Merger activity increased last week with five new deals announced and one deal closing.
The new deals announced last week were across different sectors. Two of the five new deals belong to the financial services sector, one from the real estate sector and two from the technology sector. According to Bloomberg, on December 4, 2019, Amherst Residential had announced that it was in advanced discussions to acquire Front Yard Residential (RESI). Front Yard’s shares went up by around 11% before trading stopped that day. On February 18, 2020, Front Yard entered into a definitive agreement to be acquired by Amherst.
The biggest highlight for last week was the acquisition of E*TRADE Financial Corporation (ETFC) by Morgan Stanley (MS). This announcement was made just months after E-Trade’s rivals Charles Shcwab (SCHW) and TD Ameritrade (AMTD) decided to merge in a $26 billion deal. It is interesting to see one of Wall Street’s biggest investment banks strike a deal with an online brokerage firm at a time where almost all brokerage firms have slashed their commissions and fees and are offering free trading. According to James Gorman, Chairman and CEO of Morgan Stanley, this acquisition will help position Morgan Stanley as a top player across all three channels: Financial Advisory, Self-Directed, and Workplace. He also said that E*TRADE represents an extraordinary growth opportunity for Morgan Stanley’s Wealth Management business. Check out Jason Zweig’s article in the Wall Street Journal about why investors need to understand the rules of the new game.
Besides definitive and confirmed new deals, we also look at potential deals that could be announced in the coming weeks or months. There were two potential deals announced last week. The Board of Directors of Blue Apron Holdings (APRN) announced that they are exploring a range of strategic alternatives, which could include the sale of the company. The company has posted a string of quarterly losses since it went public in June 2017 at a split adjusted $150/share. The stock closed at $2.98 last Friday. According to Reuters, French power utility Engie SA has approached Ameresco (AMRC) to express interest in acquiring it. This was the second potential deal announced last week.
Weekly Spread Changes
The table below shows weekly spread changes between February 14, 2020 and February 21, 2020.