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.
Symbol | Quote | Acquiring Company | Acquiring Company Quote | Current Spread | Last Week Spread | Spread Change Weekly | Deal Type |
---|---|---|---|---|---|---|---|
PGNX | 5.16 | Lantheus Holdings, Inc. (LNTH) | 16.57 | -0.45% | -9.69% | 9.24% | All Stock |
ETFC | 53.35 | Morgan Stanley (MS) | 52.42 | 2.50% | 0.00% | 2.50% | All Stock |
IOTS | 12.33 | Dialog Semiconductor Plc (DLGNF) | 41.37 | 1.78% | 0.00% | 1.78% | All Cash |
CBB | 12.62 | Brookfield Infrastructure Partners L.P. (BIP) | 55.45 | -16.80% | -18.16% | 1.36% | All Cash |
FG | 11.94 | Fidelity National Financial, Inc. (FNF) | 43.9 | 4.69% | 3.39% | 1.30% | Special Conditions |
INST | 48.83 | Thoma Bravo, LLC (N/A) | 0.35% | 2.81% | -2.46% | All Cash | |
AVX | 21.69 | Kyocera Corporation (N/A) | 0.00 | -10.10% | -4.97% | -5.13% | All Cash |
TSG | 25.4 | Flutter Entertainment PLC (PDYPF) | 117.5 | 4.22% | 10.00% | -5.78% | All Stock |
YTRA | 3.52 | Ebix, Inc. (EBIX) | 33.71 | -4.23% | 1.85% | -6.08% | All Stock |
S | 10.05 | T-Mobile US, Inc. (TMUS) | 98.57 | 0.59% | 13.87% | -13.28% | All Stock |
Having received all needed approvals, T-Mobile US (TMUS) and Sprint Corporation (S) continue to work towards closing their deal. The spread on the deal, which was over 90% earlier this month narrowed to less than 1% last week after the companies received approval from a federal judge to proceed with the merger and the companies renegotiated the deal in such a way that it did not hurt common shareholders. The exchange ratio for common shareholders remained 0.10256 T-Mobile shares for each Sprint share, while SoftBank took a small cut by agreeing to a ratio of 0.091 shares of T-Mobile for each share of Sprint or in other words 11 shares of Sprint for each share of T-Mobile.
Considering the spread on the deal is now less than 1% and my position in Sprint is unhedged, I will be closing out the rest of my position in the coming days.
Progenics Pharmaceuticals (PGNX) saw a 9.24% weekly change in its spread after entering into an amended and restated agreement with Lantheus Holdings (LNTH). Under the amended terms, the stock consideration to be received by Progenics shareholders has been increased and a non-tradeable contingent value right (“CVR”) was added to the deal.
The other updates announced last week for the active deals include shareholders approval for KEMET Corporation’s (KEM) acquisition by Yageo Corporation and Cleveland-Cliffs (CLF) and AK Steel Holding Corporation (AKS) receiving all necessary regulatory approvals for their merger.
You can find all the active deals listed below in our Merger Arbitrage Tool (MAT) that automatically updates itself during market hours.
There were two new deals announced in the Deals in the Works section.
Deal Statistics:
Total Number of Deals Closed in 2020 | 26 |
Total Number of Deals Not Completed in 2020 | 2 |
Total Number of Pending Deals | |
Cash Deals | 39 |
Stock Deals | 23 |
Stock & Cash Deals | 6 |
Special Conditions | 4 |
Total Number of Pending Deals | 72 |
Aggregate Deal Consideration | $462.56 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) | $2.04 | $1.53 | 06/30/2020 | 33.21% | 94.69% |
GNW | 10/23/2016 | China Oceanwide Holdings Group Co., Ltd. (N/A) | $5.43 | $4.33 | 03/31/2020 | 25.40% | 250.61% |
FIT | 11/01/2019 | Google LLC (GOOG) | $7.35 | $6.45 | 06/30/2020 | 13.95% | 39.79% |
LACQ | 12/30/2019 | GTWY Holdings Limited (N/A) | $11.50 | $10.45 | 06/30/2020 | 10.05% | 28.65% |
QUMU | 02/11/2020 | Synacor, Inc. (SYNC) | $1.97 | $1.86 | 06/30/2020 | 5.94% | 16.94% |
FG | 02/07/2020 | Fidelity National Financial, Inc. (FNF) | $12.50 | $11.94 | 09/30/2020 | 4.69% | 7.78% |
SORL | 11/29/2019 | Ruili International Inc. (N/A) | $4.72 | $4.52 | 06/30/2020 | 4.42% | 12.62% |
TSG | 10/02/2019 | Flutter Entertainment PLC (PDYPF) | $26.47 | $25.4 | 09/30/2020 | 4.22% | 7.01% |
FSBC | 12/19/2019 | Evans Bancorp, Inc. (EVBN) | $17.80 | $17.08 | 06/30/2020 | 4.22% | 12.02% |
KEM | 11/11/2019 | Yageo Corporation (N/A) | $27.20 | $26.12 | 12/31/2020 | 4.13% | 4.84% |
List of all pending deals:
We currently have 72 active deals in our Merger Arbitrage Tool with an aggregate deal consideration of $462.56 billion, which is a significant increase from last week’s $440.26 billion. The spike in the aggregate deal consideration is because of Morgan Stanley’s $13 billion deal to acquire E-Trade. Neon Therapeutics (NTGN) continues to hold the top position on our table with a 33.21% spread, followed by Genworth Financial (GNW) with 25.4% spread and Fitbit (FIT) with a spread of 13.95%.
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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