Merger Arbitrage Mondays – CyrusOne (CONE) And CoreSite (COR) To Be Acquired In Mega Data Centre Deals

Merger activity decreased last week with five new deals announced, three deals completed and one deal terminated.

Two of the five new deals announced last week were successful potential deals in the works. Accounting for a combined deal value of $25 billion, both of these companies are data center REITs.

Data centers have been a significant area of growth over the last couple of decades as more and more companies got comfortable with moving to the cloud and having a different company house their data and clusters of servers. The arrangement was a win-win as most companies no longer had to worry about physical security, backups, cooling the heat intensive server rooms, etc.

CyrusOne (CONE) and CoreSite (COR) agreed to be acquired in deals valued at $15 billion and $10 billion respectively, making them the largest deals in the data center industry so far. Earlier this year, Blackstone acquired QTS Realty for $10 billion and Cyxtera (CYXT) completed a SPAC business combination with Starboard Value Acquisition. Ranked by colocation and data center revenues, CyrusOne and CoreSite are the third and fourth largest data center operators in the US according to a report by Synergy Research.

We added CyrusOne to our list of potential deals on September 28, 2021, when Reuters reported that the company was exploring strategic alternatives that included a potential sale of the company. CONE’s price after this announcement was $77.57. KKR and Global Infrastructure Partners entered into a definitive agreement to acquire CyrusOne at a 25% premium on its closing stock price of $72.57 per share back on September 27.  Headquartered in Dallas, Texas, CyrusOne operates 57 data centers internationally and 55% of its revenue comes from cloud customers.

The other mega data center deal announced last week was the acquisition of CoreSite Realty Corporation (COR) by American Tower Corporation (AMT). We added COR to our list of potential deals on November 9, 2021, when Reuters reported that the company was working with an investment bank to explore its options after attracting acquisition interest. CoreSite’s price after this announcement was $160.90. As of the third-quarter 2021, CoreSite’s portfolio spans 25 data centers, 21 cloud on-ramps and over 32,000 interconnections in eight major U.S. markets. Tom Bartlett, American Tower’s Chief Executive Officer stated,

We are in the early stages of a cloud-based, connected and globally distributed digital transformation that will evolve over the next decade and beyond. We expect the combination of our leading global distributed real estate portfolio and CoreSite’s high quality, interconnection-focused data center business to help position American Tower to lead in the 5G world. As the convergence of wireless and wireline networks accelerates and classes of communications infrastructure further align, we anticipate the emergence of attractive value creation opportunities within the digital infrastructure ecosystem.

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

  1. On November 15, 2021, Waldencast Acquisition (WALDentered into definitive simultaneous business combination agreements with skin care brand Obagi and makeup and skin care brand Milk Makeup.
  2. Semantix, Latin America’s first fully integrated data software platform, announced that it has entered into a definitive agreement to merge with Alpha Capital (ASPC).

Weekly Spread Changes:

The table below shows weekly spread changes between November 12 and November 19, 2021.

Symbol Quote Acquiring
Company
Acquiring
Company Quote
Current
Spread
Last Week
Spread
Spread Change
Weekly
Deal
Type
JOBS 50.33 Garnet Faith Limited (N/A) 57.06% 45.63% 11.43% All Cash
CHNG 20.56 UnitedHealth Group Incorporated (UNH) 440 25.24% 20.55% 4.69% All Cash
AJRD 42.87 Lockheed Martin Corporation (LMT) 341.44 18.96% 16.87% 2.09% All Cash
XLNX 220.87 Advanced Micro Devices, Inc. (AMD) 155.41 21.26% 19.21% 2.05% All Stock
FCCY 24.76 Lakeland Bancorp, Inc. (LBAI) 18.59 1.94% -0.10% 2.04% All Stock
XLRN 178.75 Merck (MRK) 80.7 0.70% 3.98% -3.28% All Cash
SOLY 21.22 Allergan Aesthetics (N/A) 6.50% 10.14% -3.64% All Cash
AZPN 154.46 Emerson Electric Co. (EMR) 93.34 3.59% 7.43% -3.84% Special Conditions
ABTX 43.92 CBTX, Inc. (CBTX) 29.95 -3.28% 0.91% -4.19% All Stock
MX 18.85 South Dearborn Limited (N/A) 53.85% 59.34% -5.49% All Cash

Deal Statistics:

Total Number of Deals Closed in 2021 170
Total Number of Deals Not Completed in 2021 13
Total Number of Pending Deals
Cash Deals 56
Stock Deals 30
Stock & Cash Deals 6
Special Conditions 5
Total Number of Pending Deals 97
Total Deal Size $1.01 trillion

New Deals:

  1. The acquisition of CyrusOne (CONE) by KKR and Global Infrastructure Partners for $15 billion or $90.50 per share in cash. We added CONE as a potential deal to the Deals in the Works section on September 28, 2021, and the price after the news of the potential deal came out was $77.57.
  2. The acquisition of CoreSite Realty Corporation (COR) by American Tower Corporation (AMT) for $10.1 billion or $170 per share in cash. We added COR as a potential deal to the Deals in the Works section on November 9, 2021, and the price after the news of the potential deal came out was $160.90.
  3. The acquisition of Casper Sleep (CSPR) by Durational Capital Management for $318.49 million or $6.90 per share in cash.
  4. The acquisition of Dicerna Pharmaceuticals (DRNA) by Novo Nordisk (NVO) for $2.09 billion or $38.25 per share in cash.
  5. The acquisition of Spirit of Texas Bancshares (STXB) by Simmons First National Corporation (SFNC) for $581 million in an all stock deal. Under the terms of the Merger Agreement, Simmons will issue approximately 18,325,000 shares of its common stock, which is equal to 1.035 shares of Simmons for each STXB share, subject to certain conditions and potential adjustments, including substituting cash for Simmons’ common stock to the extent necessary to cash out Spirit’s stock options and warrants.

Deal Updates:

  1. On November 15, 2021, Mid Penn Bancorp (MPB) and Riverview Financial Corporation (RIVE) issued a joint press release announcing the receipt of all bank regulatory approvals required to consummate the merger of Riverview with and into Mid Penn.
  2. On November 15, 2021, Meredith Corporation (MDP) announced that its pending acquisitions by Gray Television (GTN) and IAC’s (IAC) Dotdash Media received key regulatory approvals.
  3. On November 16, 2021, Chatham Asset Management made a binding offer for RR Donnelley & Sons (RRD) that would value the printing company at $663.4 million, outbidding a rival deal from investment firm Atlas Holdings. Chatham, the largest investor in RR Donnelley with a 14.9% stake, offered $9.10 per share for the remaining stock in the company.
  4. On November 16, 2021, Rogers Communications (RCI) announced that Joe Natale has left his role as President and CEO of the company. Tony Staffieri has been appointed Interim President and CEO.
  5. On November 16, 2021, shareholders of Community Bankers Trust Corporation (ESXBapproved the company’s merger with United Bankshares (UBSI) at a special meeting of shareholders.
  6. On November 17, 2021, Merck (MRK) announced that the waiting period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, in connection with Merck’s pending acquisition of Acceleron Pharma (XLRN) has expired.
  7. On November 17, 2021, Kraton Corporation (KRA) and DL Chemical received CFIUS Clearance. The Merger remains subject to other closing conditions, including the receipt of certain antitrust approvals outside of the United States, and is expected to be completed by the end of the first half of 2022.
  8. On November 18, 2021, Paper Excellence and Domtar Corporation (UFS) jointly announced that they have received Canadian Competition Act approval for their business combination.
  9. On November 19, 2021, shareholders of Echo Global Logistics (ECHOapproved the company’s merger with The Jordan Company at a special meeting of shareholders.
  10. On November 19, 2021, Investors Bancorp (ISBC) announced that stockholders of the Company approved the planned merger with Citizens Financial Group (CFG) at a special meeting of the Company’s stockholders.

Closed Deals:

  1. The acquisition of JMP Group (JMP) by Citizens Financial Group (CFG) on November 15, 2021. It took 68 days for this deal to be completed.
  2. The acquisition of Trillium Therapeutics (TRIL) by Pfizer (PFE) on November 17, 2021. It took 86 days for this deal to be completed.
  3. The acquisition of Flexion Therapeutics (FLXN) by Pacira BioSciences (PCRX) on November 19, 2021. It took 39 days for this deal to be completed.

Terminated Deals:

  1. Tarena International (TEDU) announced that the Company and the buyer group consisting of Mr. Han Shaoyun, Ascendent Capital Partners, Kidedu Holdings Limited, Kidarena Merger Sub and Kidtech Limited mutually agreed to terminate the previously announced Agreement and Plan of Merger.

Top 10 deals with largest spreads:

Symbol Announced
Date
Acquiring
Company
Closing
Price
Last
Price
Closing
Date
Profit Annualized
Profit
JOBS 06/21/2021 Garnet Faith Limited (N/A) $79.05 $50.33 12/31/2021 57.06% 520.70%
MX 03/26/2021 South Dearborn Limited (N/A) $29.00 $18.85 12/31/2021 53.85% 491.35%
CHNG 01/06/2021 UnitedHealth Group Incorporated (UNH) $25.75 $20.56 02/28/2022 25.24% 93.07%
XLNX 10/27/2020 Advanced Micro Devices, Inc. (AMD) $267.83 $220.87 12/31/2021 21.26% 194.02%
AJRD 12/20/2020 Lockheed Martin Corporation (LMT) $51.00 $42.87 03/31/2022 18.96% 53.25%
SJR 03/15/2021 Rogers Communications Inc. (RCI) $32.40 $29.21 06/30/2022 10.92% 18.04%
STXB 11/19/2021 Simmons First National Corporation (SFNC) $31.73 $28.92 06/30/2022 9.72% 16.05%
NFH 08/04/2021 Unicorn II Holdings Limited (N/A) $12.00 $11.03 12/31/2021 8.79% 80.25%
SAFM 08/09/2021 Cargill and Continental Grain Company (N/A) $203.00 $187.1 01/31/2022 8.50% 43.69%
COHR 03/25/2021 II-VI Incorporated (IIVI) $278.31 $256.92 12/31/2021 8.33% 75.98%

List of all pending deals:

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

Conclusion:

SPAC activity continued to increase last week with 11 new SPAC IPOs filed. With two mega data center deals announced last week, the total value of active deals has crossed the $1 trillion mark after two years. We wrote the following in our M&A 2020 report titled: U.S. Mergers and Acquisitions: A 2020 Report

“Looking at the full year however, there were 154 deals worth over $605 billion announced in 2020, a sharp decline when compared to the $938 worth of deals announced in 2019 and over $1 trillion worth of deals announced in 2018.”

Disclaimer: I have long positions in Magnachip Semiconductor (MX), Nuance Communications (NUAN) and Change Healthcare (CHNG). I also have put options in Change Healthcare. 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.

Leave A Comment

You must be logged in to post a comment.