Merger Arbitrage Mondays – The Bidding War For Kansas City Southern Picks Up Heat

  • May 17, 2021

Merger activity increased last week with four new deals announced, three deals completed and one deal that fell apart.

Domtar Corporation (UFS) was founded in 1848 in England and was originally called Boulton Holding Ltd. Domtar is the largest integrated manufacturer and marketer of uncoated paper in North America and the second-largest in the world.

A week ago we added Domtar to our list of potential deals when Paper Excellence announced that it was exploring a deal to acquire the company. Domtar completed the sale of its Personal Care business in the first quarter of 2021. The sale was part of the company’s ongoing effort to strategically optimize its portfolio in order to strengthen its balance sheet, enhance liquidity, and repurchase shares.

On May 11, 2021, Domtar and Paper Excellence entered into a strategic business combination, under which Paper Excellence will acquire Domtar for $55.50 per share in cash or $3 billion, representing a premium of approximately 37% to Domtar’s closing share price on May 3, 2021, the day before the potential deal was announced and a premium of approximately 44% to the 30-day volume-weighted average price as of May 3, 2021.

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 2 new SPAC IPOs and 8 new SPAC business combinations announced last week. You can find the new SPAC IPO announcements in our SPACs tool here.

  1. Wynn Resorts, Limited (WYNN) and Austerlitz Acquisition Corporation I (AUS) announced that they have entered into a definitive agreement under which Austerlitz I will combine with Wynn Interactive Ltd. to create an independent public company.
  2. Plus, an autonomous trucking technology company, entered into a definitive business combination agreement with Hennessy Capital Investment Corp. V (HCIC).
  3. AgileThought, Inc. and LIV Capital Acquisition Corp. (LIVKentered into a definitive business combination agreement.
  4. Benson Hill, Inc. announced that it will become publicly listed through a business combination with Star Peak Corp II (STPC).
  5. Better HoldCo, Inc. and Aurora Acquisition Corp. (AURCentered into a definitive merger agreement that will transform Better into a publicly listed company.
  6. Ginkgo Bioworks, Inc. and Soaring Eagle Acquisition Corp. (SRNG) have agreed to a business combination that will result in Ginkgo becoming a publicly listed company.
  7. Arqit Limited and Centricus Acquisition Corp. (CENHentered into a definitive agreement that would result in Arqit becoming a publicly listed company.
  8. Bird Rides, Inc. and Switchback II Corporation (SWBK) announced the signing of a definitive business combination agreement that would make Bird a public company.

Weekly Spread Changes:

The table below shows weekly spread changes between May 7, and May 14, 2021.

Company Quote
Last Week
Spread Change
GRUB58.55Just Eat N.V. (TKAYY)10.46519.93%7.35%12.58%All Stock
MX22.77South Dearborn Limited (N/A)27.36%19.79%7.57%All Cash
DOYU7.84HUYA Inc. (HUYA)15.5845.07%39.44%5.63%All Stock
OSN4.54New Ossen Group Limited (N/A)0.0012.33%8.97%3.36%All Cash
SOGO8.24Tencent Parties (N/A)8.01%5.20%2.81%All Cash
MXIM92.85Analog Devices, Inc. (ADI)149.611.51%2.58%-1.07%All Stock
PFBI19.1Peoples Bancorp Inc. (PEBO)33.311.15%2.24%-1.09%All Stock
BPY18.29Brookfield Asset Management Inc. (BAM)48.38-0.66%0.94%-1.60%Special Conditions
HCAP9.05Portman Ridge Finance Corporation (PTMN)2.4313.61%15.58%-1.97%Cash Plus Stock
KSU309.01Canadian Pacific Railway Limited (CP)79.91-58.23%-6.79%-51.44%Cash Plus Stock

Deal Statistics:

Total Number of Deals Closed in 202171
Total Number of Deals Not Completed in 20214
Total Number of Pending Deals
Cash Deals46
Stock Deals25
Stock & Cash Deals15
Special Conditions3
Total Number of Pending Deals89
Aggregate Deal Consideration$717.36 billion

New Deals:

  1. The acquisition of Soliton (SOLY) by Allergan Aesthetics for $550 million or $22.60 per share in cash.
  2. The merger of Extraction Oil & Gas (XOG) and Bonanza Creek Energy (BCEI) for $2.6 billion in an all stock deal. Under the terms of the definitive merger agreement, Extraction shareholders will receive a fixed exchange ratio of 1.1711 shares of Bonanza Creek common shares for each share of Extraction common stock owned on the closing date.
  3. The acquisition of Ferro Corporation (FOE) by Prince International Corporation for $2.1 billion or $22.00 per share in cash.
  4. The acquisition of Domtar Corporation (UFS) by Paper Excellence for $3.02 billion or $55.50 per share in cash. We added UFS as a potential deal to the Deals in the Works section on May 4, 2021, and the price after the news of the potential deal came out was $48.30.

Deal Updates:

  1. On May 10, 2021, ORBCOMM (ORBC) announced the expiration of the 30-day “go-shop” period under the terms of the merger agreement between ORBCOMM and GI Partners.
  2. On May 11, 2021, Alexion Pharmaceuticals (ALXN) announced that its shareholders have voted to adopt and approve the previously announced agreement to be acquired by AstraZeneca (AZN) at a special meeting of shareholders.
  3. On May 12, 2021, Aon plc (AON) and Willis Towers Watson (WLTW) announced they have signed a definitive agreement to sell Willis Re and a set of Willis Towers Watson corporate risk and broking and health and benefits services to Arthur J. Gallagher & Co.. These businesses will be divested for a total consideration of approximately US$3.57B.
  4. On May 12, 2021, II-VI Incorporated (IIVI) and Coherent (COHRconfirmed the expiration of the waiting period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, in connection with the pending transaction.
  5. On May 12, 2021, shareholders of Enable Midstream Partners (ENBLapproved the company’s merger with Energy Transfer (ET) at a special meeting of shareholders and the companies each received a request for additional information and documentary material from the FTC in connection with the FTC’s review of the transactions contemplated by the Merger Agreement.
  6. On May 13, 2021, Kansas City Southern (KSUannounced receipt of a revised acquisition proposal from Canadian National Railway Company (CNI). Under the terms of CN’s revised proposal, each share of KCS common stock would be exchanged for $200 in cash and 1.129 shares of CN common stock. The proposal is binding on CN and may be accepted by KCS at any time prior to 5:00 pm EDT on Friday, May 21, 2021. KCS has notified CP that it intends to terminate KCS’s merger agreement with CP and enter into the definitive agreement with CN, subject to CP’s right to negotiate amendments to the merger agreement for at least five business days and the KCS board’s further determination as to whether any such amendments would cause the CN proposal no longer to constitute a “Company Superior Proposal.”
  7. On May 13, 2021, S&P Global (SPGI) and IHS Markit (INFO) announced that following feedback from regulators, the leadership from both companies have decided to explore a divestiture of IHS Markit’s Oil Price Information Services (OPIS) business, as well as IHS Markit’s Coal, Metals and Mining business. This decision was taken to ensure the pending merger of both companies closes on a timely basis.
  8. On May 14, 2021, shareholders of Aegion Corporation (AEGNapproved the company’s merger with New Mountain Capital at a special meeting of shareholders.

Closed Deals:

  1. The acquisition of Noble Midstream Partners (NBLX) by Chevron Corporation (CVX) on May 11, 2021. It took 67 days for this deal to be completed.
  2. The acquisition of FLIR Systems (FLIR) by Teledyne Technologies Incorporated (TDY) on May 14, 2021. It took 130 days for this deal to be completed.
  3. The acquisition of Atlantic Power Corporation (AT) by I Squared Capital on May 14, 2021. It took 119 days for this deal to be completed.

Terminated Deals:

  1. On May 12, 2021, China XD Plastics Company Limited (CXDCprovided a notice of termination to Faith Dawn Limited and Faith Horizon, pursuant to which the Company terminated the Merger Agreement because the Parent and Merger Sub breached certain representations and warranties and covenants set forth in the Merger Agreement.

Top 10 deals with largest spreads:

DOYU10/12/2020HUYA Inc. (HUYA)$11.37$7.8406/30/202145.07%373.87%
MX03/26/2021South Dearborn Limited (N/A)$29.00$22.7712/31/202127.36%43.80%
GRUB06/10/2020Just Eat N.V. (TKAYY)$70.22$58.5506/30/202119.93%165.34%
CHMA05/05/2021Amryt Pharma (AMYT)$4.74$4.0109/30/202118.20%48.86%
HCAP12/23/2020Portman Ridge Finance Corporation (PTMN)$10.28$9.0506/30/202113.61%112.90%
CHNG01/06/2021UnitedHealth Group Incorporated (UNH)$25.75$22.8812/31/202112.54%20.08%
OSN12/17/2020New Ossen Group Limited (N/A)$5.10$4.5406/30/202112.33%102.32%
NEWA10/02/2020Crouching Tiger Holding Limited (N/A)$3.65$3.3206/30/20219.94%82.45%
XLNX10/27/2020Advanced Micro Devices, Inc. (AMD)$128.55$11812/31/20218.94%14.31%
SJR03/15/2021Rogers Communications Inc. (RCI)$32.40$29.7706/30/20228.83%7.88%

List of all pending deals:

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


The number of new deals and SPAC business combinations announced increased last week and the bidding war for Kansas City Southern (KSU) continued after Canadian National Railway Company (CNI) submitted a revised proposal.

Disclaimer: I have long positions in Nuance Communications (NUAN), 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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