary closing conditions.
  5. On September 19, 2019, El Paso Electric Company (EE) announced that its shareholders approved the previously announced agreement and plan of merger with J.P. Morgan Investment Management.
  6. On September 19, 2019, Centene Corporation (CNC) and WellCare Health Plans (WCG) announced that insurance departments of 17 states have approved Centene’s pending acquisition of WellCare.
  7. On September 20, 2019, II-VI Incorporated (IIVI) and Finisar Corporation (FNSR) jointly announced that II-VI has obtained antitrust clearance from the State Administration for Market Regulation of the People’s Republic of China for II-VI’s acquisition of Finisar. II-VI expects the closing of its acquisition to occur on or about September 24, 2019.
  8. On September 20, 2019, Peak Resorts (SKIS) announced that the Company’s shareholders, approved the merger agreement for the acquisition of the Company by Vail Resorts (MTN). The transaction is expected to close on or about September 24, 2019.
  9. On September 20, 2019, the requisite waiting period in Japan expired for the previously announced pending acquisition of Cray (CRAY), by Hewlett Packard Enterprise Company (HPE). Cray anticipates the closing of the Merger will occur on September 25, 2019, subject to the waiver or satisfaction of the remaining conditions.

Closed Deals:

  1. The acquisition of Total System Services (TSS) by Global Payments (GPN) on September 18, 2019. It took 113 days for this deal to be completed.
  2. The acquisition of Chesapeake Lodging Trust (CHSP) by Park Hotels & Resorts (PK) on September 18, 2019. It took 135 days for this deal to be completed.
  3. The acquisition of Speedway Motorsports (TRK) by Sonic Financial Corporation on September 18, 2019. It took 57 days for this deal to be completed.
  4. The acquisition of Aquantia (AQ) by Marvell Technology Group (MRVL) on September 19, 2019. It took 136 days for this deal to be completed.
  5. The acquisition of Tribune Media Company (TRCO) by Nexstar Media Group (NXST) on September 19, 2019. It took 290 days for this deal to be completed.
  6. The acquisition of EMC Insurance Group (EMCI) by Employers Mutual Casualty Company on September 19, 2019. It took 133 days for this deal to be completed.
  7. The acquisition of Intermolecular (IMI) by EMD Group Holding II, a wholly owned subsidiary of Merck KGaA on September 20, 2019. It took 137 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
PACB 11/01/2018 Illumina, Inc. (ILMN) $8.00 $5.63 12/31/2019 42.10% 155.20%
S 04/29/2018 T-Mobile US, Inc. (TMUS) $8.27 $6.58 01/31/2020 25.61% 71.91%
ABDC 08/13/2019 Crescent Capital BDC, Inc. (N/A) $11.02 $9 12/31/2019 22.44% 82.75%
GNW 10/23/2016 China Oceanwide Holdings Group Co., Ltd. (N/A) $5.43 $4.47 12/31/2019 21.48% 79.18%
ONCE 02/25/2019 Roche Holding AG (RHHBY) $114.50 $102.36 04/30/2020 11.86% 19.68%
MLNX 03/11/2019 NVIDIA Corporation (NVDA) $125.00 $111.9 12/31/2019 11.71% 43.16%
OHAI 08/01/2019 Portman Ridge Finance Corporation (PTMN) $1.46 $1.32 12/31/2019 10.61% 39.10%
AGN 06/25/2019 AbbVie Inc. (ABBV) $182.99 $166.47 03/31/2020 9.92% 19.06%
ACIA 07/08/2019 Cisco Systems, Inc. (CSCO) $70.00 $64.58 07/31/2020 8.39% 9.82%
CRZO 07/15/2019 Callon Petroleum Company (CPE) $9.29 $8.63 12/31/2019 7.61% 28.05%

List of all pending deals:

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

Disclaimer: I hold long positions in Mellanox Technologies (MLNX), Pacific Biosciences of California (PACB), Celgene (CELG), Bristol-Myers Squibb (BMY) and Finisar (FNSR). 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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