Merger Arbitrage Mondays – A SPAC Finds A Home

Merger activity decreased with one new deal announced, eight deals closing and one deal falling apart. You can find all the active deals listed below in our Merger Arbitrage Tool (MAT) that automatically updates itself during market hours.

There were no new deals announced in the Deals in the Works section.

Deal Statistics:

Total Number of Deals Closed in 2020 4
Total Number of Deals Not Completed in 2020 1
Total Number of Pending Deals
Cash Deals 43
Stock Deals 20
Stock & Cash Deals 4
Special Conditions 5
Total Number of Pending Deals 72
Aggregate Deal Consideration $404.78 billion

New Deals:

We did not have any traditional mergers or acquisitions announced last week and the only deal inked was the merger of a special purpose acquisition company (SPAC), Leisure Acquisition (LACQ), with the operating company GTWY Holdings Limited in a one for one share exchange. The enterprise value of the combined entity is expected to be $1.115 billion. SPACs or blank check companies are publicly traded companies with no operations of their own. They are set up to find an operating business and eventually merge into that operating business, which in this case is GTWY Holdings, the Canadian holding company for Gateway Casinos & Entertainment Limited.

The combined company will be listed on the NYSE with the symbol GTWY. Since all outstanding public warrants to purchase Leisure shares will be converted automatically into warrants to purchase shares of GTWY at an exercise price of US$11.50 per share, we are treating this as a “Special Conditions” deal in our Merger Arbitrage Tool with a price of $11.50.

The deal also includes “earn-outs” (similar to the Contingent Value Rights or CVRs we often see with biotech deals) in the form of warrants for existing GTWY Holdings shareholders that become exercisable if the stock rises to $12.50 or $15 at specific time intervals.

Overall the deal is worth looking into further considering it is priced at around 7.5 times expected 2020 adjusted EBITDA and there are both earn outs as well as additional warrants for existing GTWY Holdings shareholders that aligns their incentives with shareholders.

Deal Updates:

  1. On December 31, 2019, Tiffany (TIF) announced that it will hold a special meeting of its stockholders on February 4, 2020.
  2. On January 2, 2020, Anixter International (AXEagreed to a further amendment and restatement of the Amended Merger Agreement with Clayton, Dubilier & Rice to increase the per-share consideration payable to Anixter’s shareholders to $93.50 per share in cash (from $86.00 per share in cash and a $2.50 contingent value right upon the occurrence of certain events). The transaction is now valued at approximately $4.3 billion.
  3. On January 3, 2020, WESCO International (WCCsubmitted a revised proposal to the board of directors of Anixter International (AXE) to acquire Anixter for $97.00 per share in cash and stock.
  4. January 3, 2020: According to a sec filing, Stryker’s (SYK) proposed merger with Wright Medical (WMGI) is facing additional scrutiny from the Federal Trade Commission.
  5. On January 3, 2020, Taylor Morrison Home Corporation (TMHC) announced that its subsidiary, Taylor Morrison Communities has extended the expiration date for its previously announced offers to exchange any and all outstanding senior notes of three series issued by William Lyon Homes (WLH) for up to $1.09 billion aggregate principal amount of new notes to be issued by TMCI to January 20, 2020.

Closed Deals:

  1. The acquisition of Pivotal Software (PVTL) by VMware (VMW) on December 30, 2019. It took 130 days for this deal to be completed.
  2. The acquisition of Genesee & Wyoming (GWR) by Brookfield Infrastructure and GIC (BIP) on December 30, 2019. It took 182 days for this deal to be completed.
  3. The acquisition of Ecology & Environment (EEI) by WSP Global on December 31, 2019. It took 125 days for this deal to be completed.
  4. The acquisition of Carolina Trust BancShares (CART) by Carolina Financial Corporation (CARO) on December 31, 2019. It took 169 days for this deal to be completed.
  5. The acquisition of Entegra Financial (ENFC) by First Citizens BancShares (FCNCA) on January 1, 2020. It took 252 days for this deal to be completed.
  6. The acquisition of Bancorp Of New Jersey (BKJ) by ConnectOne Bancorp (CNOB) on January 2, 2020. It took 139 days for this deal to be completed.
  7. The acquisition of Two River Bancorp (TRCB) by OceanFirst Financial (OCFC) on January 2, 2020. It took 146 days for this deal to be completed.
  8. The acquisition of Avon Products (AVP) by Natura Cosméticos S.A. (NATU3.SA) on January 3, 2020. It took 226 days for this deal to be completed.

Deals Terminated:

  1. On January 2, 2020, Illumina (ILMN) and Pacific Biosciences of California (PACB) announced that they have mutually agreed to terminate their merger agreement.

Top 10 deals with largest spreads:

Symbol Announced
Date
Acquiring
Company
Closing
Price
Last
Price
Closing
Date
Profit Annualized
Profit
S 04/29/2018 T-Mobile US, Inc. (TMUS) $8.02 $5.18 01/31/2020 54.77% 799.65%
GNW 10/23/2016 China Oceanwide Holdings Group Co., Ltd. (N/A) $5.43 $4.37 03/31/2020 24.26% 104.16%
ABDC 08/13/2019 Crescent Capital BDC, Inc. (N/A) $11.02 $9.13 03/31/2020 20.70% 88.89%
FIT 11/01/2019 Google LLC (N/A) $7.35 $6.44 06/30/2020 14.13% 29.30%
LACQ 12/30/2019 GTWY Holdings Limited (N/A) $11.50 $10.43 06/30/2020 10.26% 21.28%
TSG 10/02/2019 Flutter Entertainment PLC (PDYPF) $28.39 $26.02 09/30/2020 9.10% 12.39%
MLNX 03/11/2019 NVIDIA Corporation (NVDA) $125.00 $117.55 03/31/2020 6.34% 27.21%
SORL 11/29/2019 Ruili International Inc. (N/A) $4.72 $4.44 06/30/2020 6.31% 13.08%
YTRA 07/17/2019 Ebix, Inc. (EBIX) $3.32 $3.1500 03/31/2020 5.33% 22.90%
ACHN 10/16/2019 Alexion Pharmaceuticals, Inc. (ALXN) $6.30 $6.07 06/30/2020 3.79% 7.86%

List of all pending deals:

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

Disclaimer: I hold long positions in Sprint (S), Mellanox Technologies (MLNX) and Pacific Biosciences of California (PACB). 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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