Merger Arbitrage Mondays – Standard Industries Finally Bags W. R. Grace

Merger activity increased last week with seven new deals announced and four deals completed. In keeping with what we have been seeing for several weeks, two of these seven new deals were banking related mergers.

There were a total of 24 deals announced in the month of April for a total deal value of over $114 billion. Looking back one year, we had only 2 deals announced in April 2020, which was the lowest deal volume we had seen in a decade. Four of the seven deals announced last week were multi-billion dollar deals.

Founded in 1854 and headquartered in Columbia, Maryland, W. R. Grace (GRA) is a global specialty chemical company, that operates through two business segments—Catalysts Technologies and Materials Technologies. We added W. R. Grace as a potential deal in the works on November 9, 2020, when it received a proposal from 40 North Management LLC, one of its shareholders, to acquire all outstanding common shares of the Company for $60 per share in cash. On January 11, 2021, 40 North Management increased its offer to acquire all of the outstanding shares of common stock of GRA for $65 per share in cash and further increased the offer to $70 on April 1, 2021. On April 26, 2021, W. R. Grace entered into a definitive agreement under which Standard Industries Holdings will acquire Grace in an all-cash transaction valued at approximately $7.0 billion, including Grace’s pending pharma fine chemistry acquisition. 40 North is a “related investment” business of Standard Industries. The $70 purchase price represents a premium of approximately 59% over Grace’s closing stock price of $44.05 on November 6, 2020, the last trading day prior to the announcement of 40 North’s initial proposal to acquire the Company on November 9, 2020.

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

  1. Clarus Therapeutics and Blue Water Acquisition (BLUWannounced a definitive business combination agreement that will result in Clarus becoming a publicly-traded company.
  2. Shapeways, Inc. and Galileo Acquisition Corp. (GLEO) announced that they have entered into a definitive merger agreement.
  3. Enjoy Technology Inc. and Marquee Raine Acquisition Corp. (MRACentered into a definitive merger agreement.
  4. Sonder Holdings Inc. and Gores Metropoulos II, Inc. (GMII) announced that they have entered into a definitive agreement to combine.

Weekly Spread Changes:

The table below shows weekly spread changes between April 23, 2021, and April 30, 2021.

Symbol Quote Acquiring
Company
Acquiring
Company Quote
Current
Spread
Last Week
Spread
Spread Change
Weekly
Deal
Type
DOYU 9.11 HUYA Inc. (HUYA) 17.62 41.19% 28.62% 12.57% All Stock
AJRD 46.72 Lockheed Martin Corporation (LMT) 380.56 9.16% 4.94% 4.22% All Cash
MX 25.01 South Dearborn Limited (N/A) 15.95% 12.10% 3.85% All Cash
KSU 292.21 Canadian Pacific Railway Limited (CP) 373.13 -6.76% -10.06% 3.30% Cash Plus Stock
LEAF 8.86 Graham Holdings Company (GHC) 635.61 -4.06% -6.70% 2.64% All Cash
HCAP 9.04 Portman Ridge Finance Corporation (PTMN) 2.38 11.48% 14.46% -2.98% Cash Plus Stock
CADE 22.25 BancorpSouth Bank (BXS) 29.59 -1.29% 1.97% -3.26% Cash Plus Stock
MRLN 22.55 HPS Investment Partners LLC (N/A) 0.00 4.21% 8.70% -4.49% All Cash
SJR 28.93 Rogers Communications Inc. (RCI) 49.23 11.99% 16.59% -4.60% Special Conditions
CXDC 1.07 Faith Dawn Limited and Faith Horizon (N/A) 12.15% 17.07% -4.92% All Cash

Deal Statistics:

Total Number of Deals Closed in 2021 66
Total Number of Deals Not Completed in 2021 3
Total Number of Pending Deals
Cash Deals 44
Stock Deals 25
Stock & Cash Deals 15
Special Conditions 4
Total Number of Pending Deals 88
Total Deal Size $704.04 billion

New Deals:

  1. The acquisition of Flagstar Bancorp (FBC) by New York Community Bancorp (NYCB) for $2.6 billion in an all stock deal. Under terms of the agreement, Flagstar shareholders will receive 4.0151 shares of New York Community common stock for each Flagstar share they own.
  2. The acquisition of Proofpoint (PFPT) by Thoma Bravo for $12.3 billion or $176 per share in cash.
  3. The acquisition of W. R. Grace (GRA) by Standard Industries Holdings for $7 billion or $70 per share in cash. We added GRA as a potential deal to the Deals in the Works section on November 9, 2020, and the price after the news of the potential deal came out was $55.99.
  4. The acquisition of First Choice Bancorp (FCBP) by Enterprise Financial Services (EFSC) for $397.7 million in an all stock deal. Under the terms of the agreement, each holder of FCBP common stock will receive 0.6603 shares of EFSC common stock for each FCBP common share held.
  5. The merger of Tremont Mortgage Trust (TRMT) with RMR Mortgage Trust (RMRM) for $252.33 million in an all stock deal. Under the terms of the merger agreement, each TRMT common share will be converted into 0.520 of one newly issued RMRM common share.
  6. The acquisition of VEREIT (VER) by Realty Income Corporation (O) for $17.66 billion in an all stock deal. Under the terms of the agreement, VEREIT shareholders will receive 0.705 shares of Realty Income stock for every share of VEREIT stock they own. Immediately following the acquisition, both companies will spin-off their combined office properties into a separate publicly traded REIT.
  7. The acquisition of Tarena International (TEDU) by Kidedu Holdings Limited for $230.6 million or $4 per share in cash.

Deal Updates:

  1. On April 26, 2021, FBL Financial Group (FFG) announced that it has received the necessary approvals from the Financial Industry Regulatory Authority in relation to its proposed transaction with Farm Bureau Property & Casualty Insurance Company.
  2. On April 27, 2021, Cubic Corporation (CUB) announced that the shareholders of the company approved a proposal to adopt the merger agreement entered into between the company and an affiliate of Veritas Capital.
  3. On April 28, 2021, shareholders of CoreLogic (CLGXapproved the company’s merger with Stone Point Capital and Insight Partners at a special meeting of shareholders.
  4. On April 29, 2021, shareholders of Cantel Medical (CMDapproved the company’s merger with STERIS (STE) at a special meeting of shareholders.
  5. On April 29, 2021, Noble Midstream Partners (NBLX) announced that it expects to close the previously announced merger transaction with Chevron Corporation (CVX) in mid-May.
  6. On April 30, 2021, Cooper Tire & Rubber Company (CTB) announced that its stockholders overwhelmingly voted to approve the agreement and plan of merger with The Goodyear Tire & Rubber Company (GT).
  7. On April 30, 2021, Boston Private Financial Holdings (BPFH) reminded shareholders that the previously adjourned special meeting of shareholders to vote on the proposed transaction with SVB Financial Group (SIVB) will reconvene on May 4, 2021.
  8. On April 30, 2021, Linx S.A.(LINX) announced that its merger with StoneCo (STNE) is subject to Brazilian antitrust authority (CADE) approval and other customary closing conditions. There can be no assurance that such approval will be obtained or that the merger will be consummated, on a timely basis or at all. We have extended the closing date for this deal to June 30, 2021.

Closed Deals:

  1. The acquisition of Glu Mobile (GLUU) by Electronic Arts (EA) on April 29, 2021. It took 80 days for this deal to be completed.
  2. The acquisition of RigNet (RNET) by Viasat (VSAT) on April 30, 2021. It took 130 days for this deal to be completed.
  3. The acquisition of Aphria (APHA) by Tilray (TLRY) on April 30, 2021. It took 135 days for this deal to be completed.
  4. The acquisition of Waddell & Reed Financial (WDR) by Macquarie Asset Management on April 30, 2021. It took 149 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
DOYU 10/12/2020 HUYA Inc. (HUYA) $12.86 $9.11 06/30/2021 41.19% 254.83%
MX 03/26/2021 South Dearborn Limited (N/A) $29.00 $25.01 12/31/2021 15.95% 23.96%
CHNG 01/06/2021 UnitedHealth Group Incorporated (UNH) $25.75 $22.95 12/31/2021 12.20% 18.33%
CXDC 06/15/2020 Faith Dawn Limited and Faith Horizon (N/A) $1.20 $1.07 05/10/2021 12.15% 554.32%
SJR 03/15/2021 Rogers Communications Inc. (RCI) $32.40 $28.93 06/30/2022 11.99% 10.33%
HCAP 12/23/2020 Portman Ridge Finance Corporation (PTMN) $10.08 $9.04 06/30/2021 11.48% 71.00%
XLNX 10/27/2020 Advanced Micro Devices, Inc. (AMD) $140.66 $127.96 12/31/2021 9.93% 14.91%
AJRD 12/20/2020 Lockheed Martin Corporation (LMT) $51.00 $46.72 12/31/2021 9.16% 13.76%
OSN 12/17/2020 New Ossen Group Limited (N/A) $5.10 $4.71 06/30/2021 8.28% 51.23%
COHR 03/25/2021 II-VI Incorporated (IIVI) $281.10 $259.99 12/31/2021 8.12% 12.19%

List of all pending deals:

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

Conclusion:

The number of new deals announced in a month this year has been consistently increasing from 16 deals announced in January 2021, 19 in February 2021, 21 in March 2021, and 24 in April 2021. The SPAC frenzy on the other hand has almost fizzled out with just 13 SPAC IPOs announced in the month of April when compared to the record-breaking 111 SPAC IPOs that were announced in March 2021.

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.

Connect with me on LinkedIn: http://www.linkedin.com/in/asifsuria or follow me on Twitter@asifsuria

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