Merger Arbitrage Mondays – Home Depot Brings HD Supply Holdings Back Into The Fold

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

There have been a total of ten new deals announced in the month of November so far.

On November 16, 2020, The Home Depot (HD) announced the acquisition of its old subsidiary, HD Supply Holdings (HDS) for $56.00 per share at a premium of 25% to the closing price of HDS prior to the announcement. In 2007, The Home Depot had sold HD Supply to private equity firm Clayton, Dubilier and Rice for $8.3 billion. Given the high demand for home building products on account of the pandemic, this deal makes a lot of sense for Home Depot. It is interesting that they chose not to use their more expensive stock to acquire the company and instead opted for an all cash deal.

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 November 13, 2020, and November 20, 2020.

Symbol Quote Acquiring
Company
Acquiring
Company Quote
Current
Spread
Last Week
Spread
Spread Change
Weekly
Deal
Type
FBSS 16.5 Virginia National Bankshares Corporation (VABK) 25.2 3.09% 1.38% 1.71% All Stock
MCEP 2.56 Contango Oil & Gas Company (MCF) 1.47 0.49% -1.15% 1.64% All Stock
IPHI 148.59 Marvell Technology Group Ltd. (MRVL) 43.96 13.14% 12.06% 1.08% Cash Plus Stock
GSUM 1.735 Gridsum Corporation (N/A) 15.27% 14.29% 0.98% All Cash
WLTW 199.4 Aon plc (AON) 198.67 7.60% 6.76% 0.84% All Stock
SG 11.79 Third Point Reinsurance Ltd. (TPRE) 9.21 -19.42% -17.39% -2.03% Special Conditions
GNW 4.63 China Oceanwide Holdings Group Co., Ltd. (N/A) 17.28% 20.67% -3.39% All Cash
TAT 0.2395 TAT Holdco LLC and TAT Merger Sub LLC (N/A) -45.72% -40.94% -4.78% All Cash
CBMG 18.3 CBMG management (N/A) 7.92% 13.70% -5.78% All Cash
HPR 11.67 Bonanza Creek Energy, Inc. (BCEI) 23.86 -76.69% 0.00% -76.69% All Stock

Deal Statistics:

Total Number of Deals Closed in 2020 123
Total Number of Deals Not Completed in 2020 16
Total Number of Pending Deals
Cash Deals 38
Stock Deals 16
Stock & Cash Deals 3
Special Conditions 3
Total Number of Pending Deals 60
Total Deal Size $812.48 billion

New Deals:

  1. The acquisition of HD Supply Holdings (HDS) by The Home Depot (HD) for $11.35 billion or $56.00 per share in cash.
  2. The acquisition of Foundation Building Materials (FBM) by American Securities for $1.37 billion or $19.25 per share in cash.
  3. The acquisition of China Biologic Products Holdings (CBPO) by CBPO Holdings Limited and CBPO Group Limited in a going private transaction for $3.65 billion or $120.00 per share in cash. We added CBPO as a potential deal to the Deals in the Works section on September 18, 2019, and the price after the news of the potential deal came out was $113.99.
  4. The acquisition of Norbord (OSB) by West Fraser Timber for $3.1 billion in an all stock deal. Under the terms of the agreement, Norbord shareholders will receive 0.675 of a West Fraser share for each Norbord share. The completion of the Transaction will also be subject to the listing by West Fraser of its common shares on the New York Stock Exchange (“NYSE”). As a result, U.S. shareholders of Norbord will receive shares of West Fraser upon completion of the Arrangement that will be tradeable on the NYSE.

Deal Updates:

  1. On November 13, 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 BMC Stock Holdings (BMCH) by Builders FirstSource (BLDR).
  2. On November 20, 2020, Virtusa Corporation (VRTU) announced that its stockholders voted to adopt the previously announced merger agreement with Baring Private Equity Asia.

Closed Deals:

  1. The acquisition of AMAG Pharmaceuticals (AMAG) by Covis Group S.à r.l. on November 16, 2020. It took 46 days for this deal to be completed.
  2. The acquisition of MyoKardia (MYOK) by Bristol-Myers Squibb Company (BMY) on November 17, 2020. It took 43 days for this deal to be completed.
  3. The acquisition of Yintech Investment Holdings Limited (YIN) by Yinke Holdings on November 18, 2020. It took 93 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
GNW 10/23/2016 China Oceanwide Holdings Group Co., Ltd. (N/A) $5.43 $4.63 11/30/2020 17.28% 788.34%
GSUM 10/01/2020 Gridsum Corporation (N/A) $2.00 $1.735 03/31/2021 15.27% 43.22%
IPHI 10/29/2020 Marvell Technology Group Ltd. (MRVL) $168.12 $148.59 12/31/2021 13.14% 11.87%
DOYU 10/12/2020 HUYA Inc. (HUYA) $15.31 $13.83 06/30/2021 10.69% 17.73%
XLNX 10/27/2020 Advanced Micro Devices, Inc. (AMD) $145.87 $132.38 12/31/2021 10.19% 9.21%
CBMG 08/12/2020 CBMG management (N/A) $19.75 $18.3 12/31/2020 7.92% 74.16%
WLTW 03/09/2020 Aon plc (AON) $214.56 $199.4 06/30/2021 7.60% 12.62%
MXIM 07/13/2020 Analog Devices, Inc. (ADI) $84.97 $80.47 06/30/2021 5.60% 9.29%
OSB 11/19/2020 West Fraser Timber Co. Ltd. (N/A) $37.78 $36.21 03/31/2021 4.34% 12.27%
NEWA 10/02/2020 Crouching Tiger Holding Limited (N/A) $3.65 $3.5 06/30/2021 4.29% 7.11%

List of all pending deals:

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

Disclaimer: I have a long position in Otelco (OTEL). 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.

Connect with me on LinkedIn: http://www.linkedin.com/in/asifsuria or follow me on Twitter@asifsuria

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