Merger Arbitrage Mondays – EQM Midstream Partners merges with Equitrans Midstream Corporation

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 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.

The updates announced for active deals last week included Craft Brew Alliance (BREW), InterXion Holding (INXN) and Central European Media Enterprises (CETV) receiving approval from their shareholders for their respective deals. The Federal Trade Commission (FTC) granted early termination of the required waiting period under the Hart-Scott-Rodino Act for the acquisitions of Forescout Technologies (FSCT) and Pope Resources (POPE). Zayo Group Holdings (ZAYO) received regulatory approval and Eldorado Resorts (ERI) received state approval for their deals.

Weekly Spread Changes

The weakness we saw in the market last week related to the spread of the COVID-19 virus was also reflected in active deals with the spread on several mergers and acquisitions increasing last week. The table below shows weekly spread changes between February 21, 2020 and February 28, 2020.

Symbol Quote Acquiring
Company Quote
Last Week
Spread Change
NTGN 1.5 BioNTech SE (BNTX) 35.1 47.42% 33.21% 14.21% All Stock
FOMX 3.6 Menlo Therapeutics Inc. (MNLO) 2.95 -19.17% -33.26% 14.09% Special Conditions
GNW 3.9 China Oceanwide Holdings Group Co., Ltd. (N/A) 39.23% 25.40% 13.83% All Cash
CBB 13.05 Brookfield Infrastructure Partners L.P. (BIP) 50.54 -4.21% -16.80% 12.59% All Cash
SORL 4.15 Ruili International Inc. (N/A) 0.00 13.73% 4.42% 9.31% All Cash
CYOU 10.76 Limited (SOHU) 9.53 0.37% 0.84% -0.47% All Cash
FSBC 17.22 Evans Bancorp, Inc. (EVBN) 39.27 3.37% 4.22% -0.85% All Cash
INXN 84.89 Digital Realty Trust, Inc. (DLR) 120.11 -0.01% 1.02% -1.03% All Stock
DLPH 14.12 BorgWarner Inc. (BWA) 31.6 1.47% 2.71% -1.24% All Stock
YTRA 2.84 Ebix, Inc. (EBIX) 26.44 -6.90% -4.23% -2.67% All Stock

Cincinnati Bell (CBB) amended its deal with Brookfield Infrastructure. The consideration payable to holders of outstanding shares of Cincinnati Bell common stock has been increased to $12.50 per share in cash from $10.50 per share in cash. This is the third amended deal in the month of February.

There were five new deals announced in the Deals in the Works section. On December 19, 2019, Xperi Corporation (XPER) and TiVo Corporation (TIVO) entered into a definitive agreement to combine in an all-stock transaction. According to Bloomberg, Xperi received an unsolicited takeover proposal on February 24, 2020, from a consortium led by its former chief executive officer, posing a potential challenge to its merger with TiVo.

Boingo Wireless (WIFI) and Iovance Biotherapeutics (IOVA) are exploring potential sales. Gilead Sciences (GILD) approached cancer therapy company Forty Seven  (FTSV) with a takeover offer. According to Reuters, Apollo Global Management (APO) has approached Tutor Perini Corp (TPC), with a close to $1 billion acquisition offer.

You can find all the active deals listed below in our Merger Arbitrage Tool (MAT) that automatically updates itself during market hours.

Deal Statistics:

Total Number of Deals Closed in 2020 27
Total Number of Deals Not Completed in 2020 2
Total Number of Pending Deals
Cash Deals 40
Stock Deals 24
Stock & Cash Deals 6
Special Conditions 4
Total Number of Pending Deals 74
Aggregate Deal Consideration $473.61 billion

New Deals:

  1. The acquisition of Jumei International Holding Limited (JMEI) by Super ROI Global Holding Limited and Jumei Investment Holding Limited in a ‘going private transaction’ for $299.19 million. Under the terms of the Agreement, Purchaser will promptly commence a tender offer to acquire all the outstanding Class A Ordinary Shares of the Company not owned by Purchaser at a price of $2.0 per share or $20.0 per ADS in cash, without interest and less $0.05 per ADS cancellation fees, $0.02 per ADS depositary service fees. We added JMEI as a potential deal to the Deals in the Works section on January 12, 2020, and the price after the news of the potential deal came out was $19.00.
  2. The acquisition of GAIN Capital Holdings (GCAP) by INTL FCStone (INTL) for $236 million or $6.00 per share in cash.
  3. The merger of EQM Midstream Partners (EQM) and Equitrans Midstream Corporation (ETRN) for $10.03 billion in an all stock deal. Under the terms of the agreement, each outstanding public common unit of EQM would be exchanged for 2.44 shares of ETRN common stock.

Deal Updates:

  1. On February 24, 2020, The Federal Trade Commission (FTC) granted early termination of the required waiting period under the Hart-Scott-Rodino Act with respect to the acquisition of Forescout Technologies (FSCT) by Advent International.
  2. On February 25, 2020, Craft Brew Alliance (BREW) announced that its shareholders voted at a special meeting of shareholders to adopt the agreement.
  3. On February 26, 2020, Stryker (SYK) announced that it has extended the offering period of its previously announced cash tender offer for all outstanding ordinary shares of Wright Medical Group (WMGI) from February 27, 2020 until April 30, 2020.
  4. On February 26, 2020, The Federal Trade Commission (FTC) granted early termination of the required waiting period under the Hart-Scott-Rodino Act with respect to the acquisition of Pope Resources (POPE) by Rayonier (RYN).
  5. On February 27, 2020, InterXion Holding (INXN) announced that InterXion shareholders voted to approve all proposals related to the Company’s pending strategic stock-for-stock combination with Digital Realty Trust (DLR).
  6. On February 27, 2020, Zayo Group Holdings (ZAYO) announced that all regulatory approvals relating to the previously announced merger through which the Company would be acquired by affiliates of Digital Colony Partners and the EQT Infrastructure IV fund have been received.
  7. On February 27, 2020, Eldorado Resorts (ERI) announced that the Company received approval from the Maryland State Lottery & Gaming Control Agency in connection with its pending acquisition of Caesars Entertainment Corporation (CZR) subject to customary conditions.
  8. On February 27, 2020, shareholders of Central European Media Enterprises (CETVapproved the acquisition of the company by Czech investment group PPF, although a U.S. senator has asked authorities to review the deal.
  9. On February 28, 2020, Cincinnati Bell (CBB) announced that it has amended its definitive merger agreement with Brookfield Infrastructure and its institutional partners to increase the consideration payable to holders of outstanding shares of Cincinnati Bell common stock to $12.50 per share in cash from $10.50 per share in cash, which values the transaction at approximately $2.745 billion, including debt.

Closed Deals:

  1. The acquisition of Diversified Restaurant Holdings (SAUC) by ICV Partners on February 25, 2020. It took 111 days for this deal to be completed.

Top 10 deals with largest spreads:

Symbol Announced
Profit Annualized
NTGN 01/16/2020 BioNTech SE (BNTX) $2.21 $1.5 06/30/2020 47.42% 143.04%
GNW 10/23/2016 China Oceanwide Holdings Group Co., Ltd. (N/A) $5.43 $3.9 03/31/2020 39.23% 477.31%
FIT 11/01/2019 Google LLC (GOOG) $7.35 $6.39 06/30/2020 15.02% 45.32%
SORL 11/29/2019 Ruili International Inc. (N/A) $4.72 $4.15 06/30/2020 13.73% 41.43%
CDOR 07/22/2019 NexPoint Hospitality Trust (N/A) $11.10 $9.98 03/16/2020 11.22% 273.08%
LACQ 12/30/2019 GTWY Holdings Limited (N/A) $11.50 $10.42 06/30/2020 10.36% 31.27%
FG 02/07/2020 Fidelity National Financial, Inc. (FNF) $12.50 $11.44 09/30/2020 9.27% 15.88%
QUMU 02/11/2020 Synacor, Inc. (SYNC) $1.79 $1.69 06/30/2020 5.75% 17.33%
TSG 10/02/2019 Flutter Entertainment PLC (PDYPF) $24.12 $22.95 09/30/2020 5.12% 8.77%
MLNX 03/11/2019 NVIDIA Corporation (NVDA) $125.00 $119.42 03/31/2020 4.67% 56.85%

List of all pending deals:

The list of all pending deals is only available to InsideArbitrage Premium members.

The number of active deals in our Merger Arbitrage Tool increased last week to 74 with an aggregate deal consideration of $473.61 billion, an increase from last week’s $462.56 billion. Neon Therapeutics (NTGN), Genworth Financial (GNW)  and Fitbit (FIT) still hold the top 3 positions in our table. Condor Hospitality Trust (CDOR) and Mellanox Technologies (MLNX) moved into the ‘Top 10 deals with largest spreads” table, replacing FSB Bancorp (FSBC) and KEMET Corporation (KEM).

Disclaimer: I hold a long position in 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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