Merger Arbitrage Mondays – Rosetta Stone Acquired At A Huge Premium

Merger activity increased last week with four new deals announced and two deals completed.

M&A activity continues to pick up pace as we come close to the end of the third quarter. We had been tracking two of the four new deals announced last week in our ‘Deals in the Works’ table before they were announced.

The acquisition of Rosetta Stone (RST) by Cambium Learning Group comes at a time when the entire world is moving towards digital learning.

John Hass, Chairman and Chief Executive Officer of Rosetta Stone, said, “This transaction represents the next step on a path that, over the past several years, has transformed our language business and built a previously small K-12 software business into a growing leader in education technology.” This deal values Rosetta at $30, at a premium of about 87.5% to Rosetta Stone’s unaffected closing price on July 16, 2020, when Bloomberg reported that the company was exploring a potential sale. Rosetta had been trading around $16 prior to that report.

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 August 28, 2020, and September 4, 2020.

Symbol Quote Acquiring
Company
Acquiring
Company Quote
Current
Spread
Last Week
Spread
Spread Change
Weekly
Deal
Type
SUNW 0.5949 The Peck Company Holdings, Inc. (PECK) 3.22 0.23% -19.18% 19.41% All Stock
LINX 6.72 StoneCo Ltd. (STNE) 50 -2.23% -5.00% 2.77% Special Conditions
CXDC 1.15 Faith Dawn Limited and Faith Horizon (N/A) 4.35% 1.69% 2.66% All Cash
TIF 121.79 LVMH Moët Hennessy Louis Vuitton SE (LVMUY) 96.56 10.85% 8.98% 1.87% All Cash
FIT 6.33 Google LLC (GOOG) 1591.04 16.11% 14.31% 1.80% All Cash
WMGI 30.45 Stryker Corporation (SYK) 197.62 0.99% 1.96% -0.97% All Cash
PFNX 12.69 Ligand Pharmaceuticals Incorporated (LGND) 99.07 -5.44% -4.38% -1.06% Special Conditions
DCOM 13.47 Bridge Bancorp, Inc. (BDGE) 20.63 -0.76% 0.60% -1.36% All Stock
CETV 4.35 PPF Group N.V. (N/A) 5.29% 10.10% -4.81% All Cash
GNW 3.46 China Oceanwide Holdings Group Co., Ltd. (N/A) 56.94% 129.11% -72.17% All Cash

Deal Statistics:

Total Number of Deals Closed in 2020 94
Total Number of Deals Not Completed in 2020 14
Total Number of Pending Deals
Cash Deals 30
Stock Deals 14
Stock & Cash Deals 4
Special Conditions 3
Total Number of Pending Deals 51
Aggregate Deal Consideration $638.59 billion

New Deals:

  1. The acquisition of Aimmune Therapeutics (AIMT) by Sociétés des Produits Nestlé for $1.68 billion or $34.50 per share in cash.
  2. The acquisition of Rosetta Stone (RST) by Cambium Learning Group for $670.43 million or $30.00 per share in cash. We added RST as a potential deal to the Deals in the Works section on July 17, 2020, and the price after the news of the potential deal came out was $20.02.
  3. The acquisition of Akcea Therapeutics (AKCA) by Ionis Pharmaceuticals (IONS) for $1.31 billion or $18.15 per share in cash.
  4. The acquisition of Fuling Global (FORK) by Fuling ParentCo in a going private transaction for $72.94 million or $2.35 per share in cash. We added FORK as a potential deal to the Deals in the Works section on June 22, 2020, and the price after the news of the potential deal came out was $2.17.

Deal Updates:

  1. On September 1, 2020, StoneCo (STNE) announced that it has entered into revised terms of a definitive agreement for STNE Participações to merge its business with Linx (LINX). The compensation offered by STNE to the shareholders of Linx was increased, so that the shareholders of Linx will receive (i) a portion in cash equal to R$ 31,56, updated pro rata die based on the Interbank Deposit Certificate (CDI) variation as from the sixth (6th) month counted as of August 11, 2020, and (ii) 0,0126774 class A shares of StoneCo traded on NASDAQ. Based on the closing prices as of August 31, 2020, this exchange ratio corresponds to a price per Linx share of R$ 35.10.
  2. On September 1, 2020, Genworth (GNW) confirmed that its Board of Directors and management team determined that Oceanwide has provided satisfactory information regarding its funding plan for the purchase price consideration of approximately $2.7 billion, and Genworth therefore does not intend to exercise its right to terminate the merger agreement as of August 31, 2020.
  3. On September 4, 2020, Just Eat Takeaway.com (TKAYF) and Grubhub (GRUBannounced receipt of all regulatory approvals required in respect of Just Eat Takeaway.com’s proposed acquisition of Grubhub.

Closed Deals:

  1. The acquisition of LogMeIn (LOGM) by Francisco Partners on August 31, 2020. It took 258 days for this deal to be completed.
  2. The acquisition of The Meet Group (MEET) by NuCom Group on September 4, 2020. It took 183 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 $4.43 09/30/2020 150.56% 2289.83%
GILT 01/29/2020 Comtech Telecommunications Corp. (CMTL) $8.52 $5.3 10/31/2021 60.67% 52.72%
GNW 10/23/2016 China Oceanwide Holdings Group Co., Ltd. (N/A) $5.43 $3.46 09/30/2020 56.94% 865.91%
FIT 11/01/2019 Google LLC (GOOG) $7.35 $6.33 12/31/2020 16.11% 50.70%
TIF 11/25/2019 LVMH Moët Hennessy Louis Vuitton SE (LVMUY) $135.00 $121.79 12/31/2020 10.85% 34.13%
MXIM 07/13/2020 Analog Devices, Inc. (ADI) $73.99 $68.68 06/30/2021 7.73% 9.50%
CBMG 08/12/2020 CBMG management (N/A) $19.75 $18.5 12/31/2020 6.76% 21.26%
INWK 07/16/2020 HH Global Group Limited (N/A) $3.00 $2.84 12/31/2020 5.63% 17.73%
BREW 11/12/2019 Anheuser-Busch (N/A) $16.50 $15.66 12/31/2020 5.36% 16.88%
CETV 10/27/2019 PPF Group N.V. (N/A) $4.58 $4.35 10/27/2020 5.29% 37.84%

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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