The year 2021 is off to an active start. Merger activity increased significantly last week with eight new deals announced, four deals completed and two deals terminated. Two of the eight new deals announced last week were potential deals in the works.
The bidding war for Alaska Communications Systems Group (ALSK) finally came to an end after the company terminated its previous agreement with Macquarie Capital and agreed to be acquired by ATN International (ATNI).
In the ‘weekly spread changes’ table below, there has been a significant change in the weekly spread for Cardtronics (CATM). Cardtronics received an unsolicited proposal from a third party. According to The Wall Street Journal, the new bidder is NCR Corporation (NCR). Another deal that saw a significant change in its spread was Genworth Financial (GNW). The Dec 31, 2020 merger deadline was not extended this time and the stock dropped sharply last Monday. This has been the longest running active deal we have tracked going on more than 4 years at this point. For all intents and purposes the deal is dead but it has not been officially called off and hence remains on our table.
In case you missed it, you can read our 2020 report on U.S. mergers and acquisitions here.
SPAC Arbitrage
We mentioned in our previous post that we have started adding and updating SPACs in our new SPACs tool here. Out of the 29 SPACs announced in the first week of January, there were 13 SPAC IPOs announced on Friday alone raising over $3 billion. We wrote the following in our introduction to SPACs in the January 2021 premium newsletter:
My first exposure to Special Purpose Acquisition Companies (SPACs) came shortly after the dot com bubble burst. I was in Eugene, Oregon at the time and interviewed for a job at a local company that had resulted from a SPAC (called blank check companies back then) acquiring an operating business. The SPAC sponsors were from Chicago and had the right combination of sales and operations skills. They significantly grew the business they acquired in just a few short years, enriching both themselves and their investors in the process. For the ensuing 15 years, I heard off and on about blank check companies and SPACs including the ill fated acquisition attempt of the middling Indian travel company Yatra Online (YTRA) by a SPAC in July 2019.
If you are not familiar with SPACs, this 2018 Harvard Law School article provides a good primer on this asset class. In very simple terms, a SPAC raises money in an IPO and then looks for an existing operating business to acquire with that capital. The process provides a faster and simpler way for the operating business to go public without having to go through the longer and potentially more expensive IPO process.
You can find all the active deals listed below in our Merger Arbitrage Tool (MAT) that automatically updates itself during market hours.
There was new deal announced in the Deals in the Works section last week.
Weekly Spread Changes:
The table below shows weekly spread changes between January 1, 2020, and January 8, 2020.
Symbol | Quote | Acquiring Company | Acquiring Company Quote | Current Spread | Last Week Spread | Spread Change Weekly | Deal Type |
---|---|---|---|---|---|---|---|
GNW | 3.12 | China Oceanwide Holdings Group Co., Ltd. (N/A) | 74.04% | 43.65% | 30.39% | All Cash | |
APHA | 8.57 | Tilray, Inc. (TLRY) | 11.31 | 10.61% | 0.04% | 10.57% | All Stock |
DOYU | 11.02 | HUYA Inc. (HUYA) | 21.09 | 39.71% | 31.55% | 8.16% | All Stock |
EIDX | 120.96 | BridgeBio Pharma, Inc. (BBIO) | 65.51 | -39.43% | -44.32% | 4.89% | Special Conditions |
HPR | 9.59 | Bonanza Creek Energy, Inc. (BCEI) | 23.62 | -71.92% | -75.94% | 4.02% | All Stock |
GRUB | 82.44 | Just Eat Takeaway.com N.V. (TKAYY) | 12.22 | -0.54% | 3.08% | -3.62% | All Stock |
HCAP | 7.68 | Portman Ridge Finance Corporation (PTMN) | 1.87 | 4.10% | 7.92% | -3.82% | Cash Plus Stock |
NEWA | 3.47 | Crouching Tiger Holding Limited (N/A) | 5.19% | 10.94% | -5.75% | All Cash | |
GSUM | 1.73 | Gridsum Corporation (N/A) | 15.61% | 24.22% | -8.61% | All Cash | |
CATM | 41.08 | Apollo Global Management (APO) | 46.96 | -14.80% | -0.85% | -13.95% | All Cash |
Deal Statistics:
Total Number of Deals Closed in 2021 | 4 |
Total Number of Deals Not Completed in 2021 | 1 |
Total Number of Pending Deals | |
Cash Deals | 46 |
Stock Deals | 21 |
Stock & Cash Deals | 8 |
Special Conditions | 5 |
Total Number of Pending Deals | 80 |
Aggregate Deal Consideration | $408.39 billion |
New Deals:
Deal Updates:
Closed Deals:
Terminated Deals:
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 | $3.12 | 01/31/2021 | 74.04% | 1286.86% |
DOYU | 10/12/2020 | HUYA Inc. (HUYA) | $15.40 | $11.02 | 06/30/2021 | 39.71% | 84.75% |
CXDC | 06/15/2020 | Faith Dawn Limited and Faith Horizon (N/A) | $1.20 | $1.01 | 02/07/2021 | 18.81% | 245.23% |
GSUM | 10/01/2020 | Gridsum Corporation (N/A) | $2.00 | $1.73 | 03/31/2021 | 15.61% | 71.21% |
PRVL | 12/15/2020 | Eli Lilly and Company (LLY) | $26.50 | $23.2 | 03/31/2021 | 14.22% | 64.90% |
APHA | 12/16/2020 | Tilray, Inc. (TLRY) | $9.48 | $8.57 | 06/30/2021 | 10.61% | 22.64% |
XLNX | 10/27/2020 | Advanced Micro Devices, Inc. (AMD) | $163.00 | $147.99 | 12/31/2021 | 10.14% | 10.43% |
WLTW | 03/09/2020 | Aon plc (AON) | $221.64 | $203.64 | 06/30/2021 | 8.84% | 18.86% |
OSN | 12/17/2020 | New Ossen Group Limited (N/A) | $5.10 | $4.69 | 06/30/2021 | 8.74% | 18.66% |
CBMG | 08/12/2020 | CBMG management (N/A) | $19.75 | $18.18 | 03/31/2021 | 8.64% | 39.40% |
List of all pending deals:
Conclusion:
The decision of the NYSE to delist three Chinese companies including China Mobile based on guidance from the Treasury Department will create challenges for deals that have a Chinese acquirer (like the Genworth deal) or that require approval by Chinese authorities (like the Acacia Communications deal). Arbitrageurs will have to keep this new risk in mind as they analyze the probability of deals closing while keeping an eye out for any regulatory changes with domestic deals on account of shifts in the political sands.
Disclaimer: I have long positions in Otelco (OTEL), Zagg (ZAGG) and Prevail Therapeutics (PRVL). 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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