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Merger Arbitrage Mondays – Bank Mergers Dominate

  • April 26, 2021

We have been writing about two M&A trends this year including bidding wars for companies and consolidation in the banking sector. We saw both trends in play last week with a new superior offer for the railroad Kansas City Southern (KSU) and three new bank mergers announced last week. The three new bank mergers don’t include one where the acquiring company wants the target, Marlin Business Services (MRLN), to cease operations as a bank. It is not surprising that the S&P Regional Banking ETF (KRE) is up more than 30% this year compared to a 10% gain for the S&P 500. One could argue that a more appropriate benchmark for small regional banks might be the Russell 2000 index of small cap stocks. Even in that comparison, KRE is trouncing the 15% year-t0-date returns of the Russell 2000 index.

Merger activity remained steady last week with six new deals announced and seven deals completed. You can find all the active deals listed below in our Merger Arbitrage Tool (MAT) that automatically updates itself during market hours.

There were no new deals announced in the Deals in the Works section last week.

SPAC Arbitrage

There were 4 new SPAC business combinations announced last week. You can find the new SPAC IPO announcements in our SPACs tool here.

  1. SmartRent.com, Inc. entered into a definitive business combination agreement with Fifth Wall Acquisition Corp. I (FWAA).
  2. Vivid Seats Inc. has entered into a definitive transaction agreement with Horizon (HZAC), that will result in Vivid Seats Inc. becoming a public company.
  3. CompoSecure Holdings and Roman DBDR Tech Acquisition (DBDRentered into a definitive merger agreement.
  4. SGHC Limited has entered into a definitive agreement with Sports Entertainment Acquisition Corp. (SEAH).

Weekly Spread Changes:

The table below shows weekly spread changes between April 16, 2021, and April 23, 2021.

Company Quote
Last Week
Spread Change
TPCO17.44Alden Global Capital (N/A)-1.09%-6.10%5.01%All Cash
CXDC1.025Faith Dawn Limited and Faith Horizon (N/A)17.07%12.15%4.92%All Cash
NEWA3.39Crouching Tiger Holding Limited (N/A)7.67%4.29%3.38%All Cash
GRUB72.61Just Eat Takeaway.com N.V. (TKAYY)11.183.32%1.16%2.16%All Stock
CCRC6.15Taiying Group Ltd. and Taiying International Inc. (N/A)0.005.69%4.00%1.69%All Cash
COHR269.84II-VI Incorporated (IIVI)77.877.79%9.72%-1.93%Cash Plus Stock
CHNG23.22UnitedHealth Group Incorporated (UNH)400.3110.90%12.89%-1.99%All Cash
LINX6.92StoneCo Ltd. (STNE)67.67-9.68%-6.86%-2.82%Special Conditions
MX25.87South Dearborn Limited (N/A)12.10%15.31%-3.21%All Cash
KSU301.62Canadian Pacific Railway Limited (CP)370.71-10.06%5.08%-15.14%Cash Plus Stock

Deal Statistics:

Total Number of Deals Closed in 202162
Total Number of Deals Not Completed in 20213
Total Number of Pending Deals
Cash Deals43
Stock Deals23
Stock & Cash Deals15
Special Conditions4
Total Number of Pending Deals85
Aggregate Deal Consideration$663.59 billion

New Deals:

  1. The merger of Sterling Bancorp (STL) and Webster Financial Corporation (WBS) for $5.12 billion in an all stock deal. Under the terms of the agreement, Sterling will merge into Webster, and Sterling’s shareholders will receive a fixed exchange ratio of 0.463 of a Webster share for each share of Sterling stock they own.
  2. The acquisition of Knoll (KNL) by Herman Miller (MLHR) for $1.8 billion in a cash plus stock deal. Under the terms of the agreement, Knoll shareholders will receive $11.00 in cash and 0.32 shares of Herman Miller common stock for each share of Knoll common stock they own.
  3. The acquisition of Marlin Business Services (MRLN) by HPS Investment Partners for $109.4 million or $23.50 per share in cash.
  4. The merger of American River Bankshares (AMRB) and Bank of Marin Bancorp (BMRC) for $134.5 million in an all stock deal. Under the terms of the agreement, AMRB shareholders will receive a fixed exchange ratio of 0.575 shares of BMRC common stock for each share of AMRB common stock outstanding.
  5. The acquisition of Welbilt (WBT) by The Middleby Corporation (MIDD) for $4.3 billion in an all stock deal. Under the terms of the agreement, Welbilt shareholders will receive a fixed exchange ratio of 0.1240 shares of Middleby common stock for each share of Welbilt common stock.
  6. The acquisition of Meridian Bancorp (EBSB) by Independent Bank Corp. (INDB) for $1.15 billion in an all stock deal. Under the terms of the agreement, each Meridian stockholder will receive 0.2750 of a share of Independent common stock for each share of Meridian common stock.

Deal Updates:

  1. On April 19, 2021, Tribune Publishing Company (TPCOconfirmed receipt of a letter from Stewart Bainum, in which Mr. Bainum communicated that Hansjörg Wyss has informed him that he will no longer provide the level of equity commitment indicated in the revised, non-binding proposal from Newslight dated April 1, 2021, to acquire all of the outstanding shares of Tribune common stock for $18.50 per share in cash.
  2. On April 20, 2021, Canadian National Railway (CNI) announced that it has made a superior proposal to combine with Kansas City Southern (KSU) in a cash-and-stock transaction valued at $33.7 billion, or $325 per share.
  3. On April 20, 2021, The US Department of Justice intervened in the proposed merger of Aon (AON) with Willis Towers Watson (WLTW), demanding divestitures in addition to those set out by the European Commission (EC).
  4. On April 21, 2021, shareholders of RigNet (RNETapproved the company’s merger with Viasat (VSAT) at a special meeting of shareholders.
  5. On April 21, 2021, AVANGRID (AGR) announced that it has received Federal Energy Regulatory Commission (FERC) approval for its proposed PNM Resources (PNM) merger.
  6. On April 21, 2021, South Korea’s antitrust authority approved Analog Devices (ADI) planned purchase of Maxim Integrated (MXIM).
  7. On April 23, 2021, GW Pharmaceuticals (GWPH) and Jazz Pharmaceuticals (JAZZ) announced that GW’s shareholders voted to approve the acquisition of GW by a subsidiary of Jazz at the GW shareholder meetings. The Court hearing to sanction the acquisition is currently scheduled for May 5, 2021, and the completion of the acquisition is expected to occur shortly thereafter.
  8. April 23, 2021: Australia’s review of Aon’s (AON) purchase of Willis Towers (WLTWhas been delayed as the regulator needs more information from the parties.
  9. On April 24, 2021, Canadian Pacific Railway (CP) welcomed the U.S. Surface Transportation Board’s (STB) decision to approve its merger with Kansas City Southern (KSU).
  10. On April 24, 2021, Kansas City Southern (KSU) announced that its Board of Directors has unanimously determined that the unsolicited proposal received from Canadian National Railway (CNI) on April 20, 2021 to acquire KCS in a cash and stock transaction valued by CN at $325 per KCS share could reasonably be expected to lead to a “Company Superior Proposal”.

Closed Deals:

  1. The acquisition of Inphi Corporation (IPHI) by Marvell Technology Group (MRVL) on April 20, 2021. It took 173 days for this deal to be completed.
  2. The acquisition of China Biologic Products Holdings (CBPO) by CBPO Holdings Limited and CBPO Group Limited on April 20, 2021. It took 152 days for this deal to be completed.
  3. The acquisition of NIC Inc. (EGOV) by Tyler Technologies (TYL) on April 21, 2021. It took 70 days for this deal to be completed.
  4. The acquisition of Ruhnn Holding Limited (RUHN) by RUNION Holding Limited on April 20, 2021. It took 76 days for this deal to be completed.
  5. The acquisition of CRH Medical Corporation (CRHM) by Well Health Technologies on April 22, 2021. It took 73 days for this deal to be completed.
  6. The acquisition of GenMark Diagnostics (GNMK) by Roche (RHHBY) on April 22, 2021. It took 38 days for this deal to be completed.
  7. The acquisition of RealPage (RP) by Thoma Bravo on April 22, 2021. It took 122 days for this deal to be completed.

Top 10 deals with largest spreads:

DOYU10/12/2020HUYA Inc. (HUYA)$13.51$10.506/30/202128.62%160.71%
CXDC06/15/2020Faith Dawn Limited and Faith Horizon (N/A)$1.20$1.02505/10/202117.07%445.12%
SJR03/15/2021Rogers Communications Inc. (RCI)$32.40$27.7906/30/202216.59%14.08%
HCAP12/23/2020Portman Ridge Finance Corporation (PTMN)$10.12$8.8406/30/202114.46%81.21%
MX03/26/2021South Dearborn Limited (N/A)$29.00$25.8712/31/202112.10%17.74%
CHNG01/06/2021UnitedHealth Group Incorporated (UNH)$25.75$23.2212/31/202110.90%15.97%
OSN12/17/2020New Ossen Group Limited (N/A)$5.10$4.6206/30/202110.39%58.34%
XLNX10/27/2020Advanced Micro Devices, Inc. (AMD)$142.63$129.6612/31/202110.00%14.66%
MRLN04/19/2021HPS Investment Partners LLC (N/A)$23.50$21.6203/31/20228.70%9.36%
COHR03/25/2021II-VI Incorporated (IIVI)$290.86$269.8412/31/20217.79%11.42%

List of all pending deals:

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

Disclaimer: I have long positions in Change Healthcare (CHNG) and Brookfield Property Partners (BPY). 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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