Merger Arbitrage Mondays – More Than 10 Deals With Spreads Of Over 25%

Merger activity ground to a halt last week with no new deals announced and two active deals completed. Merger spreads continued to remain wide for a second week in a row and at one point even AbbVie’s acquisition of Allergan (AGN) was trading at a spread of over 12% as you can see below from our spread history chart for that deal.

AbbVie Allergan Spread History Chart

AbbVie Allergan Spread History Chart (click to enlarge)

With 10 deals trading at spreads of over 25% and 26 deals trading with spreads of over 10%, the merger arbitrage space is rife with both opportunity and risk. If the economic situation deteriorates further and impacted industries are not able to benefit from the massive $2 trillion stimulus package that has now passed both houses of congress, there is a good possibility that several of these deals will fall apart.

Studying the material adverse change (MAC) clause of a merger agreement may not be sufficient, as acquirers could choose to walk away from deals and take their chances in the courts. Paying attention to the kind of acquirer, the macro environment and industry specific issues is very important at this juncture. We wrote the following in last week’s Merger Arbitrage Mondays article about industry specific risks,

As the COVID-19 outbreak escalates globally, we saw significant changes in the spreads for the active deals in our table. Companies belonging to the consumer discretionary sector, like Stein Mart (SMRT), Tiffany & Co (TIF) and Caesars Entertainment Corporation (CZR) had to shut down stores and operations in response to the COVID-19 outbreak.

The Tiffany situation was interesting with the spread on the merger jumping over 20% early last week before settling lower towards the end of the week. There was some chatter about the drop in Tiffany being related to Citadel Investment unwinding its merger arbitrage position after the head of its merger arbitrage desk, Maulin Shah, leaving the company following a bad bet on the Sprint – T-Mobile merger. There was also some chatter about LVMH approaching Tiffany’s board to acquire shares on the open market at a discount, which frankly felt far fetched.

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

There was one new deal announced in the Deals in the Works section last week.

Weekly Spread Changes:

The table below shows weekly spread changes between March 20, 2020 and March 27, 2020.

Symbol Quote Acquiring
Company
Acquiring
Company Quote
Current
Spread
Last Week
Spread
Spread Change
Weekly
Deal
Type
YTRA 1.08 Ebix, Inc. (EBIX) 17.48 61.85% 28.57% 33.28% All Stock
CDOR 4.47 NexPoint Hospitality Trust (N/A) 148.32% 120.24% 28.08% All Cash
POPE 79.15 Rayonier Inc. (RYN) 21.85 23.32% 11.26% 12.06% Cash Plus Stock
NTGN 2.26 BioNTech SE (BNTX) 55 53.32% 41.52% 11.80% All Stock
TIVO 6.7 Xperi Corporation (XPER) 13.57 -7.85% -16.64% 8.79% All Stock
SORL 4.04 Ruili International Inc. (N/A) 16.83% 47.96% -31.13% All Cash
PGNX 3.59 Lantheus Holdings, Inc. (LNTH) 12.12 4.66% 41.37% -36.71% All Stock
GILT 7.34 Comtech Telecommunications Corp. (CMTL) 14.99 15.03% 52.96% -37.93% Cash Plus Stock
CETV 3.18 PPF Group N.V. (N/A) 44.03% 84.68% -40.65% All Cash
SMRT 0.488 Kingswood Capital Management, L.P. (N/A) 84.43% 221.43% -137.00% All Cash

Deal Statistics:

Total Number of Deals Closed in 2020 37
Total Number of Deals Not Completed in 2020 3
Total Number of Pending Deals
Cash Deals 37
Stock Deals 27
Stock & Cash Deals 5
Special Conditions 4
Total Number of Pending Deals 73
Aggregate Deal Consideration $538.81 billion

Deal Updates:

  1. On March 24, 2020, the Board of Directors of SORL Auto Parts (SORLresolved to hold the special meeting of the Company’s stockholders ‎at on May 8, 2020.
  2. On March 24, 2020, Aircastle Limited (AYR) announced the receipt of the final regulatory approval that is a condition to closing Aircastle’s previously announced merger with an entity controlled by affiliates of Marubeni Corporation and Mizuho Leasing Company, Limited.
  3. On March 24, 2020, Telaria (TLRA) announced that, due to the rapidly evolving public health concerns relating to the novel coronavirus (COVID-19) pandemic, it intends to convene and then immediately adjourn, without conducting any business, its special meeting of stockholders scheduled to occur on March 30, 2020 in a virtual meeting format only.
  4. On March 24, 2020, Condor Hospitality Trust (CDOR) provided an update on the previously announced acquisition by merger of the Company by NexPoint Hospitality Trust. Closing of the acquisition did not occur on March 23, 2020, as extended to such date at the request of NHT pursuant to a previously announced amendment to the merger agreement. The Company is in discussions with NHT concerning the closing of the acquisition, and the Company is also reviewing its options and reserves all rights under the merger agreement.
  5. On March 24, 2020, Genworth Financial (GNW) and China Oceanwide Holdings Group announced that the New York State Department of Financial Services (NYDFS) has reapproved the proposed acquisition of control by Oceanwide of Genworth’s New York-domiciled insurance company, Genworth Life Insurance Company of New York (GLICNY).
  6. On March 27, 2020, shareholders of Southwest Georgia Financial Corporation (SGBapproved the company’s merger with The First Bancshares (FBMS) at a special meeting of shareholders.
  7. On March 27, 2020, The Stars Group (TSG) announced that its special meeting of shareholders to approve the proposed all-share combination with Flutter Entertainment will be held on Friday, April 24, 2020.

Closed Deals:

  1. The acquisition of Instructure (INST) by Thoma Bravo on March 24, 2020. It took 111 days for this deal to be completed.
  2. The acquisition of Aircastle Limited (AYR) by Marubeni Corporation and Mizuho Leasing Company, Limited on March 27, 2020. It took 142 days for this deal to be completed.

Top 10 deals with largest spreads:

Symbol Announced
Date
Acquiring
Company
Closing
Price
Last
Price
Closing
Date
Profit Annualized
Profit
CDOR 07/22/2019 NexPoint Hospitality Trust (N/A) $11.10 $4.47 06/30/2020 148.32% 582.12%
SMRT 01/31/2020 Kingswood Capital Management, L.P. (N/A) $0.90 $0.488 06/30/2020 84.43% 331.35%
YTRA 07/17/2019 Ebix, Inc. (EBIX) $1.75 $1.08 03/31/2020 61.85% 11287.96%
NTGN 01/16/2020 BioNTech SE (BNTX) $3.47 $2.26 06/30/2020 53.32% 209.26%
GNW 10/23/2016 China Oceanwide Holdings Group Co., Ltd. (N/A) $5.43 $3.75 03/31/2020 44.80% 8176.00%
CETV 10/27/2019 PPF Group N.V. (N/A) $4.58 $3.18 06/30/2020 44.03% 172.79%
CZR 06/24/2019 Eldorado Resorts, Inc. (ERI) $9.76 $6.85 06/30/2020 42.50% 166.79%
FSBC 12/19/2019 Evans Bancorp, Inc. (EVBN) $17.80 $13.39 06/30/2020 32.94% 129.26%
FG 02/07/2020 Fidelity National Financial, Inc. (FNF) $12.50 $9.51 09/30/2020 31.44% 62.03%
TGE 12/17/2019 Blackstone Infrastructure Partners (N/A) $22.45 $17.44 06/30/2020 28.73% 112.75%

List of all pending deals:

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

Symbol Announced
Date
Acquiring
Company
Deal
Type
Closing
Value
Closing
Price
Last
Price
Volume Closing
Date
Profit Annu.
Profit
+ CDOR 07/22/2019 NexPoint Hospitality Trust (N/A) All Cash $318 million $11.10 $4.47 37,555 06/30/2020 148.32% 588.45%
+ SMRT 01/31/2020 Kingswood Capital Management, L.P. (N/A) All Cash $819.29 million $0.90 $0.488 206,396 06/30/2020 84.43% 334.95%
+ YTRA 07/17/2019 Ebix, Inc. (EBIX) All Stock $239 million $1.75 $1.08 110,999 03/31/2020 61.85% 22575.93%
+ NTGN 01/16/2020 BioNTech SE (BNTX) All Stock $67 million $3.47 $2.26 158,705 06/30/2020 53.32% 211.54%
+ GNW 10/23/2016 China Oceanwide Holdings Group Co., Ltd. (N/A) All Cash $2.7 billion $5.43 $3.75 7,586,137 03/31/2020 44.80% 16352.00%
+ CETV 10/27/2019 PPF Group N.V. (N/A) All Cash $2.1 billion $4.58 $3.18 1,094,193 06/30/2020 44.03% 174.67%
+ CZR 06/24/2019 Eldorado Resorts, Inc. (ERI) Cash Plus Stock $17.3 billion $9.76 $6.85 13,631,888 06/30/2020 42.50% 168.60%
+ FSBC 12/19/2019 Evans Bancorp, Inc. (EVBN) All Cash $34.7 million $17.80 $13.39 341 06/30/2020 32.94% 130.67%
+ FG 02/07/2020 Fidelity National Financial, Inc. (FNF) Special Conditions $2.7 billion $12.50 $9.51 3,058,603 09/30/2020 31.44% 62.37%
+ TGE 12/17/2019 Blackstone Infrastructure Partners (N/A) All Cash $7.93 billion $22.45 $17.44 3,254,381 06/30/2020 28.73% 113.97%
+ POPE 01/15/2020 Rayonier Inc. (RYN) Cash Plus Stock $656 million $97.61 $79.15 19,386 06/30/2020 23.32% 92.53%
+ CORV 03/16/2020 ADVANZ PHARMA (N/A) Special Conditions $76 million $0.42 $0.355 1,618,984 06/30/2020 18.31% 72.64%
+ SORL 11/29/2019 Ruili International Inc. (N/A) All Cash $351.05 million $4.72 $4.04 103,400 06/30/2020 16.83% 66.78%
+ GILT 01/29/2020 Comtech Telecommunications Corp. (CMTL) Cash Plus Stock $532.5 million $8.44 $7.34 276,380 10/31/2021 15.03% 9.46%
+ WEBK 12/05/2019 Cambridge Bancorp (CATC) All Stock $122 million $29.00 $25.39 2,245 06/30/2020 14.22% 56.41%
+ AXE 01/13/2020 WESCO International, Inc. (WCC) Special Conditions $4.5 billion $100.00 $87.66 348,582 09/30/2020 14.08% 27.92%
+ FIT 11/01/2019 Google LLC (GOOG) All Cash $2.1 billion $7.35 $6.46 5,421,033 06/30/2020 13.78% 54.66%
+ TSG 10/02/2019 Flutter Entertainment PLC (PDYPF) All Stock $12.25 billion $20.06 $17.68 2,603,630 09/30/2020 13.48% 26.74%
+ KEM 11/11/2019 Yageo Corporation (N/A) All Cash $1.8 billion $27.20 $23.98 572,837 12/31/2020 13.43% 17.76%
+ TCO 02/10/2020 Simon Property Group, Inc. (SPG) All Cash $8.79 billion $52.50 $46.39 1,182,753 06/30/2020 13.17% 52.25%
+ MEET 03/05/2020 NuCom Group (N/A) All Cash $500 million $6.30 $5.6 1,543,696 12/31/2020 12.50% 16.53%
+ IOTS 02/20/2020 Dialog Semiconductor Plc (DLGNF) All Cash $500 million $12.55 $11.2 535,351 09/30/2020 12.05% 23.91%
+ BREW 11/12/2019 Anheuser-Busch (N/A) All Cash $321 million $16.50 $14.85 354,207 06/30/2020 11.11% 44.08%
+ TECD 11/13/2019 Apollo Global Management (APO) All Cash $5.4 billion $145.00 $130.64 356,344 06/30/2020 10.99% 43.61%
+ SBBX 03/12/2020 Provident Financial Services, Inc. (PFS) All Stock $208.9 million $18.10 $16.39 20,534 09/30/2020 10.45% 20.73%
+ DLPH 01/28/2020 BorgWarner Inc. (BWA) All Stock $3.3 billion $10.75 $9.73 1,761,282 12/31/2020 10.44% 13.80%
+ TCBI 12/09/2019 Independent Bank Group, Inc. (IBTX) All Stock $3 billion $24.81 $22.73 789,585 06/30/2020 9.14% 36.27%
+ JMEI 02/25/2020 Super ROI Global Holding Limited and Jumei Investment Holding Limited (N/A) All Cash $299.19 million $20.00 $18.31 24,462 06/30/2020 8.96% 35.54%
+ RESI 02/18/2020 Amherst Residential, LLC (N/A) All Cash $2.3 billion $12.50 $11.5 542,015 06/30/2020 8.70% 34.50%
+ GCAP 02/27/2020 INTL FCStone Inc. (INTL) All Cash $236 million $6.00 $5.57 144,815 06/30/2020 7.72% 30.63%
+ QGEN 03/03/2020 Thermo Fisher Scientific Inc. (TMO) All Cash $11.5 billion $43.34 $40.45 2,163,993 06/30/2021 7.14% 5.71%
+ WLTW 03/09/2020 Aon plc (AON) All Stock $34.45 billion $178.65 $167.21 1,289,912 06/30/2021 6.84% 5.47%
+ WMGI 11/04/2019 Stryker Corporation (SYK) All Cash $5.4 billion $30.75 $29 3,123,100 12/31/2020 6.03% 7.98%
+ TIF 11/25/2019 LVMH Moët Hennessy Louis Vuitton SE (LVMUY) All Cash $16.2 billion $135.00 $127.44 1,670,247 06/30/2020 5.93% 23.54%
+ AGN 06/25/2019 AbbVie Inc. (ABBV) Cash Plus Stock $63 billion $183.23 $173 2,533,182 03/31/2020 5.91% 2158.82%
+ FSCT 02/06/2020 Advent International (N/A) All Cash $1.9 billion $33.00 $31.22 849,115 06/30/2020 5.70% 22.62%
+ AMTD 11/25/2019 The Charles Schwab Corporation (SCHW) All Stock $26 billion $36.42 $34.51 3,432,893 12/31/2020 5.54% 7.33%
+ PBBI 10/22/2019 Centreville Bank (N/A) All Cash $115.5 million $15.25 $14.46 21,665 06/30/2020 5.46% 21.68%
+ CBB 03/13/2020 Macquarie Infrastructure Partners (N/A) All Cash $2.9 billion $15.50 $14.73 583,016 06/30/2021 5.23% 4.18%
+ QUMU 02/11/2020 Synacor, Inc. (SYNC) All Stock $24.06 million $1.46 $1.395 39,061 06/30/2020 4.81% 19.07%
+ PGNX 10/02/2019 Lantheus Holdings, Inc. (LNTH) All Stock $486.85 million $3.76 $3.59 662,001 05/15/2020 4.66% 36.96%
+ ETFC 02/20/2020 Morgan Stanley (MS) All Stock $13 billion $35.48 $33.98 5,112,132 12/31/2020 4.41% 5.83%
+ MLNX 03/11/2019 NVIDIA Corporation (NVDA) All Cash $6.9 billion $125.00 $119.79 1,593,914 03/31/2020 4.35% 1587.49%
+ CSFL 01/27/2020 South State Corporation (SSB) All Stock $3.29 billion $17.91 $17.18 421,909 09/30/2020 4.23% 8.39%
+ IBKC 11/04/2019 First Horizon National Corporation (FHN) All Stock $5.28 billion $38.14 $36.63 467,254 06/30/2020 4.12% 16.34%
+ ACIA 07/08/2019 Cisco Systems, Inc. (CSCO) All Cash $2.6 billion $70.00 $67.41 522,957 07/31/2020 3.84% 11.40%
+ TERP 03/16/2020 Brookfield Renewable Partners L.P. (BEP) All Stock $10.5 billion $15.70 $15.16 845,519 09/30/2020 3.57% 7.08%
+ LM 02/18/2020 Franklin Resources, Inc. (BEN) All Cash $6.5 billion $50.00 $48.32 2,801,202 09/30/2020 3.48% 6.90%
+ CY 06/02/2019 Infineon Technologies AG (IFNNY) All Cash $9.56 billion $23.85 $23.12 5,094,591 03/31/2020 3.16% 1152.47%
+ OPB 02/03/2020 Pacific Premier Bancorp, Inc. (PPBI) All Stock $1 billion $16.33 $15.83 143,075 06/30/2020 3.13% 12.43%
+ LOGM 12/17/2019 Francisco Partners (N/A) All Cash $4.3 billion $86.05 $83.59 640,083 06/30/2020 2.94% 11.68%
+ CYOU 01/24/2020 Sohu.com Limited (SOHU) All Cash $579 million $10.80 $10.51 67,755 06/30/2020 2.76% 10.95%
+ LACQ 12/30/2019 GTWY Holdings Limited (N/A) Special Conditions $1.115 billion $11.50 $11.2 1 06/30/2020 2.68% 10.63%
+ RARX 10/09/2019 UCB (N/A) All Cash $2.1 billion $48.00 $46.9 1,179,191 03/31/2020 2.35% 856.08%
+ ADSW 04/15/2019 Waste Management, Inc. (WM) All Cash $4.9 billion $33.15 $32.46 1,524,312 03/31/2020 2.13% 775.88%
+ FSB 01/21/2020 FB Financial Corporation (FBK) Cash Plus Stock $611 million $21.07 $20.68 49,914 09/30/2020 1.88% 3.73%
+ MFSF 10/29/2019 Northwest Bancshares, Inc. (NWBI) All Stock $346 million $27.24 $26.77 15,111 06/30/2020 1.76% 6.97%
+ WBC 03/28/2019 ZF Friedrichshafen AG (N/A) All Cash $7.29 billion $136.50 $134.34 887,331 03/31/2020 1.61% 586.87%
+ EQM 02/27/2020 Equitrans Midstream Corporation (ETRN) All Stock $10.03 billion $10.25 $10.09 1,273,485 06/30/2020 1.57% 6.21%
+ EE 06/03/2019 J.P. Morgan Investment Management Inc. (N/A) All Cash $4.3 billion $68.25 $67.26 558,058 06/30/2020 1.47% 5.84%
+ MINI 03/02/2020 WillScot Corporation (WSC) All Stock $2.89 billion $26.48 $26.17 339,757 09/30/2020 1.18% 2.34%
+ S 04/29/2018 T-Mobile US, Inc. (TMUS) All Stock $59 billion $8.38 $8.29 18,102,471 07/01/2020 1.10% 4.32%
+ FTSV 03/02/2020 Gilead Sciences, Inc. (GILD) All Cash $4.9 billion $95.50 $94.55 1,555,104 06/30/2020 1.00% 3.99%
+ CARO 11/18/2019 United Bankshares, Inc. (UBSI) All Stock $1.1 billion $24.89 $24.7 184,435 06/30/2020 0.79% 3.11%
+ HXL 01/12/2020 Woodward, Inc. (WWD) All Stock $7.63 billion $38.76 $38.49 1,867,956 09/30/2020 0.69% 1.37%
+ AVX 02/21/2020 Kyocera Corporation (N/A) All Cash $2.95 billion $21.75 $21.66 1,788,704 03/31/2020 0.42% 151.66%
+ WAAS 12/23/2019 Culligan (N/A) All Cash $1.1 billion $27.10 $27.03 912,212 03/31/2020 0.26% 94.52%
+ OMN 07/02/2019 Synthomer plc (N/A) All Cash $909.23 million $10.15 $10.14 655,608 03/31/2020 0.10% 36.00%
+ TLRA 12/19/2019 the Rubicon Project, Inc. (RUBI) All Stock $373.92 million $6.49 $6.56 1,084,295 06/30/2020 -1.04% -4.11%
+ MSBF 12/18/2019 Kearny Financial Corp. (KRNY) All Stock $94 million $10.96 $11.25 1,941 06/30/2020 -2.59% -10.26%
+ SGB 12/18/2019 The First Bancshares, Inc. (FBMS) All Stock $85.22 million $19.25 $20.81 669 06/30/2020 -7.50% -29.74%
+ TIVO 12/19/2019 Xperi Corporation (XPER) All Stock $2.04 billion $6.17 $6.7 871,903 06/30/2020 -7.85% -31.13%
+ TTPH 03/16/2020 AcelRx Pharmaceuticals, Inc. (ACRX) All Stock $14.4 million $0.80 $1.2 551,653 06/30/2020 -33.29% -132.09%

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.

Connect with me on LinkedIn: http://www.linkedin.com/in/asifsuria or follow me on Twitter@asifsuria

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