Merger activity decreased last week with five new deals announced and four deals completed. Two of the five deals announced were successful “deals in the works”.
Founded in 1973 in Dallas, Texas, The Michaels Companies is one of America’s largest arts and crafts retailer. I had been tracking the stock for several years when it looked incredibly cheap under $20 in 2017. However the leveraged balance sheet and a difficult retail landscape for brick-and-mortar retailers kept me away.
The stock began a long slow decline and hit a bottom during the pandemic at $1.46. The company saw significant momentum during the COVID-19 lockdown as most Americans who ended up working from home looked for DIY projects to redecorate. The company first went public in 1984. In 2006, Bain Capital and the Blackstone Group, purchased The Michaels Companies for $6 billion, taking it private. The company went public again in the year 2014. Earlier this month, Apollo Global Management expressed interest in acquiring Michaels. This potential deal was successful two days later when Michaels agreed to be acquired by APO in a transaction valued at $5 billion.
You can find all the active deals listed below in our Merger Arbitrage Tool (MAT) that automatically updates itself during market hours.
There were four new deals announced in the Deals in the Works section last week.
SPAC Arbitrage
While merger activity has been interesting the last few weeks, most of the action appears to be concentrated in the SPAC space. There were an astounding 36 new SPAC IPOs and 7 new SPAC business combinations announced just last week. To put the level of SPAC activity in perspective, there were just 11 SPAC IPOs in all of Q1 2020. This comes at a time when growth stocks appear to have fallen out of favor and the spillover effect is being felt in SPAC land as you can see from this tweet from Chamath Palihapitiya. We covered his sale of Virgin Galactic (SPCE) in our latest insider weekends post.
You can find the new SPAC IPO announcements in our SPACs tool here.
On March 7, 2021, The Wall Street Journal announced that Evolv Technology, a crowd-safety company backed by Microsoft co-founder Bill Gates and former Florida governor Jeb Bush will be going public by merging with the SPAC NewHold Investment Corp. in a deal valued at $1.7 billion.
Weekly Spread Changes:
The table below shows weekly spread changes between February 26, 2021, and March 5, 2021.
Symbol | Quote | Acquiring Company | Acquiring Company Quote | Current Spread | Last Week Spread | Spread Change Weekly | Deal Type |
---|---|---|---|---|---|---|---|
HPR | 9.19 | Bonanza Creek Energy, Inc. (BCEI) | 39.5 | -51.00% | -63.89% | 12.89% | All Stock |
NEOS | 0.77 | Aytu BioScience, Inc. (AYTU) | 7.46 | 5.41% | -2.07% | 7.48% | All Stock |
CLGX | 79.09 | Stone Point Capital and Insight Partners (N/A) | 1.15% | -5.50% | 6.65% | All Cash | |
LINX | 6.75 | StoneCo Ltd. (STNE) | 76.67 | -7.41% | -10.71% | 3.30% | Special Conditions |
CHNG | 22.4 | UnitedHealth Group Incorporated (UNH) | 347.1 | 14.96% | 12.59% | 2.37% | All Cash |
WLTW | 228.02 | Aon plc (AON) | 232.76 | 10.25% | 11.46% | -1.21% | All Stock |
SYNC | 2.17 | Centre Lane Partners, LLC (N/A) | 0.00 | 1.38% | 3.29% | -1.91% | All Cash |
GRUB | 60.19 | Just Eat Takeaway.com N.V. (TKAYY) | 9.12 | 1.67% | 3.68% | -2.01% | All Stock |
DOYU | 14.7 | HUYA Inc. (HUYA) | 26.17 | 29.96% | 34.14% | -4.18% | All Stock |
FBSS | 20.7 | Virginia National Bankshares Corporation (VABK) | 31.19 | 1.71% | 7.32% | -5.61% | All Stock |
Deal Statistics:
Total Number of Deals Closed in 2021 | 30 |
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 | 2 |
Total Number of Pending Deals | 86 |
Aggregate Deal Consideration | $512.58 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) | $19.10 | $14.7 | 06/30/2021 | 29.96% | 95.09% |
APHA | 12/16/2020 | Tilray, Inc. (TLRY) | $18.13 | $15.71 | 06/30/2021 | 15.39% | 48.85% |
CHNG | 01/06/2021 | UnitedHealth Group Incorporated (UNH) | $25.75 | $22.4 | 12/31/2021 | 14.96% | 18.26% |
XLNX | 10/27/2020 | Advanced Micro Devices, Inc. (AMD) | $135.32 | $119.95 | 12/31/2021 | 12.81% | 15.64% |
WLTW | 03/09/2020 | Aon plc (AON) | $251.38 | $228.02 | 06/30/2021 | 10.25% | 32.52% |
AJRD | 12/20/2020 | Lockheed Martin Corporation (LMT) | $56.00 | $51.06 | 12/31/2021 | 9.67% | 11.81% |
CXDC | 06/15/2020 | Faith Dawn Limited and Faith Horizon (N/A) | $1.20 | $1.1 | 05/10/2021 | 9.09% | 51.85% |
ALXN | 12/12/2020 | AstraZeneca (AZN) | $162.09 | $150.1 | 09/30/2021 | 7.99% | 14.09% |
OSN | 12/17/2020 | New Ossen Group Limited (N/A) | $5.10 | $4.73 | 06/30/2021 | 7.82% | 24.83% |
IPHI | 10/29/2020 | Marvell Technology Group Ltd. (MRVL) | $162.43 | $150.65 | 12/31/2021 | 7.82% | 9.54% |
List of all pending deals:
Conclusion:
Four out of the five new deals announced last week were multi-billion dollar deals. The aggregate deal consideration has hence increased to $512.58 billion this year. On the SPAC front, the number of new IPOs continued to rise significantly last week in spite of all the speculation about the SPAC frenzy fading out. Just like there were opportunities on the long side of the SPAC trade, we are likely to see interesting opportunities on the short side after some of the more speculative SPAC business combinations stumble in the coming years.
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.
Connect with me on LinkedIn: http://www.linkedin.com/in/asifsuria or follow me on Twitter@asifsuria