Merger activity remained steady last week with four new deals announced and six deals completed.
Two of the largest deals of this year were announced last week. Headquartered in Calgary, Canada, Shaw Communications (SJR) operates as a connectivity company through wireline and wireless systems. The company entered into an agreement to be acquired by Rogers Communications (RCI). As part of the transaction the combined company plans to invest $2.5 billion in 5G networks over the next five years across Western Canada. The spread on this deal at nearly 20% is high on account of regulatory concerns and an expected closing in the first half of 2022.
On July 31, 2020, we had added Kansas City Southern (KSU) as a potential deal in the works after The Wall Street Journal had announced that, “A group of big buyout investors is considering a takeover bid for railroad operator Kansas City Southern that could be worth more than $21 billion and mark a big bet on U.S.-Mexico trade.” On Sunday, March 21, 2021, KSU entered into an agreement to be acquired by Canadian Pacific Railway Limited (CP) in a cash plus stock transaction. The two step merger process the companies have come up with is interesting and reduces regulatory risks for both shareholders and arbitrageurs. The two step process is described in the press release as follows,
“First, CP will establish a “plain vanilla”, independent voting trust to acquire the shares of KCS. Upon shareholder approval of the transaction, and satisfaction of customary closing conditions, CP will acquire KCS shares and place them into the voting trust. This step is currently expected to be completed in the second half of 2021, at which point KCS shareholders will receive their consideration.
CP’s placement of KCS shares into the voting trust will insulate KCS from control by CP until the STB authorizes control. KCS’ management and Board of Directors will continue to steward the company while it is in trust, pursuing KCS’ independent business plan and growth strategies.
The second step of the process is to obtain control approval from the STB and other applicable regulatory authorities. The STB review is expected to be completed by the middle of 2022. Upon obtaining control approval, the two companies will be integrated, unlocking the benefits of the combination.”
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.
SPAC Arbitrage
There were 23 new SPAC IPOs and 7 new SPAC business combinations announced last week. You can find the new SPAC IPO announcements in our SPACs tool here.
Weekly Spread Changes:
The table below shows weekly spread changes between March 12, 2021, and March 19, 2021.
Symbol | Quote | Acquiring Company | Acquiring Company Quote | Current Spread | Last Week Spread | Spread Change Weekly | Deal Type |
---|---|---|---|---|---|---|---|
HPR | 5.5 | Bonanza Creek Energy, Inc. (BCEI) | 32.39 | -32.86% | -50.77% | 17.91% | All Stock |
AEGN | 27.42 | New Mountain Capital, L.L.C. (N/A) | -1.53% | -10.74% | 9.21% | All Cash | |
FBSS | 20.62 | Virginia National Bankshares Corporation (VABK) | 31.98 | 4.69% | -0.87% | 5.56% | All Stock |
AT | 2.83 | I Squared Capital (N/A) | 0.00 | 7.07% | 3.77% | 3.30% | All Cash |
DOYU | 13.17 | HUYA Inc. (HUYA) | 24.99 | 38.52% | 35.37% | 3.15% | All Stock |
BMTC | 48.05 | WSFS Financial Corporation (WSFS) | 51.96 | -2.68% | -0.40% | -2.28% | All Stock |
NEWA | 3.69 | Crouching Tiger Holding Limited (N/A) | -1.08% | 3.99% | -5.07% | All Cash | |
APHA | 19.34 | Tilray, Inc. (TLRY) | 25.35 | 9.85% | 15.53% | -5.68% | All Stock |
COHR | 260.3 | Lumentum Holdings Inc. (LITE) | 83.54 | -0.33% | 6.77% | -7.10% | Cash Plus Stock |
HCAP | 8.59 | Portman Ridge Finance Corporation (PTMN) | 2.11 | 4.48% | 11.62% | -7.14% | Cash Plus Stock |
Deal Statistics:
Total Number of Deals Closed in 2021 | 37 |
Total Number of Deals Not Completed in 2021 | 1 |
Total Number of Pending Deals | |
Cash Deals | 54 |
Stock Deals | 18 |
Stock & Cash Deals | 12 |
Special Conditions | 3 |
Total Number of Pending Deals | 87 |
Aggregate Deal Consideration | $584.9 billion |
New Deals:
Deal Updates:
Closed Deals:
Top 10 deals with largest spreads:
Symbol | Announced Date | Acquiring Company | Closing Price | Last Price | Closing Date | Profit | Annualized Profit |
---|---|---|---|---|---|---|---|
DOYU | 10/12/2020 | HUYA Inc. (HUYA) | $18.24 | $13.17 | 06/30/2021 | 38.52% | 140.59% |
KSU | 03/21/2021 | Canadian Pacific Railway Limited (CP) | $275.08 | $224.16 | 12/31/2021 | 22.71% | 29.19% |
SJR | 03/15/2021 | Rogers Communications Inc. (RCI) | $32.40 | $27.09 | 06/30/2022 | 19.60% | 15.39% |
CHNG | 01/06/2021 | UnitedHealth Group Incorporated (UNH) | $25.75 | $22.75 | 12/31/2021 | 13.19% | 16.95% |
XLNX | 10/27/2020 | Advanced Micro Devices, Inc. (AMD) | $136.25 | $122.88 | 12/31/2021 | 10.88% | 13.99% |
APHA | 12/16/2020 | Tilray, Inc. (TLRY) | $21.25 | $19.34 | 06/30/2021 | 9.85% | 35.97% |
ATH | 03/08/2021 | Apollo Global Management, Inc. (APO) | $54.34 | $49.64 | 01/31/2022 | 9.46% | 10.96% |
WLTW | 03/09/2020 | Aon plc (AON) | $240.73 | $220 | 06/30/2021 | 9.42% | 34.40% |
AJRD | 12/20/2020 | Lockheed Martin Corporation (LMT) | $51.00 | $46.61 | 12/31/2021 | 9.42% | 12.10% |
CXDC | 06/15/2020 | Faith Dawn Limited and Faith Horizon (N/A) | $1.20 | $1.1 | 05/10/2021 | 9.09% | 67.72% |
List of all pending deals:
Conclusion:
The four new deals announced last week were all multi-billion dollar deals, due to which, the Aggregate Deal Consideration increased significantly to $584.9 billion. SPAC activity continues at a steady pace with seven new business combinations announced last week. 84 SPAC IPOs have been filed so far in the month of March.
Disclaimer: I have long positions in Change Healthcare (CHNG) and 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.
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