Merger activity decreased last week with three new deals announced and one deal closing. Even though the activity with respect to new deals announced and existing deals closing was low last week, we saw an uptick in potential deals and a number of updates related to the active deals in our list.
We continue to see consolidation in the midstream section of the energy industry with yet another merger announced where EQM Midstream Partners (EQM) is merging with Equitrans Midstream Corporation (ETRN) in a $10.03 billion all stock deal. The resulting entity would be a C-Corporation and EQM will as a result abandon its Master Limited Partnership (MLP) structure.
Kinder Morgan was one of the first companies in the energy industry to favor the Master Limited Partnership (MLP) structure that allowed companies to pay no corporate taxes and pass all its profits to investors as distributions. More than five years ago, it was also one of the first to abandon the structure by merging its four pipeline companies into a single one and adopting a traditional C corporate structure. With changes in the tax structure in 2018 pushing the corporate tax rate well below the top individual tax rate, the MLP structure was no longer as tax efficient as it once was and we have seen a number of MLP companies converting to C corporations in 2018.
Headquartered in Beijing, China, Jumei International Holding Limited (JMEI) is an online retailer of beauty products. Earlier this year, on January 12, 2020, the company announced that its board of directors had received a preliminary non-binding proposal letter from Mr. Leo Ou Chen, chairman of the Board, chief executive officer and acting chief financial officer of the Company, to acquire all of the outstanding ordinary shares of the Company. Jumei agreed to a ‘going private transaction’ last week at a 14.7% premium. These ‘going private’ deals are often viewed with skepticism and we have some of them fail in the past. In that context, the 2.99% spread on this deal is lower than what we would have expected.
Founded in 1999, Gain Capital Holdings (GCAP) is one of the early developers of online forex trading and owns the site FOREX.com. On February 27, 2020, the company entered into a definitive agreement to be acquired by INTL FCStone (INTL) at a 70% premium. The stock appreciated from $3.53 to $5.86 after the deal was announced.