Merger Arbitrage Mondays – Magnachip Receives A Rival Bid

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

Chad Williams founded QTS Realty Trust (QTS) in the year 2003 with the purchase of a data center in Kansas. The company provides data center solutions across a diverse footprint spanning more than 7 million square feet of owned data center space throughout North America and Europe. On June 7, 2021, QTS entered into a definitive agreement to be acquired by Blackstone Funds in a $10 billion transaction. Another data center REIT that we had tracked in our Merger Arbitrage Tool was the acquisition of InterXion Holding (INXN) by Digital Realty Trust (DLR). This deal was completed on March 13, 2020. Both deals were announced at a premium of over 20%. According to analysts, CyrusOne (CONE) and CoreSite (COR) could be potential M&A targets among data center REITs, following the sale of QTS.

Another highlight from last week was Magnachip (MX) receiving an unsolicited proposal from Cornucopia Investment Partners to acquire the company for $35.00. Magnachip entered into an agreement to be acquired by South Dearborn Limited for $29.00 on March 26, 2021. Shares of the company were up by 11.3% on Friday following the announcement of the rival bid. The spread on the deal, despite this new offer, is still nearly 12% or almost 22% annualized assuming the deal closes by the end of the year.

Semiconductor deals generally trade at a large spread because the wounds from failed deals like Lattice Semiconductor (LSCC) and NXP Semiconductors (NXPI) are still on the minds of arbitrageurs. The former failed because the U.S. government decided to block the deal and the latter failed because the Chinese government essentially ran out the clock on the deal. Despite these concerns, several semiconductor deals have successfully completed since the NXPI fiasco. The situation with Magnachip appears to be a little more risky to me compared to other semiconductor deals that have gone through. Magnachip (MX) is not only undergoing formal CFIUS review, there is also the risk the South Korean government might attempt to block the deal.

You can find all the active deals listed below in our Merger Arbitrage Tool (MAT) that automatically updates itself during market hours.

There was one new deal announced in the Deals in the Works section last week.

SPAC Arbitrage

There were 9 SPAC IPOs filed and 6 new SPAC business combinations announced last week. You can find the new SPAC IPO announcements in our SPACs tool here.

  1. Dave and VPC Impact Acquisition Holdings III, Inc. (VPCCentered into a definitive agreement for a business combination that will result in Dave becoming a publicly traded company.
  2. Wall Box Chargers SL and Kensington Capital Acquisition Corp. II (KCACannounced a definitive agreement for a business combination that would result in Wallbox becoming a publicly listed company.
  3. Valo Health and Khosla Ventures Acquisition Co. (KVSAentered into a definitive merger agreement.
  4. Venus Acquisition Corporation (VENA) and VIYI Algorithm Inc. controlled by WiMi Hologram Cloud, Inc. (WIMIentered into a definitive merger agreement.
  5. SIGNA Sports United has entered into a business combination agreement with Yucaipa Acquisition Corporation (YAC).
  6. Vertical Aerospace Group Ltd. entered into a definitive agreement for a business combination with Broadstone Acquisition Corp. (BSN).

Weekly Spread Changes:

The table below shows weekly spread changes between June 4, and June 11, 2021.

Symbol Quote Acquiring
Company
Acquiring
Company Quote
Current
Spread
Last Week
Spread
Spread Change
Weekly
Deal
Type
HOME 36.4 Hellman & Friedman (N/A) -1.10% -2.96% 1.86% All Cash
NEWA 3.4701 Crouching Tiger Holding Limited (N/A) 5.18% 3.40% 1.78% All Cash
XEC 71.55 Cabot Oil & Gas Corporation (COG) 17.28 -3.04% -4.62% 1.58% All Stock
TEDU 3.61 Kidedu Holdings Limited (N/A) 0.00 10.80% 9.29% 1.51% All Cash
LINX 7.35 StoneCo Ltd. (STNE) 63.32 -14.97% -16.44% 1.47% Special Conditions
AJRD 49.51 Lockheed Martin Corporation (LMT) 387.72 3.01% 4.81% -1.80% All Cash
DOYU 8.02 HUYA Inc. (HUYA) 16.04 46.00% 47.99% -1.99% All Stock
CCRC 6.21 Taiying Group Ltd. and Taiying International Inc. (N/A) 0.00 4.67% 7.08% -2.41% All Cash
OSN 4.72 New Ossen Group Limited (N/A) 0.00 8.05% 11.84% -3.79% All Cash
MX 25.91 South Dearborn Limited (N/A) 11.93% 24.46% -12.53% All Cash

Deal Statistics:

Total Number of Deals Closed in 2021 85
Total Number of Deals Not Completed in 2021 5
Total Number of Pending Deals
Cash Deals 42
Stock Deals 31
Stock & Cash Deals 13
Special Conditions 3
Total Number of Pending Deals 89
Aggregate Deal Consideration $757.09 billion

New Deals:

  1. The acquisition of U.S. Concrete (USCR) by Vulcan Materials Company (VMC) for $2.32 billion or $74 per share in cash.
  2. The acquisition of QTS Realty Trust (QTS) by The Blackstone Group (BX) for $10 billion or $78 per share in cash.
  3. The acquisition of Iconic Brand Group (ICON) by Iconix Acquisition Corp. for $585 million or $3.15 per share in cash in a “going private” transaction.

Deal Updates:

  1. On June 9, 2021, Proofpoint (PFPTannounced the expiration of the 45-day “go-shop” period under the terms of the previously announced definitive agreement with Thoma Bravo.
  2. On June 10, 2021, Leaf Group (LEAF) announced that its shareholders approved the Merger Agreement entered into by Leaf Group and Graham Holdings Company (GHC).
  3. On June 10, 2021, Fly Leasing Limited (FLY) announced that it has received shareholder approval to be acquired by an affiliate of Carlyle Aviation Partners.
  4. On June 10, 2021, WSFS Financial Corporation (WSFS) and Bryn Mawr Bank Corporation (BMTC), jointly announced that their respective stockholders approved the previously announced merger of BMTC into WSFS at a special meeting of stockholders for each company.
  5. On June 11, 2021, Magnachip Semiconductor Corporation (MXconfirmed receipt of an unsolicited proposal from Cornucopia Investment Partners to acquire all of the outstanding shares of Magnachip common stock for $35.00 per share in cash.
  6. On June 11, 2021, Extended Stay America (STAY) announced that holders of a majority of its shares have voted in favor of the previously announced amended merger agreement under which the company will be acquired by funds managed by Blackstone Real Estate Partners and Starwood Capital.

Closed Deals:

  1. The acquisition of Cooper Tire & Rubber Company (CTB) by The Goodyear Tire & Rubber Company (GT) on June 7, 2021. It took 105 days for this deal to be completed.
  2. The acquisition of Harvest Capital Credit (HCAP) by Portman Ridge Finance Corporation (PTMN) on June 8, 2021. It took 167 days for this deal to be completed.
  3. The acquisition of GasLog (GLOG) by BlackRock’s Global Energy & Power Infrastructure team on June 9, 2021. It took 107 days for this deal to be completed.
  4. The acquisition of TCF Financial Corporation (TCF) by Huntington Bancshares Incorporated (HBAN) on June 9, 2021. It took 178 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) $11.71 $8.02 06/30/2021 46.00% 987.65%
MX 03/26/2021 South Dearborn Limited (N/A) $29.00 $25.91 12/31/2021 11.93% 21.66%
TEDU 04/30/2021 Kidedu Holdings Limited (N/A) $4.00 $3.61 09/30/2021 10.80% 36.18%
CHMA 05/05/2021 Amryt Pharma (AMYT) $4.63 $4.19 09/30/2021 10.48% 35.10%
KSU 05/21/2021 Canadian National Railway Company (CNI) $324.55 $294.3 12/31/2021 10.28% 18.67%
CHNG 01/06/2021 UnitedHealth Group Incorporated (UNH) $25.75 $23.39 12/31/2021 10.09% 18.32%
XLNX 10/27/2020 Advanced Micro Devices, Inc. (AMD) $140.13 $128.5 12/31/2021 9.05% 16.43%
SJR 03/15/2021 Rogers Communications Inc. (RCI) $32.40 $29.77 06/30/2022 8.83% 8.44%
SBBP 05/24/2021 Xeris Pharmaceuticals, Inc. (XERS) $3.10 $2.85 11/15/2021 8.66% 20.39%
OSN 12/17/2020 New Ossen Group Limited (N/A) $5.10 $4.72 06/30/2021 8.05% 172.86%

List of all pending deals:

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

Conclusion:

Merger activity declined slightly last week but SPAC activity picked up with nine SPAC IPOs filed when compared to none filed in the week prior. There were six new SPAC business combinations also announced last week when compared to just two in the week prior. There have also been multiple rumors about potential SPAC business combinations.

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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