Merger Arbitrage Mondays – An Insurance Company Finds A New Home

Merger activity decreased last week with three new deals announced and five deals closing.

FGL Holdings (FG) previously known as Fidelity & Guaranty Life was founded in the year 1959. The company has been a leader in providing annuity and life-insurance product for nearly 60 years. This is the third time this company has made its way into our Merger Arbitrage Tool. We added Fidelity & Guaranty Life to our list of active deals in the year 2015, when the company announced it would be acquired by the Chinese insurance firm Anbang Insurance. The deal was terminated on April 17, 2017. Just over a month later, on May 24, 2017, Fidelity & Guaranty Life agreed to be acquired by CF Corporation. That deal was completed on November 30, 2017 and the company renamed itself FGL Holdings. Almost three years later, the company has made it to our list for the third time, now being acquired by Fidelity National Financial (FNF) in a cash or stock deal.

Opus Bank (OPB), an Irvine, California based regional bank, agreed to be acquired by Pacific Premier Bancorp (PPBI), another Irvine based bank for $1 billion in an all stock deal.

The acquisition of Forescout Technologies (FSCT) by Advent International was the third deal announced last week. Forescout provides agentless visibility, control and orchestration from campus to cloud. The company started exploring strategic alternatives including a possible sale in November of last year.

Weekly Spread Changes

The table below shows weekly spread changes for some of the deals from our Merger Arbitrage table between January 31, 2020 and February 7, 2020.

Symbol Quote Acquiring Company Current Spread Spread Last Week Weekly Spread Change Deal Type
GNW 3.82 China Oceanwide Holdings Group Co., Ltd. 42.15% 32.44% 9.71% All Cash
CBB 12.9 Brookfield Infrastructure Partners L.P. (BIP) -18.60% -23.41% 4.81% All Cash
BREW 16.11 Anheuser-Busch 2.42% 0.61% 1.81% All Cash
MSBF 16.76 Kearny Financial Corp. (KRNY) -5.99% -7.41% 1.42% All Stock
LACQ 10.44 GTWY Holdings Limited 10.15% 10.26% -0.11% Special Conditions
AVX 20.32 Kyocera Corporation -4.04% -3.80% -0.24% All Cash
FIT 6.64 Google LLC 10.69% 12.73% -2.04% All Cash
PGNX 4.62 Lantheus Holdings, Inc. (LNTH) -7.72% -1.77% -5.95% All Stock
NTGN 1.51 BioNTech SE (BNTX) 28.84% 36.31% -7.47% All Stock
S 4.93 T-Mobile US, Inc. (TMUS) 77.74% 85.85% -8.11% All Stock
FOMX 4.5 Menlo Therapeutics Inc. (MNLO) -35.33% -24.42% -10.91% Special Conditions

Genworth Financial (GNW) has been in our list of active deals for over three years now. On February 4, 2020, Tom McInerney, President and CEO of Genworth Financial said that they are in discussions with the New York Department of Financial Services in an effort to secure a reapproval of the Oceanwide transaction, which represents one of the last remaining milestones in closing the transaction. He also said, “However, if the parties are unable to reach an agreement with the NYDFS that is also acceptable to our other state insurance regulators, Oceanwide and Genworth will need to consider other alternatives to the transaction for each party.” The Merger Agreement has been extended to not later than March 31, 2020.

The T-Mobile (TMUS) and Sprint (S) merger continues to reel under Antitrust issues. U.S. District Court Judge Victor Marrero is expected to deliver a decision later this month regarding the antitrust trials.

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. According to the Wall Street Journal, the owner of the New York Stock Exchange has made a takeover offer for eBay (EBAY) that could value the company at more than $30 billion.

Deal Statistics:

Total Number of Deals Closed in 2020 22
Total Number of Deals Not Completed in 2020 2
Total Number of Pending Deals
Cash Deals 39
Stock Deals 21
Stock & Cash Deals 6
Special Conditions 4
Total Number of Pending Deals 70
Aggregate Deal Consideration $431.45 billion

New Deals:

  1. The acquisition of Opus Bank (OPB) by Pacific Premier Bancorp (PPBI) for $1 billion in an all stock deal. Under the terms of the agreement, holders of Opus common stock (including holders of Opus Series A preferred stock whose shares will be treated on an as-converted basis) will have the right to receive 0.90 shares of Pacific Premier common stock for each share of Opus common stock they own.
  2. The acquisition of FGL Holdings (FG) by Fidelity National Financial (FNF) for $2.7 billion in a cash or stock deal. Under the terms of the agreement, holders of F&G’s ordinary shares (other than FNF and its subsidiaries) may elect to receive either (i) $12.50 per share in cash or (ii) 0.2558 of a share of FNF common stock for each ordinary share of F&G they own. This is subject to an election and proration mechanism such that the aggregate consideration paid to such holders of F&G’s ordinary shares will consist of approximately 60% cash and 40% FNF common stock.
  3. The acquisition of Forescout Technologies (FSCT) by Advent International for $1.9 billion or $33.00 per share in cash. We added FSCT as a potential deal to the Deals in the Works section on November 11, 2019, and the price after the news of the potential deal came out was $32.52.

Deal Updates:

  1. On February 3, 2020, LogMeIn (LOGMannounced the expiration of a 45-day “go-shop” period under the terms of the previously announced definitive agreement in which LogMeIn will be acquired in a transaction led by affiliates of Francisco Partners.
  2. On February 4, 2020, Tiffany (TIF) announced that at a special meeting of its stockholders, the Company’s stockholders voted to approve the adoption of the previously announced Agreement and Plan of Merger.
  3. On February 4, 2020, KEMET Corporation (KEMannounced the expiration of the required waiting period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976 (the “HSR Act”) in connection with the previously announced acquisition of KEMET by Yageo Corporation.
  4. On February 4, 2020, Zayo Group Holdings (ZAYO) announced that with respect to its Merger Agreement with DigitalColony Partners, it has obtained regulatory approvals relating to review and clearance by the Committee on Foreign Investment in the United States (CFIUS) and the receipt of certain foreign antitrust approvals, certain other foreign direct investment review approvals, and the approval of multiple U.S. states (all of which have been obtained except for approval from the California public utility commission), and the receipt of FCC approval.
  5. On February 5, 2020, Xperi Corporation (XPER) and TiVo Corporation (TIVO) announced that they have received notification of early termination of the waiting period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976 (the “HSR Act”) with respect to the all-stock merger of equals transaction of Xperi and TiVo.
  6. On February 5, 2020, Craft Brew Alliance (BREW) and Anheuser-Busch Companies each received a request for additional information and documentary materials (the “Second Request”) from the DOJ in connection with the DOJ’s review of the Merger.
  7. On February 5, 2020, El Paso Electric Company (EE) and the Infrastructure Investments Fund announced that the City of El Paso, Texas consented to the acquisition of EPE by an affiliate of IIF by approving EPE’s Franchise Assignment Application filed with the City of El Paso on September 20, 2019.
  8. On February 6, 2020, Foamix Pharmaceuticals (FOMX) and Menlo Therapeutics (MNLO) announced that the shareholders of Foamix and stockholders of Menlo voted to approve all shareholder and stockholder proposals necessary to complete the previously announced merger at their respective shareholder meetings. The parties expect to complete the merger in early March 2020.

Closed Deals:

  1. The acquisition of Continental Building Products (CBPX) by Compagnie de Saint-Gobain S.A. on February 3, 2020. It took 83 days for this deal to be completed.
  2. The acquisition of Aevi Genomic Medicine (GNMX) by Cerecor (CERC) on February 3, 2020. It took 60 days for this deal to be completed.
  3. The acquisition of Liberty Property Trust (LPT) by Prologis (PLD) on February 4, 2020. It took 100 days for this deal to be completed.
  4. The acquisition of William Lyon Homes (WLH) by Taylor Morrison Home Corporation (TMHC) on February 6, 2020. It took 92 days for this deal to be completed.
  5. The acquisition of Innophos Holdings (IPHS) by One Rock Capital Partners on February 7, 2020. It took 109 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
S 04/29/2018 T-Mobile US, Inc. (TMUS) $8.76 $4.93 03/31/2020 77.74% 556.40%
GNW 10/23/2016 China Oceanwide Holdings Group Co., Ltd. (N/A) $5.43 $3.82 03/31/2020 42.15% 301.64%
NTGN 01/16/2020 BioNTech SE (BNTX) $1.95 $1.51 06/30/2020 28.84% 74.12%
FIT 11/01/2019 Google LLC (N/A) $7.35 $6.64 06/30/2020 10.69% 27.48%
LACQ 12/30/2019 GTWY Holdings Limited (N/A) $11.50 $10.44 06/30/2020 10.15% 26.10%
TSG 10/02/2019 Flutter Entertainment PLC (PDYPF) $25.01 $23.2 09/30/2020 7.79% 12.16%
FSBC 12/19/2019 Evans Bancorp, Inc. (EVBN) $17.80 $16.95 06/30/2020 5.01% 12.89%
MLNX 03/11/2019 NVIDIA Corporation (NVDA) $125.00 $119.56 03/31/2020 4.55% 32.56%
AMTD 11/25/2019 The Charles Schwab Corporation (SCHW) $51.27 $49.31 12/31/2020 3.97% 4.45%
SORL 11/29/2019 Ruili International Inc. (N/A) $4.72 $4.54 06/30/2020 3.96% 10.19%

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) and Mellanox Technologies (MLNX). 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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