Merger Arbitrage Mondays – Merger Activity Kicks Into High Gear

Merger activity remained steady last week with four new deals announced and none of the forty-two active deals reaching completion.

After months of muted activity on the M&A front due to the COVID-19 pandemic, it is interesting to see a steady increase in the number of new deals announced in the second half of this year. With digital healthcare evolving in the world of medicine, we witnessed the largest digital health deal last week, when Teladoc Health (TDOC) and Livongo Health (LVGO) announced their merger. More than 90% of the deal consideration in this cash plus stock deal is in stock. Teledoc shareholders will own 58% of the combined company after the merger. The combination of these two companies will create a significant entity in the field of virtual care and telemedicine.

The market did not look kindly to this $18.5 billion deal (when announced) and both stocks dropped immediately. The weakness continued the rest of the week and both companies dropped double digits last week as you can see from the chart below. Both companies were trading at extreme valuations before the deal was announced and maybe this announcement took the momentum out of both stocks.

Livongo and Teledoc Post Merger Performance

Livongo and Teledoc Post Merger Performance

Another significant deal announced last week was the merger of GCI Liberty and Liberty Broadband Corporation. We had added GLIBA to our list of potential deals on June 29, 2020.

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 July 31, 2020, and August 7, 2020.

Symbol Quote Acquiring
Company
Acquiring
Company Quote
Current
Spread
Last Week
Spread
Spread Change
Weekly
Deal
Type
CNXM 9.66 CNX Resources Corporation (CNX) 11.09 1.03% -5.22% 6.25% All Stock
QGEN 47.31 Thermo Fisher Scientific Inc. (TMO) 414.33 3.91% -0.59% 4.50% All Cash
LVGO 120.88 Teladoc Health, Inc. (TDOC) 193.72 4.25% 0.00% 4.25% Cash Plus Stock
VAR 173.82 Siemens Healthineers AG (N/A) 2.12% 0.00% 2.12% All Cash
GILT 5.75 Comtech Telecommunications Corp. (CMTL) 17.56 50.60% 53.19% -2.59% Cash Plus Stock
GRUB 75.01 Just Eat Takeaway.com N.V. (TKAYF) 106.7 -4.55% -0.89% -3.66% All Stock
DLPH 16.6 BorgWarner Inc. (BWA) 38.91 0.96% 5.16% -4.20% All Stock
ONDK 1.75 Enova International, Inc. (ENVA) 18 1.49% 9.61% -8.12% Cash Plus Stock
GNW 2.35 China Oceanwide Holdings Group Co., Ltd. (N/A) 131.06% 166.18% -35.12% All Cash

Deal Statistics:

Total Number of Deals Closed in 2020 88
Total Number of Deals Not Completed in 2020 13
Total Number of Pending Deals
Cash Deals 26
Stock Deals 11
Stock & Cash Deals 4
Special Conditions 1
Total Number of Pending Deals 42
Aggregate Deal Consideration $627.39 billion

New Deals:

  1. The acquisition of Jernigan Capital (JCAP) by NexPoint Advisors for $900 million or $17.30 per share in cash.
  2. The merger of Livongo Health (LVGO) and Teladoc Health (TDOC) for $18.5 billion in a cash plus stock deal. Under the terms of the agreement, each share of Livongo will be exchanged for 0.5920x shares of Teladoc Health plus cash consideration of $11.33 for each Livongo share.
  3. The merger of GCI Liberty (GLIBA) and Liberty Broadband Corporation (LBRDK) for $11.53 billion in an all stock deal. Under the terms of the agreement:
    · Each holder of GLIBA will receive 0.580 of a share of LBRDK
    · Each holder of GLIBB will receive 0.580 of a share of LBRDB
    · Each holder of GLIBP will receive one share of Liberty Broadband   Cumulative Redeemable Preferred Stock (with mirror terms to the current GLIBP)
    · Cash to be issued in lieu of fractional shares

    We added GLIBA as a potential deal to the Deals in the Works section on June 29, 2020, and the price after the news of the potential deal came out was $67.05.

  4. The merger of Sirius International Insurance Group (SG) and Third Point Reinsurance (TPRE) for $1.73 billion in a cash or stock deal. Under the terms of the agreement, Sirius Group shareholders will have the ability to elect one of three options as consideration for each of their shares: 1) $9.50 in cash per share; 2) 0.743 of a Third Point Re share and a two-year Contingent Value Right (CVR) which, taken together, guarantee that on the second anniversary of the closing date, the electing shareholders will have received equity and cash of at least $13.73 per share; or, 3) an aggregate of $0.905 in cash, a fraction of a Third Point Re common share, a fraction of a Series A Preference Share of Third Point Re, 0.190 of a 5-year warrant issued by Third Point Re, and $0.905 aggregate principal amount of an upside share instrument issued by Third Point Re. Given the complexity of this deal, we are treating this as a “special conditions” deal worth $9.50 per share.

Deal Updates:

  1. August 4, 2020: According to Reuters, Alphabet unit Google’s (GOOG) bid to take on Apple and Samsung in the wearable technology market by buying Fitbit (FIT) hit a hurdle as EU antitrust regulators launched an investigation into the $2.1 billion deal.
  2. On August 4, 2020, the Federal Trade Commission (FTC) granted early termination of the required waiting period under the Hart-Scott-Rodino Act with respect to the acquisition of GlobalSCAPE (GSB) by HelpSystems.
  3. On August 4, 2020, the Federal Trade Commission (FTC) granted early termination of the required waiting period under the Hart-Scott-Rodino Act with respect to the acquisition of Benefytt Technologies (BFYT) by Madison Dearborn Partners.
  4. On August 8, 2020, Majesco (MJCO) announced that it has signed an amended definitive agreement to be acquired by Thoma Bravo. Under the amendment, Thoma Bravo will acquire all of Majesco’s outstanding shares for $16.00 per share.

Closed Deals:

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 $4.17 09/30/2020 166.19% 1189.38%
GNW 10/23/2016 China Oceanwide Holdings Group Co., Ltd. (N/A) $5.43 $2.35 09/30/2020 131.06% 938.01%
GILT 01/29/2020 Comtech Telecommunications Corp. (CMTL) $8.66 $5.75 10/31/2021 50.60% 41.32%
MJCO 07/20/2020 Thoma Bravo, L.P. (N/A) $16.00 $13.09 12/31/2020 22.23% 56.74%
CETV 10/27/2019 PPF Group N.V. (N/A) $4.58 $3.9850 10/27/2020 14.93% 69.87%
FIT 11/01/2019 Google LLC (GOOG) $7.35 $6.47 09/30/2020 13.60% 97.34%
BREW 11/12/2019 Anheuser-Busch (N/A) $16.50 $14.92 12/31/2020 10.59% 27.03%
TIF 11/25/2019 LVMH Moët Hennessy Louis Vuitton SE (LVMUY) $135.00 $124.82 09/30/2020 8.16% 58.37%
INWK 07/16/2020 HH Global Group Limited (N/A) $3.00 $2.81 12/31/2020 6.76% 17.26%
MXIM 07/13/2020 Analog Devices, Inc. (ADI) $73.28 $68.69 06/30/2021 6.68% 7.53%

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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