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Merger Arbitrage Mondays – Bristol-Myers Squibb and Morgan Stanley Are Back At It

  • October 12, 2020

After a very strong third quarter where we reported on 10 new deals announced in a single week, merger activity decreased last week with four new deals announced, three active deals completed and one deal terminated.

Less than a year after acquiring Celgene Corporation in the largest pharmaceutical deal valued at $94 billion (including debt), Bristol-Myers Squibb Company (BMY) is back at it again. BMY  announced last week that it is acquiring MyoKardia (MYOK) for $13.1 billion to strengthen its portfolio. We wrote about the merger arbitrage opportunity with the Celgene deal and the associated contingent value right (CVR) that was part of that deal in a premium post in March 2019.

I have participated in several deals with CVRs  and in some instances, like the acquisition of Tobira Therapeutics by Allergan (AGN) that I discussed here, the CVRs did pay out handsomely. CVRs are usually not transferable and are rarely publicly traded but the Celgene CVRs are an exception. The Celgene CVR (BMY.RT), unlike the Tobira CVR, requires all three milestones to be hit for a $9 per CVR payout. The first milestone, approval of Ozanimod to treat Multiple Sclerosis, was achieved in March 2020. The deadline for the next milestone, approval of the CAR T-cell therapy Liso-cel to treat lymphoma, is December 31, 2020 and the deadline for the last milestone is March 31, 2021.

For a low down on how this CVR is structured, I would highly recommend this podcast by Andrew Walker that discusses the various milestones associated with the Celgene CVR. The CVR moved up significantly last week based on rumors related to a FDA inspection that pertains to the approval of Liso-cel. Considering all three milestones have to be hit for the $9 per CVR payout, the probability of this CVR paying out is low and the market was pricing the CVR as such until last week. I find the situation interesting but not enough to add to my existing position.

Just like BMY, Morgan Stanley (MS) is back at it again and announced the acquisition of Eaton Vance (EV) in a multi-billion deal within a week of completing the acquisition of E*TRADE Financial Corporation (ETFC).

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

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

Weekly Spread Changes:

The table below shows weekly spread changes between October 2, 2020, and October 9, 2020.

Company Quote
Last Week
Spread Change
FBSS15.65Virginia National Bankshares Corporation (VABK)243.51%0.00%3.51%All Stock
AMAG13.33Covis Group S.à r.l. (N/A)0.003.15%0.00%3.15%All Cash
GSUM1.82Gridsum Corporation (N/A)0.009.89%8.11%1.78%All Cash
WLTW211.44Aon plc (AON)209.196.85%5.89%0.96%All Stock
FIT6.86Google LLC (GOOG)1515.227.14%6.21%0.93%All Cash
TIF118.41LVMH Moët Hennessy Louis Vuitton SE (LVMUY)97.9314.01%16.27%-2.26%All Cash
LINX6.38StoneCo Ltd. (STNE)58.592.98%5.46%-2.48%Special Conditions
SUNW3.52The Peck Company Holdings, Inc. (PECK)9.24-51.39%-44.69%-6.70%All Stock
TAT0.2929TAT Holdco LLC and TAT Merger Sub LLC (N/A)0.00-55.62%-48.21%-7.41%All Cash
CETV4.58PPF Group N.V. (N/A)0.00%8.79%-8.79%All Cash

Deal Statistics:

Total Number of Deals Closed in 2020108
Total Number of Deals Not Completed in 202016
Total Number of Pending Deals
Cash Deals35
Stock Deals10
Stock & Cash Deals4
Special Conditions3
Total Number of Pending Deals52
Aggregate Deal Consideration$695.35 billion

New Deals:

  1. The acquisition of MyoKardia (MYOK) by Bristol-Myers Squibb Company (BMY) for $13.1 billion or $225.00 per share in cash.
  2. The acquisition of Eidos Therapeutics (EIDX) by BridgeBio Pharma (BBIO) for $562.65 million in a cash or stock deal. Under the terms of the agreement, Eidos stockholders will have the right to receive in the transaction, at their election, either 1.85 shares of BridgeBio common stock or $73.26 in cash per Eidos share subject to proration such that the cash portion of the transaction will not exceed $175 million in the aggregate. We added EIDX as a potential deal to the Deals in the Works section on August 8, 2019, and the price after the news of the potential deal came out was $32.06.
  3. The acquisition of Eaton Vance (EV) by Morgan Stanley (MS) for $7 billion in a cash plus stock deal. Under the terms of the agreement, Eaton Vance shareholders will receive $28.25 per share in cash and 0.5833 of Morgan Stanley common stock. The merger agreement also contains an election procedure allowing each Eaton Vance shareholder to seek all cash or all stock, subject to a proration and adjustment mechanism. In addition, Eaton Vance common shareholders will receive a one-time special cash dividend of $4.25 per share to be paid pre-closing by Eaton Vance from existing balance sheet resources.
  4. The acquisition of Watford Holdings (WTRE) by Arch Capital Group (ACGL) for $622 million or $31.10 per share in cash.

Deal Updates:

  1. On October 6, 2020, Central European Media Enterprises (CETVannounced the expected completion date for the previously announced transaction to be acquired by an affiliate of PPF Group. Following the European Commission’s clearance of the PPF Group merger with CME, all required regulatory approvals needed to close the previously announced transaction have been received. Accordingly, completion of the transaction is expected to occur on October 13, 2020. The spread on this deal at one point in March of this year had surpassed 154%. For a deal that traded at a very narrow spread pre-COVID, it was astounding to see this deal trade consistency trade at a double digit spread between March and September.
  2. On October 8, 2020, Just Eat Takeaway.com (TKAYF) announced that its shareholders have approved the acquisition of Grubhub (GRUB).
  3. On October 8, 2020, shareholders of On Deck Capital (ONDKapproved the company’s merger with Enova International (ENVA) at a special meeting of shareholders.
  4. On October 8, 2020, Analog Devices (ADI) and Maxim Integrated Products (MXIM) announced ADI and Maxim shareholders voted to approve their respective proposals relating to the pending combination of ADI and Maxim. The companies continue to expect that the transaction will be completed in the summer of 2021.

Terminated Deals:

  1. On October 5, 2020, Comtech Telecommunications (CMTL) and Gilat Satellite Networks (GILT) announced that the companies have agreed to terminate the merger agreement and have settled all pending litigation in the Delaware Court of Chancery. In connection with the termination and settlement agreement, Comtech has agreed to make a payment of $70.0 million to Gilat.

Closed Deals:

  1. The acquisition of Noble Energy (NBL) by Chevron Corporation (CVX) on October 5, 2020. It took 77 days for this deal to be completed.
  2. The acquisition of TD Ameritrade Holding Corporation (AMTD) by The Charles Schwab Corporation (SCHW) on October 6, 2020. It took 316 days for this deal to be completed.
  3. The acquisition of Vivint Solar (VSLR) by Sunrun (RUN) on October 8, 2020. It took 93 days for this deal to be completed.

Top 10 deals with largest spreads:

GNW10/23/2016China Oceanwide Holdings Group Co., Ltd. (N/A)$5.43$3.4311/30/202058.31%425.66%
TIF11/25/2019LVMH Moët Hennessy Louis Vuitton SE (LVMUY)$135.00$118.4112/31/202014.01%63.13%
GSUM10/01/2020Gridsum Corporation (N/A)$2.00$1.8203/31/20219.89%21.11%
FIT11/01/2019Google LLC (GOOG)$7.35$6.8612/31/20207.14%32.19%
CBMG08/12/2020CBMG management (N/A)$19.75$18.4612/31/20206.99%31.49%
WLTW03/09/2020Aon plc (AON)$225.93$211.4406/30/20216.85%9.54%
MXIM07/13/2020Analog Devices, Inc. (ADI)$77.70$7306/30/20216.44%8.97%
NEWA10/02/2020Crouching Tiger Holding Limited (N/A)$3.65$3.4506/30/20215.80%8.08%
GRUB06/10/2020Just Eat Takeaway.com N.V. (TKAYY)$77.30$74.506/30/20213.76%5.23%
FBSS10/01/2020Virginia National Bankshares Corporation (VABK)$16.20$15.6506/30/20213.51%4.90%

List of all pending deals:

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

Disclaimer: I have long positions in Bristol-Myers Squibb (BMY), the CVR BMY.RT and Immunomedics (IMMU). 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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