Merger Arbitrage Mondays – A Large Number Of Rumored Deals But No Cigar

Merger activity sputtered to a stop again last week with no new deals announced and one deal closing. This is the fifth week this year with no new deals announced. There were however some potential deals that were announced last week.

On Monday, May 11, 2020, according to Bloomberg, Amazon.com (AMZN) had discussed a potential takeover of AMC Entertainment Holdings (AMC). At a time when the COVID-19 pandemic has resulted in a significant increase in demand for meal-delivery business, Uber Technologies (UBER) announced that it is seeking to acquire Grubhub (GRUB). According to Reuters, on May 12, 2020, Hedge fund Elliott Management publicly called on Alexion Pharmaceuticals (ALXN) to sell itself, a week after Alexion Pharmaceuticals entered into a merger agreement to acquire Portola Pharmaceuticals (PTLA). On May 13, 2020, according to Bloomberg, Billionaire Anil Agarwal announced that he plans to take Indian commodities giant Vedanta (VEDL) private in order to simplify his investments. Tetraphase Pharmaceuticals (TTPH) received an unsolicited bid from Melinta Therapeutics almost two months after entering into a merger agreement with AcelRx Pharmaceuticals (ACRX).

Most of these potential deals could make sense but I am perplexed by the rumor of Amazon.com wanting to acquire AMC. I could see the synergies with Amazon.com acquiring Whole Foods but fail to see it with a leveraged movie theatre company. Uber Eats was the fastest growing division for Uber pre-crisis and it makes sense that they want to try to gain additional market share by acquiring a competitor like Grubhub. Considering Grubhub acquired Yelp’s Eat24 meal delivery service in 2017, it is possible that regulator might look at the deal closely if this rumored acquisition goes through. Although with Doordash and Postmates, there is plenty of competition in this space.

In the deal updates section, Legg Mason received approval from its shareholders for its merger with Franklin Resources, Standard Diversified (SDI) and Turning Point Brands (TPB) were granted early termination by the FTC under the HSR Act and WABCO Holdings (WBC) and ZF Friedrichshafen AG received regulatory clearance from the Chinese State Administration for Market Regulation.

While not exactly a deal update, investors analyzed the language in Simon Property Group’s (SPG) 10Q filing for any hints about how the mall REIT was thinking about its acquisition of Taubman Centers (TCO). An investor that goes by the moniker Wolf of M Street on Twitter highlights some of this change in language in this tweet.

Simon Property Group 10Q Filing

Source: Wolf of M Street and Simon Property Group 10Q Filing

The spread on the deal spiked sharply after this 10Q for the third quarter ended March 31, 2020 was filed as you can see from the spread history chart below and from our Weekly Spread Changes table below.

Taubman Centers Spread History

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

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

There were five new deals announced in the Deals in the Works section last week.

Weekly Spread Changes:

The table below shows weekly spread changes between May 8, 2020, and May 15, 2020.

Symbol Quote Acquiring
Company
Acquiring
Company Quote
Current
Spread
Last Week
Spread
Spread Change
Weekly
Deal
Type
CDOR 2.9 NexPoint Hospitality Trust (N/A) 282.76% 222.67% 60.09% All Cash
GNW 2.7 China Oceanwide Holdings Group Co., Ltd. (N/A) 101.11% 76.30% 24.81% All Cash
TCO 38.53 Simon Property Group, Inc. (SPG) 51.32 36.26% 18.72% 17.54% All Cash
FSCT 29.52 Advent International (N/A) 11.79% 2.42% 9.37% All Cash
BREW 15.015 Anheuser-Busch (N/A) 9.89% 5.57% 4.32% All Cash
CORV 0.413333 ADVANZ PHARMA (N/A) 1.61% 6.44% -4.83% Special Conditions
TTPH 2.19 AcelRx Pharmaceuticals, Inc. (ACRX) 1.4 -59.71% -51.64% -8.07% All Stock
LACQ 11.4 GTWY Holdings Limited (N/A) 0.88% 10.58% -9.70% Special Conditions
QUMU 2.35 Synacor, Inc. (SYNC) 1.21 -17.10% -1.48% -15.62% All Stock
YTRA 0.97 Ebix, Inc. (EBIX) 17.44 79.79% 110.82% -31.03% All Stock

Deal Statistics:

Total Number of Deals Closed in 2020 59
Total Number of Deals Not Completed in 2020 6
Total Number of Pending Deals
Cash Deals 24
Stock Deals 22
Stock & Cash Deals 4
Special Conditions 4
Total Number of Pending Deals 54
Aggregate Deal Consideration $531.04 billion

Deal Updates:

  1. On May 11, 2020, the Federal Trade Commission (FTC) has granted early termination of the required waiting period under the Hart-Scott-Rodino Act with respect to the acquisition of Standard Diversified (SDI) by Turning Point Brands (TPB).
  2. On May 15, 2020, Tetraphase Pharmaceuticals (TTPHreceived an unsolicited proposal from Melinta Therapeutics to acquire Tetraphase for $27.0 million in cash, plus an additional $12.5 million in cash potentially payable under contingent value rights to be issued in the transaction. The Tetraphase Board is evaluating the Melinta Proposal and has not made a determination as to whether the proposal constitutes a superior offer under the terms of the AcelRx Merger Agreement.
  3. On May 15, 2020, WABCO Holdings (WBC) and ZF Friedrichshafen AG announced that the Chinese State Administration for Market Regulation provided regulatory clearance for their previously announced merger. All required regulatory approvals have now been received and WABCO and ZF expect to close the merger on May 29, 2020.
  4. On May 15, 2020, shareholders of Legg Mason (LMapproved the company’s merger with Franklin Resources (BEN) at a special meeting of shareholders.

Closed Deals:

  1. The acquisition of SORL Auto Parts (SORL) by Ruili International on May 15, 2020. It took 168 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 $2.9 06/30/2020 282.76% 2345.61%
GNW 10/23/2016 China Oceanwide Holdings Group Co., Ltd. (N/A) $5.43 $2.7 06/30/2020 101.11% 838.76%
YTRA 07/17/2019 Ebix, Inc. (EBIX) $1.74 $0.97 06/30/2020 79.79% 661.93%
TCO 02/10/2020 Simon Property Group, Inc. (SPG) $52.50 $38.53 06/30/2020 36.26% 300.77%
TCBI 12/09/2019 Independent Bank Group, Inc. (IBTX) $27.91 $24.12 06/30/2020 15.72% 130.41%
CETV 10/27/2019 PPF Group N.V. (N/A) $4.58 $3.97 06/30/2020 15.37% 127.46%
FIT 11/01/2019 Google LLC (GOOG) $7.35 $6.55 06/30/2020 12.21% 101.32%
FSCT 02/06/2020 Advent International (N/A) $33.00 $29.52 06/30/2020 11.79% 97.79%
BREW 11/12/2019 Anheuser-Busch (N/A) $16.50 $15.015 06/30/2020 9.89% 82.04%
DLPH 01/28/2020 BorgWarner Inc. (BWA) $11.96 $11.21 12/31/2020 6.70% 10.72%

List of all pending deals:

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

Disclaimer: 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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