Merger Arbitrage Mondays – Bidding War For Coherent Continues

Merger activity increased last week with five new deals announced and four deals completed. There were also eleven new SPAC business combinations announced last week and six new potential deals in the works.

The highlight for last week was the bidding war for Coherent (COHR). Coherent was founded with limited financial resources in the laundry room of one of its founding members in Palo Alto, CA. In the summer of 1966, next to a washer and dryer, and using a piece of rain gutter as a key component, Coherent’s founders began building their first laser. Four months later, Coherent unveiled the very first CO2 commercially available laser. The company that was significantly impacted by the COVD-19 pandemic is now in the middle of a bidding war. On January 19, Coherent agreed to be acquired by Lumentum for $5.7 billion. On February 8, MKS Instruments (MKSI) announced an unsolicited bid to acquire the company for $6 billion, a 16% premium over Lumentum’s bid and on February 12, II-VI Incorporated (IIVI) announced an unsolicited bid to acquire Coherent in a deal valued at $6.5 billion, a 10% premium to the MKS bid and a 24% premium to Lumentum’s bid.

On a personal note, it was also interesting to see the $12.50 per share cash offer by Electronic Arts (EA) for mobile gaming company Glu Mobile (GLUU). We have written about Glu Mobile several times in the past and in October 2012 mentioned that one of the catalysts for the company was a potential acquisition by Activision, Electronic Arts or Zynga. I didn’t realize then it may take more than 8 years for this to come to fruition. I first wrote about the company in early March 2010 here and here and the stock was trading under $1 and the Apple App Store ecosystem was young. The company had to transform its business model from making games for “feature phones” that were sold through carriers like Verizon to competing on a global scale through the App Store. After a lot of volatility in a business driven by hits, it is good to see this positive outcome for investors.

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

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

SPAC Arbitrage

There were 26 new IPOs filed last week and 11 new SPAC business combinations announced. You can find the new SPAC IPO announcements in our new SPACs tool here.

  1. Volta Industries an industry leader in commerce-centric electric vehicle charging networks, and Tortoise Acquisition Corp. II (SNPR) announced they intend to merge.
  2. Nautilus Biotechnology and Arya Sciences Acquisition Corp III (ARYA) announced that they have entered into a definitive business combination agreement.
  3. Matterport, Inc., the spatial data company leading the digital transformation of the built world, and Gores Holdings VI (GHVIU) announced that they have entered into a definitive agreement providing for a business combination that will result in Matterport becoming a publicly listed company.
  4. GreenVision Acquisition (GRNVentered into a definitive agreement for a business combination with Helbiz, Inc.
  5. Hyzon Motors and Decarbonization Plus Acquisition Corporation (DCRBannounced a definitive agreement for a business combination that would result in Hyzon becoming a publicly listed company.
  6. Opportunity Financial and FG New America Acquisition (FGNA) entered into a definitive business combination agreement for a business combination that would result in OppFi becoming a public company.
  7. The Beachbody Company Group announced its intention to become a public company by entering into a definitive three-way merger agreement with Forest Road Acquisition (FRX) and Myx Fitness Holdings.
  8. Archer and Atlas Crest Investment Corp. (ACICentered into a definitive agreement for a business combination that would result in Archer becoming a publicly listed company.
  9. A Place for Rover, Inc., the world’s largest network of five-star pet sitters and dog walkers, has entered into a definitive business combination agreement with Nebula Caravel Acquisition (NEBC).
  10. MoneyLion Fusion Acquisition (FUSEentered into a definitive agreement which would result in MoneyLion becoming a publicly listed company.
  11. Sharecare and Falcon Capital Acquisition (FCAC) have entered into a definitive merger agreement.

Weekly Spread Changes:

The table below shows weekly spread changes between February 5, 2021, and February 12, 2021.

Symbol Quote Acquiring
Company
Acquiring
Company Quote
Current
Spread
Last Week
Spread
Spread Change
Weekly
Deal
Type
APHA 16.94 Tilray, Inc. (TLRY) 29 43.48% 29.31% 14.17% All Stock
HPR 11.19 Bonanza Creek Energy, Inc. (BCEI) 26.08 -73.43% -75.76% 2.33% All Stock
NMCI 6.78 Navios Maritime Partners L.P. (NMM) 17.83 2.56% 1.63% 0.93% All Stock
CMD 76.98 STERIS plc (STE) 183 2.31% 1.40% 0.91% Cash Plus Stock
AJRD 52.36 Lockheed Martin Corporation (LMT) 337.73 6.95% 6.16% 0.79% All Cash
NEWA 3.79 Crouching Tiger Holding Limited (N/A) -3.69% -0.82% -2.87% All Cash
GSUM 1.9 Gridsum Corporation (N/A) 5.26% 9.29% -4.03% All Cash
GNW 4.11 China Oceanwide Holdings Group Co., Ltd. (N/A) 32.12% 46.76% -14.64% All Cash
NEOS 1.12 Aytu BioScience, Inc. (AYTU) 8.57 -16.75% -0.25% -16.50% All Stock
COHR 257.99 Lumentum Holdings Inc. (LITE) 93.95 -18.08% 6.23% -24.31% Cash Plus Stock

Deal Statistics:

Total Number of Deals Closed in 2021 20
Total Number of Deals Not Completed in 2021 1
Total Number of Pending Deals
Cash Deals 51
Stock Deals 16
Stock & Cash Deals 10
Special Conditions 4
Total Number of Pending Deals 81
Aggregate Deal Consideration $460.26 billion

New Deals:

  1. The acquisition of CRH Medical Corporation (CRHM) by Well Health Technologies for $369.2 million or $4.00 per share in cash.
  2. The acquisition of Cubic Corporation (CUB) by Veritas and Evergreen Coast Capital Corporation for $2.8 billion or $70.00 per share in cash. We added CUB as a potential deal to the Deals in the Works section on September 23, 2020, and the price after the news of the potential deal came out was $56.44.
  3. The acquisition of Glu Mobile (GLUU) by Electronic Arts (EA) for $2.1 billion or $12.50 per share in cash.
  4. The acquisition of NIC (EGOV) by Tyler Technologies (TYL) for $2.3 billion or $34.00 per share in cash.
  5. The acquisition of Synacor (SYNC) by Centre Lane Partners for $92 million or $2.20 per share in cash.

Deal Updates:

  1. On February 8, 2021, Coherent (COHR) announced that it has received an unsolicited acquisition proposal from MKS Instruments (MKSI) to acquire Coherent in a cash and stock transaction.
  2. On February 12, 2021, II-VI Incorporated (IIVI) announced it has made an offer to acquire Coherent, (COHR) in a cash and stock transaction. II-VI’s proposal is valued at $260.00 per Coherent share.
  3. On February 12, 2021, PNM Resources (PNM) shareholders voted overwhelmingly to approve the merger agreement with AVANGRID (AGR) at a special shareholders meeting.

Closed Deals:

  1. The acquisition of Collectors Universe (CLCT) by D1 Capital Partners L.P., and Cohen Private Ventures, LLC on February 8, 2021. It took 70 days for this deal to be completed.
  2. The acquisition of BioTelemetry (BEAT) by Royal Philips (PHG) on February 9, 2021. It took 53 days for this deal to be completed.
  3. The acquisition of Endurance International Group Holdings (EIGI) by Clearlake Capital Group on February 10, 2021. It took 100 days for this deal to be completed.
  4. The acquisition of Virtusa Corporation (VRTU) by Baring Private Equity Asia on February 11, 2021. It took 154 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
APHA 12/16/2020 Tilray, Inc. (TLRY) $24.30 $16.94 06/30/2021 43.48% 116.68%
DOYU 10/12/2020 HUYA Inc. (HUYA) $24.83 $18.72 06/30/2021 32.62% 87.56%
GNW 10/23/2016 China Oceanwide Holdings Group Co., Ltd. (N/A) $5.43 $4.11 01/31/2021 32.12% -837.33%
XLNX 10/27/2020 Advanced Micro Devices, Inc. (AMD) $161.60 $145.75 12/31/2021 10.88% 12.41%
IPHI 10/29/2020 Marvell Technology Group Ltd. (MRVL) $191.02 $174.87 12/31/2021 9.24% 10.54%
CHNG 01/06/2021 UnitedHealth Group Incorporated (UNH) $25.75 $23.69 12/31/2021 8.70% 9.92%
WLTW 03/09/2020 Aon plc (AON) $246.28 $227.42 06/30/2021 8.29% 22.26%
HCAP 12/23/2020 Portman Ridge Finance Corporation (PTMN) $8.65 $8.02 06/30/2021 7.84% 21.03%
SOGO 09/29/2020 Tencent Parties (N/A) $8.95 $8.26 07/31/2021 7.75% 16.93%
ALXN 12/12/2020 AstraZeneca (AZN) $169.81 $158.39 09/30/2021 7.21% 11.54%

List of all pending deals:

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

Conclusion:

With five new deals announced last week, we are at a total of nine new deals by the second week of February and 25 new deals so far since the beginning of the year. Out of the seven potential deals in the works announced this month, there are some significant ones like Chevron’s bid for Exxon Mobil and Noble Midstream, Microsoft’s bid for Pinterest and the two unsolicited bids for Coherent. The number of business combinations and IPOs announced in the area of SPACs continues to keep up its pace. There has also been a significant increase in the number of registrations filed for SPAC IPOs.

Disclaimer: I have long positions in Otelco (OTEL) and Zagg (ZAGG). 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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