Merger Arbitrage Mondays – Tiffany Experiences Wild Gyrations

Merger activity increased last week with one new deal announced, three deals closing and two deals called off.

While two terminated deals in one week is a lot, the news was not all bad as one of those terminations was because the company received a better offer. Just when we thought the bidding war for Tetraphase Pharmaceuticals (TTPH) had come to an end, there was a new offer by Melinta Therapeutics and AcelRx Pharmaceuticals (ACRX) announced that it did not intend to revise further its offer for Tetraphase. Yatra Online (YTRA) filed litigation in the Court of Chancery of the State of Delaware over Ebix’s breaches of the Merger Agreement and terminated the merger agreement.

There was significant change in the spread for Tiffany & Co. (TIF) last week when Reuters reported that LVMH was not considering buying shares of Tiffany on the market. A day later, Tiffany & Co. shares had their biggest gain in more than two months after Reuters reported that LVMH decided against trying to negotiate a lower price for its planned $16 billion acquisition of the U.S. jeweler. LVMH is closely monitoring Tiffany’s debt covenants and it is possible they might attempt to renegotiate the deal if Tiffany breaches those covenants.

The DOJ decided to close its investigation of Schwab’s (SCHW) proposed acquisition of TD Ameritrade Holding Corporation (AMTD). With the exception of the market turmoil in March, the spread on this deal had consistently been between 3% and 4%, indicating the market saw some risk of regulatory risk for this deal and it is interesting to see the DOJ dropped its investigation.  The spread on Morgan Stanley’s acquisition of E*Trade (ETFC) barely budged after this news but did narrow marginally to 1.19% by last Friday.

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

There were three new deals announced in the Deals in the Works section last week. According to Bloomberg, Western Union  (WU) is seeking to acquire MoneyGram International (MGI), Rollins (ROL) is exploring strategic options including a potential sale and AstraZeneca (AZN) has made a preliminary approach to Gilead Sciences  (GILD) about a potential merger.

Weekly Spread Changes:

The table below shows weekly spread changes between May 29, 2020, and June 5, 2020.

Deal Statistics:

New Deals:

1. The acquisition of Tetraphase Pharmaceuticals (TTPH) by Melinta Therapeutics for $55 million. Under the terms of the definitive merger agreement, the upfront cash consideration in the transaction will be as follows: (i) $1.79 per share of Tetraphase common stock (including common stock underlying restricted stock units, performance-based stock units and pre-funded warrants), (ii) $2.47 per share of Tetraphase common stock underlying the common stock warrants issued by the Company in 2019, and (iii) $2.47 per share of Tetraphase common stock underlying the common stock warrants issued by the Company in 2020. Tetraphase equityholders would also be entitled to receive, for each share of Tetraphase common stock, one non-tradeable CVR, the holders of which will be entitled to receive payments of up to an additional $16.0 million in the aggregate upon the achievement of net sales of XERAVA™ in the United States of at least (i) $20 million during 2021, (ii) $35 million during any year ending on or before December 31, 2024 and (iii) $55 million during any year ending on or before December 31, 2024. We added TTPH as a potential deal to the Deals in the Works section on May 15, 2020, and the price after the news of the potential deal came out was $2.19.

Deal Updates:

1. On May 29, 2020, Provident Financial Services (PFS) SB One Bancorp (SBBX) announced the receipt of the Federal Deposit Insurance Corporation and the New Jersey Department of Banking and Insurance approvals in connection with the proposed merger of SB One with and into Provident.
2. On June 1, 2020, Tetraphase Pharmaceuticals (TTPH) announced that its Board of Directors has received a revised proposal from Melinta Therapeutics amending its prior proposal to acquire the Company, and has determined that the Amended Melinta Proposal is a “Superior Offer” under the terms of the Agreement and Plan of Merger. Under the Amended Melinta Proposal, Melinta has offered to acquire Tetraphase for $39.0 million in cash, plus an additional $16.0 million.in cash potentially payable under contingent value rights (“CVR”) to be issued in the proposed acquisition. Under the Amended Melinta Proposal, the upfront cash consideration would be as follows: (i) $1.79 per share of Tetraphase common stock (including common stock underlying restricted stock units, performance-based stock units and pre-funded warrants), (ii) $2.47 per share of Tetraphase common stock underlying the common stock warrants issued by the Company in 2019, and (iii) $2.47 per share of Tetraphase common stock underlying the common stock warrants issued by the Company in 2020. If the Amended Melinta Proposal continues to constitute a Superior Offer through Wednesday, June 3, 2020, the Tetraphase Board will consider terminating the AcelRx Merger Agreement and entering into the merger agreement with Melinta.
3. On June 1, 2020, El Paso Electric Company (EE) and the Infrastructure Investments Fund (IIF) announced that they have mutually agreed to extend the termination date for the transaction under the terms of the previously announced Agreement and Plan of Merger to September 1, 2020.
4. On June 3, 2020, AcelRx Pharmaceuticals (ACRX) announced that it does not intend to revise further its offer under the terms of its previously announced agreement to acquire Tetraphase Pharmaceuticals (TTPH), and it expects the agreement to be terminated by Tetraphase. Under the terms of the agreement, in connection with a termination of the merger agreement, AcelRx will be paid a break-up fee of approximately $1.8 million.
5. On June 4, 2020, The Charles Schwab Corporation (SCHW) announced that on June 3 the Antitrust Division of the United States Department of Justice (DOJ) informed Schwab that the DOJ has decided to close its investigation of Schwab’s proposed acquisition of TD Ameritrade Holding Corporation (AMTD).
6. On June 5, 2020, GAIN Capital Holdings (GCAP) announced that at a special meeting of its stockholders held earlier, the Company’s stockholders voted to approve the adoption of the previously announced Agreement and Plan of Merger.

Closed Deals:

1. The acquisition of TiVo Corporation (TIVO) by Xperi Corporation (XPER) on June 1, 2020. It took 165 days for this deal to be completed.
2. The acquisition of FGL Holdings (FG) by Fidelity National Financial (FNF) on June 1, 2020. It took 115 days for this deal to be completed.
3. The acquisition of Opus Bank (OPB) by Pacific Premier Bancorp (PPBI) on June 1, 2020. It took 119 days for this deal to be completed.

Deals Terminated:

1. On June 4, 2020, Tetraphase (TTPH) terminated its previously announced merger agreement with AcelRx Pharmaceuticals (ACRX), in order to enter into the definitive merger agreement with Melinta. In connection with the termination the definitive merger agreement with AcelRx, Tetraphase paid AcelRx a termination fee in the amount of $1,778,000.
2. On June 5, 2020, Yatra Online (YTRA), India’s leading online travel company, announced that it has provided notice of termination of its pending Merger Agreement with Ebix (EBIX) and filed litigation in the Court of Chancery of the State of Delaware over Ebix’s breaches of the Merger Agreement.

Top 10 deals with largest spreads:

List of all pending deals:

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

Disclaimer: I hold long positions in Gilead Sciences (GILD) and Tech Data Corporation (TECD). 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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