Merger Arbitrage Mondays – Seven Deals Close But Spreads Remain Wide

Merger activity increased last week with one new deal announced and seven deals closing. At a time when more than 10 deals trade with spreads of over 30% and 23 trade with spreads of over 10%, it is encouraging to see so many deals close including the acquisition of Sprint by T-Mobile (TMUS). The wide spreads continue to point to uncertainty related to the COVID-19 situation and we wrote the following last week,

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.

The only deal announced last week was the friendly merger of Alio Gold (ALO) with Argonaut Gold (ARGNF). Pete Dougherty, President & CEO of Argonaut stated: “This is a transaction which makes sense for both sets of shareholders.  Combining complementary assets into one larger, more relevant company generates significant synergies.  With a solid production base of over 235,000 gold equivalent ounces expected this year, a strong balance sheet and strong cash flow generation at current gold prices, we will be well positioned to evaluate and execute on growth opportunities from within the combined company’s development asset portfolio.”

The closing dates for some of the pending deals have been extended to the second quarter of 2020.

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 last week.

Weekly Spread Changes:

The table below shows weekly spread changes between March 27, 2020 and April 3, 2020.

Symbol Quote Acquiring
Company
Acquiring
Company Quote
Current
Spread
Last Week
Spread
Spread Change
Weekly
Deal
Type
CDOR 3 NexPoint Hospitality Trust (N/A) 270.00% 148.32% 121.68% All Cash
SMRT 0.3699 Kingswood Capital Management, L.P. (N/A) 143.31% 84.43% 58.88% All Cash
DLPH 6.55 BorgWarner Inc. (BWA) 21.29 47.37% 10.44% 36.93% All Stock
CETV 2.71 PPF Group N.V. (N/A) 69.00% 44.03% 24.97% All Cash
GNW 3.33 China Oceanwide Holdings Group Co., Ltd. (N/A) 63.06% 44.80% 18.26% All Cash
MSBF 11.4 Kearny Financial Corp. (KRNY) 7.63 -12.99% -2.59% -10.40% All Stock
POPE 88.9 Rayonier Inc. (RYN) 22.15 10.73% 23.32% -12.59% Cash Plus Stock
WEBK 27.28 Cambridge Bancorp (CATC) 47.2 0.35% 14.22% -13.87% All Stock
NTGN 2.53 BioNTech SE (BNTX) 52.75 31.35% 53.32% -21.97% All Stock
YTRA 0.99 Ebix, Inc. (EBIX) 12.33 24.55% 61.85% -37.30% All Stock

Deal Statistics:

Total Number of Deals Closed in 2020 44
Total Number of Deals Not Completed in 2020 3
Total Number of Pending Deals
Cash Deals 33
Stock Deals 25
Stock & Cash Deals 5
Special Conditions 4
Total Number of Pending Deals 67
Aggregate Deal Consideration $354.28 billion

New Deals:

  1. The merger of Alio Gold (ALO) with Argonaut Gold (ARGNF) for $85.74 million in an all stock deal. Under the terms of the agreement, all of the Alio issued and outstanding common shares will be exchanged on the basis of 0.67 of an Argonaut common share per each Alio common share.

Deal Updates:

  1. On March 30, 2020, Gilead Sciences (GILD) announced that the required waiting period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976 (HSR Act) with respect to Gilead’s cash tender offer for Forty Seven (FTSV) expired on March 27, 2020.
  2. On March 31, 2020, Genworth Financial (GNW) and China Oceanwide Holdings Group announced that the Virginia State Corporation Commission, Bureau of Insurance has reapproved the proposed acquisition of control by Oceanwide of Genworth’s insurance companies domiciled in Virginia. In addition, Genworth and Oceanwide have agreed to a 14th waiver and agreement of each party’s right to terminate the previously announced merger agreement. The 14th waiver extends the previous deadline of March 31, 2020 to no later than June 30, 2020.
  3. March 31, 2020: As a result of its decision to draw down on its full $500 million revolving credit facility on March 30th, 2020, Delphi Technologies (DLPHreceived notice from BorgWarner asserting that the company materially breached the transaction agreement and also asserting that, if such breach is not cured within 30 days, BorgWarner has the right to terminate the transaction agreement. At this time, Delphi Technologies intends to continue to negotiate with BorgWarner to resolve this matter. Both companies continue to believe in the long-term strategic value of the transaction and are still working together towards closing the transaction in the second half of 2020.
  4. On March 31, 2020, El Paso Electric Company (EE) and The Infrastructure Investments Fund (IIF) announced that the Federal Energy Regulatory Commission (FERC) issued an order authorizing IIF’s proposed acquisition of EPE, subject to the FERC’s approval of mitigation to address certain discrete competitive effects of the transaction that could arise. FERC concluded that the acquisition, as conditioned, satisfies governing federal standards and authorized the acquisition as consistent with the public interest.
  5. On April 2, 2020, Lantheus Holdings (LNTH) and Progenics Pharmaceuticals (PGNX) announced that they have decided to reschedule their respective special meetings of stockholders to vote on matters related to the proposed merger of Lantheus and Progenics from April 28, 2020, to June 16, 2020.
  6. On April 3, 2020, shareholders of Carolina Financial Corporation (CAROapproved the company’s merger with United Bankshares (UBSI) at a special meeting of shareholders.
  7. On April 4, 2020, the Federal Trade Commission gave the go-ahead to Franklin Resources’ (BEN) bid to buy Legg Mason (LM).

Closed Deals:

  1. The acquisition of AVX Corporation (AVX) by Kyocera Corporation on March 30, 2020. It took 38 days for this deal to be completed.
  2. The acquisition of AquaVenture Holdings Limited (WAAS) by Culligan on March 30, 2020. It took 88 days for this deal to be completed.
  3. The acquisition of Sprint Corporation (S) by T-Mobile US, (TMUS) on April 1, 2020. It took 703 days for this deal to be completed.
  4. The acquisition of Telaria (TLRA) by the Rubicon Project (RUBI) on April 1, 2020. It took 104 days for this deal to be completed.
  5. The acquisition of OMNOVA Solutions (OMN) by Synthomer plc on April 1, 2020. It took 274 days for this deal to be completed.
  6. The acquisition of Ra Pharmaceuticals (RARX) by UCB on April 2, 2020. It took 176 days for this deal to be completed.
  7. The acquisition of Southwest Georgia Financial Corporation (SGB) by The First Bancshares (FBMS) on April 3, 2020. It took 107 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 $3 06/30/2020 270.00% 1,145.93%
SMRT 01/31/2020 Kingswood Capital Management, L.P. (N/A) $0.90 $0.3699 06/30/2020 143.31% 608.23%
CETV 10/27/2019 PPF Group N.V. (N/A) $4.58 $2.71 06/30/2020 69.00% 292.86%
GNW 10/23/2016 China Oceanwide Holdings Group Co., Ltd. (N/A) $5.43 $3.33 06/30/2020 63.06% 267.65%
CZR 06/24/2019 Eldorado Resorts, Inc. (ERI) $9.31 $6.28 06/30/2020 48.30% 205.00%
DLPH 01/28/2020 BorgWarner Inc. (BWA) $9.65 $6.55 12/31/2020 47.37% 64.04%
FSBC 12/19/2019 Evans Bancorp, Inc. (EVBN) $17.80 $13.28 06/30/2020 34.04% 144.46%
TGE 12/17/2019 Blackstone Infrastructure Partners (N/A) $22.45 $16.78 06/30/2020 33.79% 143.41%
NTGN 01/16/2020 BioNTech SE (BNTX) $3.32 $2.53 06/30/2020 31.35% 133.07%
FG 02/07/2020 Fidelity National Financial, Inc. (FNF) $12.50 $9.61 09/30/2020 30.07% 61.67%

List of all pending deals:

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

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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