Merger Arbitrage Mondays – MKS Instruments’ Rumored Deal With Atotech Materializes

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

M&A activity continues to increase with 115 deals announced in the first half of this year. Over 70 of these deals were multi-billion dollar deals. Some of the largest deals that have been announced this year include Microsoft’s (MSFT) acquisition of Nuance (NUAN), Thermo Fisher’s acquisition of PPD (PPD), Canadian National Railway’s (CNI) acquisition of Kansas City Southern (KSU), UnitedHealth Group’s (UNH) acquisition of Change Healthcare (CHNG), Realty Income’s (O) acquisition of VerReit (VER), Rogers Communications’ (RCI) acquisition of Shaw Communications (SJR), Thoma Bravo’s acquisition of ProofPoint (PFPT), and Icon’s purchase of PRAH Health Sciences (PRAH).

According to PWC,

“Corporate and private acquirers have set a blistering pace for megadeals — transactions of at least $5 billion — and at this tempo, 2021 would top not only 2020 but also the volumes of the past several years. Megadeals have included several mergers with special purpose acquisition companies (SPACs), as well as the largest leveraged buyout in a decade.”

Another multi-billion dollar deal announced last week was the acquisition of Atotech Limited (ATC) by MKS Instruments (MKSI).  Founded in 1851 in Berlin and headquartered in West Bromwich, United Kingdom, Atotech is a specialty chemicals company that provides surface-finishing solutions to various industries across the world. We added ATC to our list of potential deals in the works on June 11, 2021 when semiconductor equipment maker MKS Instruments (MKSI) approached Atotech with an acquisition offer to expand its chip manufacturing capabilities. The cash plus stock deal was announced on Thursday last week.

SPAC activity continues to rise as well with 13 new SPAC IPOs filed last week, which included Chamath Palahapitiya’s new SPACs that raised $880 million in 4 upsized IPOs.

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 13 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. DFP Healthcare Acquisitions Corp (DFPHUentered into a definitive agreement for a business combination with The Oncology Institute.
  2. Pardes Biosciences, Inc. and FS Development Corp. II (FSIIentered into a definitive merger agreement.
  3. System1, and Trebia Acquisition Corp. (TREBannounced a definitive agreement for a business combination.
  4. Inspirato and Thayer Ventures Acquisition (TVACentered into a definitive merger agreement
  5. Bowlero Corp and Isos Acquisition Corporation (ISOSannounced a definitive agreement for a business combination that would result in Bowlero becoming a publicly listed company.

Weekly Spread Changes:

The table below shows weekly spread changes between June 25, and July 2, 2021.

Symbol Quote Acquiring
Company
Acquiring
Company Quote
Current
Spread
Last Week
Spread
Spread Change
Weekly
Deal
Type
TEDU 2.68 Kidedu Holdings Limited (N/A) 49.25% 39.86% 9.39% All Cash
XEC 73.71 Cabot Oil & Gas Corporation (COG) 17.84 -2.83% -7.56% 4.73% All Stock
DOYU 6.64 HUYA Inc. (HUYA) 16.5 81.40% 77.61% 3.79% All Stock
BWL-A 8.8501 Bowlero Corp. (N/A) 3.16% -0.22% 3.38% All Cash
WBT 23.18 The Middleby Corporation (MIDD) 173.78 -7.04% -10.09% 3.05% All Stock
BOCH 14.56 Columbia Banking System, Inc. (COLB) 37.51 3.05% 5.22% -2.17% All Stock
CLDB 27.25 Farmers National Banc Corp. (FMNB) 15.55 -0.14% 3.67% -3.81% All Stock
CHMA 4.71 Amryt Pharma (AMYT) 12.2 2.57% 9.40% -6.83% All Stock
NEWA 3.45 Crouching Tiger Holding Limited (N/A) 5.80% 13.00% -7.20% All Cash
SBBP 3.08 Xeris Pharmaceuticals, Inc. (XERS) 4.25 8.18% 19.72% -11.54% All Stock

Deal Statistics:

Total Number of Deals Closed in 2021 95
Total Number of Deals Not Completed in 2021 5
Total Number of Pending Deals
Cash Deals 44
Stock Deals 35
Stock & Cash Deals 12
Special Conditions 2
Total Number of Pending Deals 93
Aggregate Deal Consideration $781.44 billion

New Deals:

  1. The acquisition of QAD (QADA) by Thoma Bravo for $2 billion or $87.50 per share in cash.
  2. The acquisition of New Senior Investment Group (SNR) by Ventas (VTR) for $2.3 billion in an all stock deal. Under the terms of the agreement, New Senior shareholders will receive 0.1561 shares of newly issued Ventas stock per share of New Senior common stock.
  3. The acquisition of Riverview Financial Corporation (RIVE) by Mid Penn Bancorp (MPB) for $124.7 million in an all stock deal. Under the terms of the merger agreement, shareholders of Riverview common stock will receive 0.4833 shares of Mid Penn common stock for each share of Riverview common stock they own.
  4. The acquisition of Atotech Limited (ATC) by MKS Instruments (MKSI) for $6.5 billion in a cash plus stock deal. Under the terms of the agreement, MKS will acquire Atotech for $16.20 in cash and 0.0552 of a share of MKS common stock for each Atotech common share. We added ATC as a potential deal to the Deals in the Works section on June 11, 2021, and the price after the news of the potential deal came out was $26.19.
  5. The acquisition of J. Alexander’s Holdings (JAX) by SPB Hospitality for $220 million or $14 per share in cash.

Deal Updates:

  1. June 29, 2021: According to Bloomberg, Salesforce.com (CRM) wrapped up an $8 billion bond sale on Tuesday to fund its $27.7 billion acquisition of Slack Technologies (WORK).
  2. On June 29, 2021, Canadian National Railway Company (CNI) and Kansas City Southern (KSU) announced that three local union committees representing CN and KCS employees in the United States that are affiliated with the Brotherhood of Locomotive Engineers and Trainmen have filed four letters in support of the proposed voting trust with the Surface Transportation Board. CNI and KSU also noted that the Surface Transportation Board’s comment period regarding the companies’ application for approval of a voting trust has closed, marking another key step toward the combination of the two companies.
  3. On June 29, 2021, The U.K. Competition and Markets Authority said that it has decided not to refer Advanced Micro Devices’s (AMD) anticipated acquisition of Xilinx (XLNX) to a Phase 2 investigation.
  4. On June 30, 2021, Navistar International Corporation (NAV) announced that all regulatory approvals necessary to proceed with the previously announced merger with Dusk, a wholly owned indirect subsidiary of TRATON SE were received.  The closing date of the merger is expected to be on July 1, 2021.
  5. On June 30, 2021, Magnachip Semiconductor’s (MX) planned sale to PE firm Wise Road was approved by China’s antitrust regulator.
  6. On July 1, 2021, Premier Financial Bancorp (PFBI) announced that it has received shareholder approval to be acquired by an affiliate of Peoples Bancorp (PEBO).
  7. On June 30, 2021, The waiting period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the “HSR Act”), expired in connection with the previously announced proposed merger between  Constellation Pharmaceuticals (CNST) and MorphoSys AG (MOR).
  8. July 2, 2021: Following informal discussions with the staff at the Federal Trade Commission, AbbVie and Soliton (SOLY) have agreed to voluntarily provide the FTC with additional time in which to review the Merger. On July 2, 2021, AbbVie, as the acquiring party, voluntarily withdrew its pre-merger notification and report form under the Hart-Scott-Rodino Antitrust Improvements Act. In accordance with the regulations under the HSR Act, AbbVie plans to resubmit its HSR Act filing on or before July 7, 2021, commencing a new 30-day waiting period under the HSR Act.

Closed Deals:

  1. The acquisition of Linx S.A. (LINX) by StoneCo (STNE) on June 28, 2021. It took 321 days for this deal to be completed.
  2. The acquisition of Boston Private Financial Holdings (BPFH) by SVB Financial Group (SIVB) on July 1, 2021. It took 178 days for this deal to be completed.
  3. The acquisition of Navistar International Corporation (NAV) by Traton SE on July 1, 2021. It took 236 days for this deal to be completed.
  4. The acquisition of PRA Health Sciences (PRAH) by ICON Public Limited Company (ICLR) on July 1, 2021. It took 127 days for this deal to be completed.
  5. The acquisition of Watford Holdings (WTRE) by Arch Capital Group (ACGL) on July 2, 2021. It took 266 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) $12.05 $6.64 06/30/2021 81.40% -7427.80%
TEDU 04/30/2021 Kidedu Holdings Limited (N/A) $4.00 $2.68 09/30/2021 49.25% 204.29%
MX 03/26/2021 South Dearborn Limited (N/A) $29.00 $23.8 12/31/2021 21.85% 44.30%
XLNX 10/27/2020 Advanced Micro Devices, Inc. (AMD) $163.21 $144.56 12/31/2021 12.90% 26.16%
KSU 05/21/2021 Canadian National Railway Company (CNI) $320.55 $284.61 12/31/2022 12.63% 8.46%
CHNG 01/06/2021 UnitedHealth Group Incorporated (UNH) $25.75 $22.92 12/31/2021 12.35% 25.04%
SJR 03/15/2021 Rogers Communications Inc. (RCI) $32.40 $29 06/30/2022 11.72% 11.85%
OSN 12/17/2020 New Ossen Group Limited (N/A) $5.10 $4.565 06/30/2021 11.72% -1069.41%
WLTW 03/09/2020 Aon plc (AON) $258.76 $231.7 07/31/2021 11.68% 157.87%
COHR 03/25/2021 II-VI Incorporated (IIVI) $286.60 $261.78 12/31/2021 9.48% 19.23%

List of all pending deals:

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

Conclusion:

The M&A spree is likely to continue in the second half of the year fueled by cheap access to capital and burgeoning economic activity. Activity on the SPAC front seems to be picking up as well after the slow down in the past few months. The regulatory landscape remains interesting especially for cross-border deals and deals that require approval by industry-specific regulators but it has not stopped a lot of deals yet.

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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