Merger activity decreased last week with two new deals announced and three deals closing.
February 11, 2020 was a significant day for arbitrageurs as a deal that was widely expected to not succeed managed to see one of its key hurdles removed. After months of struggle with antitrust issues, T-Mobile (TMUS) finally received approval from a federal judge for its acquisition of Sprint (S); giving the company a stronger foothold as it plans to take on rivals Verizon and AT&T in the race for developing next-generation wireless 5G technology. The spread as you can see from our new “Weekly Spread Changes” section below, dropped from 77.74% to 13.87%.
According to Reuters, “T-Mobile’s German parent, Deutsche Telekom AG, plans to ask Sprint’s majority owner, Japan’s SoftBank Group, to agree to a lower price, arguing that Sprint’s fortunes have deteriorated following their agreement two years ago”. The deal is expected to close in the coming few weeks. I wrote the following in a premium post the day after the lawsuit was defeated,
Considering this is an all stock deal, T-Mobile already received a boost through the nearly 12% appreciation in its stock price today, which saw the stock touch an all time high. I would be very surprised if the companies tried to negotiate on price after such a long battle. Even if T-Mobile were to attempt a renegotiation, they would not just find SoftBank on the other side of the table but also Paul Singer’s Elliott Management, which has built a more than $2.5 billion stake in SoftBank Group.
The nearly 14% spread on the deal reflects both the potential renegotiation as well as a vote from the California Public Utility Commission. We have seen companies offer specific concessions to state regulators in the past to get their approval.
Weekly Spread Changes
This is a new feature we have introduced to the Merger Arbitrage Mondays post where we show the largest five spread changes week-over-week both in the negative direction (where spreads increase) as well as the positive direction (where spreads narrow like they did in the Sprint and T-Mobile deal). The table below shows weekly spread changes between February 7, 2020 and February 14, 2020.
Symbol | Quote | Acquiring Company | Acquiring Company Quote | Current Spread | Last Week Spread | Spread Change Weekly | Deal Type |
---|---|---|---|---|---|---|---|
QUMU | 1.98 | Synacor, Inc. (SYNC) | 1.29 | 4.89% | 0.00% | 4.89% | All Stock |
NTGN | 1.45 | BioNTech SE (BNTX) | 30.75 | 33.60% | 28.84% | 4.76% | All Stock |
FIT | 6.42 | Google LLC (N/A) (GOOG) | 14.49% | 10.69% | 3.80% | All Cash | |
INST | 47.66 | Thoma Bravo, LLC (N/A) | 2.81% | 0.06% | 2.75% | All Cash | |
TSG | 23.35 | Flutter Entertainment PLC (PDYPF) | 114 | 10.00% | 7.79% | 2.21% | All Stock |
PGNX | 4.61 | Lantheus Holdings, Inc. (LNTH) | 16.64 | -9.69% | -7.72% | -1.97% | All Stock |
PEGI | 27.58 | Canada Pension Plan Investment Board (N/A) | -3.01% | -0.30% | -2.71% | All Cash | |
MSBF | 17.3 | Kearny Financial Corp. (KRNY) | 12.1 | -9.08% | -5.99% | -3.09% | All Stock |
GNW | 4.3 | China Oceanwide Holdings Group Co., Ltd. (N/A) | 26.28% | 42.15% | -15.87% | All Cash | |
S | 8.69 | T-Mobile US, Inc. (TMUS) | 96.48 | 13.87% | 77.74% | -63.87% | All Stock |
The Instructure (INST) and Thoma Bravo deal went through some changes last week. On February 12, 2020, Thoma Bravo’s revised offer of $48.50 was rejected by the Instructure board during a special meeting. The shareholder meeting which was supposed to be held the next day was moved to February 14, 2020. Thoma Bravo sweetened its offer again by shelling out an additional $1.40. The two companies finally amended their merger agreement by increasing the offer price to $49.00.
With the rapid growth of online shopping, the traditional brick and mortar retail spaces have been taking a hit. Simon Property Group (SPG), the largest owner of US malls, announced last week that it is acquiring Taubman Centers (TCO) at a premium of 51%. Taubman owns, manages or leases 26 super-regional shopping centers in the U.S. and Asia.
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 | 25 |
Total Number of Deals Not Completed in 2020 | 2 |
Total Number of Pending Deals | |
Cash Deals | 37 |
Stock Deals | 22 |
Stock & Cash Deals | 6 |
Special Conditions | 4 |
Total Number of Pending Deals | 69 |
Aggregate Deal Consideration | $440.26 billion |
New Deals:
Deal Updates:
Closed Deals:
Top 10 deals with largest spreads:
Symbol | Announced Date | Acquiring Company | Closing Price | Last Price | Closing Date | Profit | Annualized Profit |
---|---|---|---|---|---|---|---|
NTGN | 01/16/2020 | BioNTech SE (BNTX) | $1.94 | $1.45 | 06/30/2020 | 33.60% | 90.85% |
GNW | 10/23/2016 | China Oceanwide Holdings Group Co., Ltd. (N/A) | $5.43 | $4.3 | 03/31/2020 | 26.28% | 218.00% |
FIT | 11/01/2019 | Google LLC (GOOG) | $7.35 | $6.42 | 06/30/2020 | 14.49% | 39.17% |
S | 04/29/2018 | T-Mobile US, Inc. (TMUS) | $9.89 | $8.69 | 03/31/2020 | 13.87% | 115.03% |
LACQ | 12/30/2019 | GTWY Holdings Limited (N/A) | $11.50 | $10.42 | 06/30/2020 | 10.36% | 28.02% |
TSG | 10/02/2019 | Flutter Entertainment PLC (PDYPF) | $25.68 | $23.35 | 09/30/2020 | 10.00% | 16.07% |
QUMU | 02/11/2020 | Synacor, Inc. (SYNC) | $2.08 | $1.9800 | 06/30/2020 | 4.89% | 13.23% |
SORL | 11/29/2019 | Ruili International Inc. (N/A) | $4.72 | $4.51 | 06/30/2020 | 4.66% | 12.59% |
FSBC | 12/19/2019 | Evans Bancorp, Inc. (EVBN) | $17.80 | $17.08 | 06/30/2020 | 4.22% | 11.40% |
FG | 02/07/2020 | Fidelity National Financial, Inc. (FNF) | $12.50 | $12.09 | 09/30/2020 | 3.39% | 5.45% |
List of all pending deals:
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.
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