Merger Arbitrage Mondays – At Home Group Receives A Boost To Its Previous Offer

Merger activity remained steady last week with three new deals announced and four deals completed.

Incorporated in 1989 and headquartered in San Francisco, CAI International is a global transportation company that offers intermodal container leasing and sales. On June 17, 2021, CAI entered into an agreement to be acquired by Mitsubishi HC Capital, a Japanese shipping conglomerate for $56 per share, representing a 46.8% premium over CAI’s closing stock price on Friday. In September of last year, Mitsubishi acquired its smaller rival Hitachi Capital to compete with global competitors and changed its name to Mitsubishi HC Capital Inc.

Mitsubishi’s merger agreement with CAI comes at a time of high shipping rates and a shortage in the supply of shipping containers on account of resurgent demand after pandemic related disruptions. Other factors that influenced this are the traffic jam in the Suez Canal and the recent partial closure of China’s Yantian port. In joining forces with MHC, CAI International aims to become a larger player in the market.

Two deals announced amendments to their merger agreements. Ossen Innovation (OSN) amended its going-private deal by extending the termination date by three months. At Home Group (HOME) also entered into an amendment with Hellman & Friedman (H&F) after announcing the expiration of the 40-day “go-shop” period and the HSR Act last week. The improved offer of $37 is an increase from the prior $36 per share offer, representing a premium of approximately 21% to the company’s closing stock price of $30.67 on May 4, 2021. This revised price did little to appease the company’s largest shareholder CAS Investment Partners, LCC, which owns a 17% stake in HOME. CAS Investment Partners asks shareholders to reject the current deal by not tendering their shares because they they think the company is worth $70 per share. It will be interesting to see if H&F comes back to the table with a higher offer following the letter CAS sent to shareholders.

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 6 SPAC IPOs filed and 5 new SPAC business combinations announced last week. You can find the new SPAC IPO announcements in our SPACs tool here.

  1. Boxed, Inc. and Seven Oaks Acquisition Corp. (SVOKannounced a definitive agreement for a business combination that would result in Boxed becoming a public company.
  2. Solid Power and Decarbonization Plus Acquisition Corporation III (DCRCannounced a definitive agreement for a business combination that would result in Solid Power becoming a publicly listed company.
  3. BCP QualTek HoldCo, LLC and Roth CH Acquisition III Co. (ROCR) announced the signing of a definitive agreement for a business combination that will result in QualTek becoming a public company.
  4. Mirion Technologies announced that it will become a publicly traded company through a business combination with GS Acquisition Holdings Corp II (GSAH).
  5. Breakthrough U.S. indoor agriculture company Local Bounti Corporation has agreed to go public through a merger with Leo Holdings III Corp. (LIII).

Weekly Spread Changes:

The table below shows weekly spread changes between June 11, and June 18, 2021.

Symbol Quote Acquiring
Company
Acquiring
Company Quote
Current
Spread
Last Week
Spread
Spread Change
Weekly
Deal
Type
TEDU 3.19 Kidedu Holdings Limited (N/A) 0.00 25.39% 10.80% 14.59% All Cash
MX 24.01 South Dearborn Limited (N/A) 20.78% 11.93% 8.85% All Cash
NEWA 3.29 Crouching Tiger Holding Limited (N/A) 10.94% 5.18% 5.76% All Cash
WLTW 225.2 Aon plc (AON) 230.1 10.35% 4.90% 5.45% All Stock
SJR 28.76 Rogers Communications Inc. (RCI) 51.42 12.66% 8.83% 3.83% Special Conditions
BWL-A 9.06 Bowlero Corp. (N/A) 0.00 0.77% 2.70% -1.93% All Cash
TRMT 6.15 RMR Mortgage Trust (RMRM) 12.02 1.63% 3.65% -2.02% All Stock
CCRC 6.35 Taiying Group Ltd. and Taiying International Inc. (N/A) 0.00 2.36% 4.67% -2.31% All Cash
WBT 23.92 The Middleby Corporation (MIDD) 161 -16.54% -13.08% -3.46% All Stock
SVBI 12.13 Shore Bancshares, Inc. (SHBI) 16.36 -3.18% 1.70% -4.88% Cash Plus Stock

Deal Statistics:

Total Number of Deals Closed in 2021 89
Total Number of Deals Not Completed in 2021 5
Total Number of Pending Deals
Cash Deals 42
Stock Deals 30
Stock & Cash Deals 13
Special Conditions 3
Total Number of Pending Deals 88
Aggregate Deal Consideration $762.63 billion

New Deals:

  1. The acquisition of Kindred Biosciences (KIN) by Elanco Animal Health Incorporated (ELAN) for $440 million or $9.25 per share in cash.
  2. The acquisition of CAI International (CAI) by Mitsubishi HC Capital for $2.9 billion or $56 per share in cash.
  3. The acquisition of Sykes Enterprises (SYKE) by Sitel Group for $2.2 billion or $54 per share in cash.

Deal Updates:

  1. On June 14, 2021, Proofpoint (PFPT) announced that the special meeting of stockholders will be held virtually via the Internet on July 23, 2021. The HSR Waiting Period applicable to the consummation of the Merger between Proofpoint (PFPT) and Thoma Bravo expired on June 14, 2021.
  2. On June 14, 2021, ORBCOMM (ORBC) announced that the waiting period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (“HSR Act”) in connection with the terms of the previously announced acquisition of ORBCOMM by GI Partners,  expired on June 14, 2021.
  3. On June 15, 2021, Canadian National Railway (CNI) and Kansas City Southern (KSUsubmitted final documents requested by the Surface Transportation Board in support of approval for a voting trust.
  4. On June 15, 2021, The UK’s Competition and Markets Authority announced that it is investigating the anticipated acquisition by NCR Corporation (NCR) of Cardtronics (CATM).
  5. On June 15, 2021, PRA Health Sciences (PRAH) announced that it has received shareholder approval to be acquired by ICON Public Limited Company (ICLR).
  6. On June 15, 2021, At Home Group (HOME) announced the expiration of the 40-day “go-shop” period under the terms of the previously announced merger agreement with Hellman & Friedman. The waiting period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976 also expired on June 14, 2021.
  7. On June 15, 2021, Magnachip (MXreceived an order from the Treasury Department on behalf of the Committee on Foreign Investment in the United States (CFIUS) telling the company to pause its acquisition by Wise Road Capital until a government review can be completed. The company is assessing the impact of the Interim Order and the special meeting of stockholders scheduled for June 17, 2021, is expected to be postponed.
  8. On June 15, 2021, Nuance Communications (NUAN) announced that it has received shareholder approval to be acquired by Microsoft (MSFT).
  9. On June 15, 2021, Athene Holding (ATH) announced that it expects to hold its special general meeting of shareholders to consider the merger transaction with Apollo Global Management (APO) during the fourth quarter of 2021 following Apollo’s special meeting of stockholders. The company believes the parties have been making good progress on integration planning and structuring for post-closing financial efficiencies and that the merger remains on track to close in early January 2022 after satisfaction of customary conditions including regulatory and shareholder approvals.
  10. On June 16, 2021, At Home Group Inc. (HOME) and funds affiliated with Hellman & Friedman (H&F) announced that they have entered into an amended and restated merger agreement under which H&F will acquire all outstanding shares of At Home for $37.00 per share in cash.
  11. On June 16, 2021, Ossen Innovation (OSN) announced that it has entered into an Amendment to the Agreement and Plan of Merger to amend its previously announced Agreement and Plan of Merger with New Ossen Innovation Limited. The Merger Agreement provides that either the Company or Parent may terminate the Merger Agreement if the effective time of the merger has not occurred on or before June 17, 2021. Pursuant to Amendment No. 1, the parties have agreed to extend the Termination Date by three months to September 17, 2021.
  12. On June 16, 2021, StoneCo (STNE) announced that CADE, the Brazilian antitrust authority, unanimously approved the business combination with Linx S.A. (LINX).
  13. On June 16, 2021, The U.S. Justice Department filed a lawsuit aimed at stopping Aon’s (AON)  acquisition of Willis Towers Watson (WLTW) because it would reduce competition and could lead to higher prices. In response, Aon and Willis Towers Watson shared a statement stating that they disagree with the U.S. Department of Justice’s action.
  14. On June 16, 2021,  Magnachip Semiconductor (MXreceived a letter from the Korean Ministry of Trade, Industry and Energy (“MOTIE”) requesting MSK to either apply for an approval or file a report, as may be applicable, under Article 11-2 of the Act on Prevention of Divulgence and Protection of Industrial Technology concerning the Merger.
  15. On June 17, 2021, Cincinnati Bell (CBBreceived all regulatory approvals required to complete the acquisition of the Company by an affiliate of Macquarie Infrastructure Partners, other than approval by the California Public Utilities Commission. The proposed merger is now expected to close during the third quarter of 2021.
  16. June 17, 2021: According to Reuters, Senior Judge Reggie Walton, who joined the U.S. District Court for the District of Columbia in 2001, will hear the Justice Department’s lawsuit aimed at stopping insurance broker Aon’s (AON) $30 billion acquisition of Willis Towers Watson (WLTW).
  17. On June 17, 2021, EU antitrust regulators set a July 20 deadline for their decision on CME Group and IHS Markit’s (INFO) proposed joint venture for over-the-counter markets.

Closed Deals:

  1. The acquisition of Leaf Group (LEAF) by Graham Holdings Company (GHC) on June 14, 2021. It took 70 days for this deal to be completed.
  2. The acquisition of Grubhub (GRUB) by Just Eat Takeaway.com N.V. (TKAYF) on June 15, 2021. It took 370 days for this deal to be completed.
  3. The acquisition of Houston Wire & Cable Company (HWCC) by Omni Cable on June 15, 2021. It took 82 days for this deal to be completed.
  4. The acquisition of Extended Stay America (STAY) by Blackstone Real Estate Partners and Starwood Capital Group on June 16, 2021. It took 93 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) $12.25 $8.27 06/30/2021 48.12% 1756.33%
TEDU 04/30/2021 Kidedu Holdings Limited (N/A) $4.00 $3.19 09/30/2021 25.39% 90.86%
MX 03/26/2021 South Dearborn Limited (N/A) $29.00 $24.01 12/31/2021 20.78% 39.10%
KSU 05/21/2021 Canadian National Railway Company (CNI) $318.18 $281.64 12/31/2022 12.98% 8.47%
SJR 03/15/2021 Rogers Communications Inc. (RCI) $32.40 $28.76 06/30/2022 12.66% 12.32%
CHNG 01/06/2021 UnitedHealth Group Incorporated (UNH) $25.75 $23.16 12/31/2021 11.18% 21.04%
SBBP 05/24/2021 Xeris Pharmaceuticals, Inc. (XERS) $3.22 $2.9 11/15/2021 11.11% 27.40%
NEWA 10/02/2020 Crouching Tiger Holding Limited (N/A) $3.65 $3.29 06/30/2021 10.94% 399.39%
OSN 12/17/2020 New Ossen Group Limited (N/A) $5.10 $4.6 06/30/2021 10.87% 396.74%
XLNX 10/27/2020 Advanced Micro Devices, Inc. (AMD) $145.89 $131.92 12/31/2021 10.59% 19.92%

List of all pending deals:

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

Conclusion:

Multiple deals received required regulatory and shareholder approvals but regulatory risk remains a key risk, especially for cross-border deals. Magnachip (MX) received orders from CFIUS to pause the merger, and the U.S. Justice Department sued to stop Aon’s (AON)  acquisition of Willis Towers Watson (WLTW). Renegotiated deals or competing bids have helped arbitrageurs offset the impact of higher regulatory risk this year.

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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