Merger Arbitrage Mondays – Spread On The Taubman Centers Acquisition Exceeds 40%

Merger activity continued to remain lackluster last week with no new deals announced and one deal closing.

This is the second time in a row no new deals were announced. FSB Bancorp (FSBC), Forescout Technologies (FSCT), IBERIABANK Corporation (IBKC) and The Stars Group (TSG) received approval from their shareholders for their respective merger agreements. KEMET Corporation (KEM) received approval from the Committee on Foreign Investment in the United States (CFIUS) in connection with its pending acquisition by Yageo Corporation.

We updated the exchange ratio for the Standard Diversified (SDI) and Turning Point Brands (TPB) deal last week. According to the merger agreement, each share of Standard Diversified’s class A and class B common stock will be converted into the right to receive a fraction of a share of TPB Voting Common Stock, par value $0.01 per share equal to (a) 97% of the total number of shares of TPB Common Stock held by SDI at the Effective Time, divided by (b)(1) the total number of shares of SDI Common Stock outstanding at such date plus (2) the total number of shares of SDI Common Stock underlying all awards of shares of SDI Common Stock granted under SDI’s 2017 Omnibus Equity Incentive Plan that are unvested. Based on this information, we calculated and updated the exchange ratio to 0.57.

I have also received several emails about the acquisition of FSB Bankcorp (FSBC) by Evans Bancorp (EVBN) and the large and growing spread on that deal. This is a cash (or) stock kind of deal. At this point the cash election is probably oversubscribed and hence most shareholders are likely to receive Evans Bancorp shares, which means the merger consideration received is likely to be well below the all cash consideration of $17.80. We are going to update our Merger Arbitrage Tool to reflect this and covert this deal from a cash deal to an all stock deal.

FSBC Spread History

FSBC Spread History (click to enlarge). Source: Inside Arbitrage Merger Arbitrage Tool.

Another deal with a large and growing spread that I have been watching is the acquisition of the mall REIT Taubman Centers (TCO) by the largest mall REIT Simon Property Group (SPG). On account of the all cash nature of the acquisition, Taubman had held up much better than other mall REITs but has been declining in recent weeks as the specter of retail bankruptcies and tenants not paying rent rises.

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

There were no new deals announced in the Deals in the Works section last week.

Weekly Spread Changes:

The table below shows weekly spread changes between April 17, 2020 and April 25, 2020.

Symbol Quote Acquiring
Company
Acquiring
Company Quote
Current
Spread
Last Week
Spread
Spread Change
Weekly
Deal
Type
FSBC 12.3 Evans Bancorp, Inc. (EVBN) 24.99 44.72% 22.76% 21.96% All Cash
TSG 25.1 Flutter Entertainment PLC (PDYPF) 111.25 -0.14% -12.70% 12.56% All Stock
TCO 37.43 Simon Property Group, Inc. (SPG) 51.49 40.26% 27.99% 12.27% All Cash
DLPH 7.99 BorgWarner Inc. (BWA) 27.08 53.67% 41.58% 12.09% All Stock
GNW 3.3 China Oceanwide Holdings Group Co., Ltd. (N/A) 64.55% 54.70% 9.85% All Cash
CZR 8.87 Eldorado Resorts, Inc. (ERI) 17.82 12.76% 21.79% -9.03% Cash Plus Stock
LACQ 11.39 GTWY Holdings Limited (N/A) 0.97% 11.33% -10.36% Special Conditions
MSBF 12.11 Kearny Financial Corp. (KRNY) 7.94 -14.76% -3.09% -11.67% All Stock
CETV 3.99 PPF Group N.V. (N/A) 14.79% 32.37% -17.58% All Cash
SDI 11.45 Turning Point Brands, Inc. (TPB) 20.69 3.00% 76.00% -73.00% All Stock

Deal Statistics:

Total Number of Deals Closed in 2020 50
Total Number of Deals Not Completed in 2020 5
Total Number of Pending Deals
Cash Deals 28
Stock Deals 24
Stock & Cash Deals 5
Special Conditions 4
Total Number of Pending Deals 61
Aggregate Deal Consideration $531.19 billion

Deal Updates:

  1. On April 20, 2020, shareholders of FSB Bancorp (FSBCapproved the company’s merger with Evans Bancorp (EVBN) at a special meeting of shareholders.
  2. On April 21, 2020, Leigh Fox, CEO of Cincinnati Bell (CBB) said the coronavirus epidemic has not had any impact on its acquisition by Macquarie Infrastructure Partners. The next step is a May 7 proxy meeting with shareholders, during which they will vote on whether they approve the acquisition. If that vote passes, the acquisition has to go through the federal regulatory process, which will take place over the following months.
  3. On April 22, 2020, Pfizer (PFE) and BioNTech SE (BNTX), the company acquiring Neon Therapeutics (NTGN), announced that the German regulatory authority, the Paul-Ehrlich-Institut, has approved the Phase 1/2 clinical trial for BioNTech’s BNT162 vaccine program to prevent COVID-19 infection.
  4. On April 22, 2020, MSB Financial (MSBF) announced that a special meeting of stockholders to vote on the merger agreement with Kearny Financial (KRNY) will be held as a virtual meeting only on May 28, 2020.
  5. On April 22, 2020, Argonaut Gold (ARNGF) and Alio Gold (ALO) have filed the joint management information circular and related meeting materials in connection with their respective special meetings of securityholders to be held on May 20, 2020.
  6. On April 22, 2020, The Meet Group (MEET) announced that a special meeting of stockholders to vote on the merger agreement with NuCom Group will be held as a virtual meeting on June 4, 2020.
  7. On April 23, 2020, TiVo (TIVO) and Xperi (XPERfiled proxy materials for their proposed merger announcing that the special meeting to vote on the deal is set for virtual gatherings by each company May 29.
  8. On April 24, 2020, Forescout Technologies (FSCT) announced that its shareholders have approved the proposed transaction with Advent International. Forescout continues to expect the transaction to close in the second calendar quarter of 2020 following the completion of a customary debt “marketing period” by Advent.
  9. On April 24, 2020, KEMET Corporation (KEM) announced that, in connection with the pending acquisition of KEMET by Yageo Corporation, the Committee on Foreign Investment in the United States (CFIUS) notified the parties that it completed review of the pending acquisition of KEMET by Yageo and determined that there are no unresolved national security concerns with respect to the transaction.
  10. On April 24, 2020, IBERIABANK Corporation (IBKCreceived shareholder approval for the merger of equals between IBERIABANK Corporation and First Horizon National Corporation (FHN).
  11. On April 24, 2020, The Stars Group (TSG) announced that its shareholders approved the proposal to combine the business with Flutter Entertainment. The Stars Group now currently expects the Arrangement to close in May 2020.

Closed Deals:

  1. The acquisition of MutualFirst Financial (MFSF) by Northwest Bancshares (NWBI) on April 24, 2020. It took 178 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 $3.62 06/30/2020 206.63% 1160.31%
GNW 10/23/2016 China Oceanwide Holdings Group Co., Ltd. (N/A) $5.43 $3.3 06/30/2020 64.55% 362.45%
DLPH 01/28/2020 BorgWarner Inc. (BWA) $12.28 $7.99 12/31/2020 53.67% 78.67%
FSBC 12/19/2019 Evans Bancorp, Inc. (EVBN) $17.80 $12.3 06/30/2020 44.72% 251.09%
TCO 02/10/2020 Simon Property Group, Inc. (SPG) $52.50 $37.43 06/30/2020 40.26% 226.09%
YTRA 07/17/2019 Ebix, Inc. (EBIX) $1.74 $1.27 06/30/2020 37.17% 208.70%
FG 02/07/2020 Fidelity National Financial, Inc. (FNF) $12.50 $10.25 09/30/2020 21.95% 51.03%
CETV 10/27/2019 PPF Group N.V. (N/A) $4.58 $3.99 06/30/2020 14.79% 83.03%
CZR 06/24/2019 Eldorado Resorts, Inc. (ERI) $10.00 $8.87 06/30/2020 12.76% 71.67%
AXE 01/13/2020 WESCO International, Inc. (WCC) $100.00 $90.55 09/30/2020 10.44% 24.26%

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.

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