Merger Arbitrage Mondays – McAfee Acquired By An Investor Group For $14 Billion

Merger activity increased last week with eight new deals announced and four deals completed. This is the highest number of new deals we have come across in a week during the last several months. Three of the eight new deals announced were potential deals in the works. Five of these new deals were acquired at a premium of over 20%.

It is not just merger activity that is ramping up. When doing some research for our mid-month update for premium members, we mined our SPAC data and found that 2021 has already seen 546 SPAC IPOs worth over $128 billion compared to 242 IPOs for the full prior year worth $66.8 billion.

SPAC IPOs 2019 to Nov 14, 2021

SPAC IPOs 2019 to Nov 14, 2021 (source: InsideArbitrage database)

Headquartered in Irving, Texas, CorePoint Lodging (CPLG) is a pure play select-service hotel owner. The company was spun off from La Quinta Holdings in 2018. We added CPLG as a potential deal in the works when the company reported in its second quarter earnings report that it had decided to explore strategic alternatives to maximize stockholder value. The price of CPLG after this announcement was $13.45. We added this deal to our Merger Arbitrage Tool (MAT) as a special conditions deal because the press release announcing the deal mentioned,

“in addition to the $15.65 per share payable in cash at closing, CorePoint stockholders may receive incremental cash consideration per share pending timely resolution of the previously disclosed tax proceedings with the IRS related to an ongoing audit of CorePoint entities, which began prior to the Company’s 2018 spin-off from La Quinta Holdings, Inc. The amount of any potential additional cash consideration payable to CorePoint stockholders will be calculated based on the amount, if any, by which the settlement amount is less than a buyer liability reserve of $160 million agreed to by the parties.”

The largest deal announced last week was the the acquisition of McAfee (MCFE) by an investor group comprised of Advent, Permira, Crosspoint Capital, CPP Investments, GIC and ADIA for $14 billion. On November 5, 2021, Bloomberg reported that McAfee was in advanced talks to go private through a deal with buyout firms Advent International and Permira, just over a year after it returned to the public markets. The stock was up 20% last Friday after this announcement. McAfee started selling firewall software in the 1980s and went public before Intel purchased it for $7.7 billion in 2010. The company changed its name to Intel Security before Intel changed the name back to McAfee after selling a majority stake to TPG in 2017 for $4.2 billion.

McAfee has a 45 day ‘go-shop’ period and the transaction is subject to customary closing conditions, including, among others, approval by McAfee shareholders, receipt of regulatory approvals, and clearance by the Committee on Foreign Investment in the United States (CFIUS).

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 12 SPAC IPOs filed and 7 new SPAC business combinations announced last week. You can find the new SPAC IPO announcements in our SPACs tool here.

  1. Biotech Acquisition Company (BIOT) Blade Therapeutics, a biopharmaceutical company based in South San Francisco, Calif., entered into a definitive merger agreement.
  2. FiscalNote Holdings, a leading AI-driven enterprise SaaS company that delivers legal and regulatory data and insights, and Duddell Street Acquisition (DSACentered into a definitive business combination agreement.
  3. Panera Brands and USHG Acquisition (HUGSsigned an agreement through which HUGS will become a cornerstone partner with Panera Brands. HUGS shares will convert into Panera shares after Panera goes public through a traditional IPO process.
  4. Tuatara Capital Acquisition Corporation (TCAC) has entered into a definitive agreement for a business combination that would result in springbig, a provider of marketing solutions, consumer mobile app experiences, and omnichannel loyalty programs in the cannabis industry, becoming a publicly listed company.
  5. Brivo and Crown PropTech Acquisitions (CPTK) announced that they have entered into a definitive merger agreement that will result in Brivo becoming a publicly listed company.
  6. Presto and Ventoux CCM Acquisition Corp. (VTAQ) have entered into a definitive merger agreement that will result in Presto becoming a publicly listed company.
  7. Rosecliff Acquisition Corp I (RCLF) and GT Gettaxi Limited, a Ground Transportation Management (GTM) platform, entered into a definitive business combination agreement.

Weekly Spread Changes:

The table below shows weekly spread changes between November 5 and November 12, 2021.

Symbol Quote Acquiring
Company
Acquiring
Company Quote
Current
Spread
Last Week
Spread
Spread Change
Weekly
Deal
Type
JOBS 54.28 Garnet Faith Limited (N/A) 0.00 45.63% 17.74% 27.89% All Cash
AZPN 148.93 Emerson Electric Co. (EMR) 97.42 7.43% -0.79% 8.22% Special Conditions
TEDU 0.7992 Kidedu Holdings Limited (N/A) 400.50% 394.74% 5.76% All Cash
AJRD 43.64 Lockheed Martin Corporation (LMT) 339.06 16.87% 11.18% 5.69% All Cash
MX 18.2 South Dearborn Limited (N/A) 59.34% 54.17% 5.17% All Cash
PNM 48.87 Avangrid, Inc. (AGR) 50.43 2.93% 3.67% -0.74% All Cash
MNTV 23.25 Zendesk (ZEN) 103.83 0.48% 1.84% -1.36% All Stock
ICBK 36.725 Nicolet Bankshares, Inc. (NCBS) 74.88 -2.13% -0.77% -1.36% All Stock
FCCY 25.89 Lakeland Bancorp, Inc. (LBAI) 19.05 -0.10% 1.92% -2.02% All Stock
SJR 29.49 Rogers Communications Inc. (RCI) 48.33 9.87% 12.46% -2.59% Special Conditions

Deal Statistics:

Total Number of Deals Closed in 2021 167
Total Number of Deals Not Completed in 2021 12
Total Number of Pending Deals
Cash Deals 54
Stock Deals 30
Stock & Cash Deals 6
Special Conditions 6
Total Number of Pending Deals 96
Total Deal Size $978.45 billion

New Deals:

  1. The acquisition of CorePoint Lodging (CPLG) by Highgate and Cerberus Capital Management for $1.5 billion or $15.65 per share in cash. In addition to the $15.65 per share payable in cash at closing, CorePoint stockholders may receive incremental cash consideration per share pending timely resolution of the previously disclosed tax proceedings with the IRS related to an ongoing audit of CorePoint entities, which began prior to the Company’s 2018 spin-off from La Quinta Holdings, Inc. We added CPLG as a potential deal to the Deals in the Works section on July 13, 2021, and the price after the news of the potential deal came out was $13.45.
  2. The acquisition of Zix Corporation (ZIXI) by OpenText for $860 million or $8.50 per share in cash. We added ZIXI as a potential deal to the Deals in the Works section on October 18, 2021, and the price after the news of the potential deal came out was $8.08.
  3. The acquisition of McAfee (MCFE) by an investor group comprised of Advent, Permira, Crosspoint Capital, CPP Investments, GIC and ADIA for $14 billion or $26 per share in cash. We added MCFE as a potential deal to the Deals in the Works section on November 5, 2021, and the price after the news of the potential deal came out was $25.46.
  4. The acquisition of Metromile (MILE) by Lemonade (LMND) for $201.47 million in an all stock deal. Under the terms of the transaction, Metromile shareholders will receive Lemonade common shares at a ratio of 19:1.
  5. The acquisition of Pretium Resources (PVG) by Newcrest Mining Limited (NCMGY) for $2.8 billion in a cash or stock deal. Pursuant to the transaction, Pretivm shareholders will have the option to elect to receive C$18.50 per Pretivm share in cash or 0.8084 Newcrest shares per Pretivm share.
  6. The acquisition of Dover Motorsports (DVD) by Speedway Motorsports for $94.69 million or $3.61 per share in cash.
  7. The acquisition of Independence Holding Company (IHC) by Geneve Holdings for $813.9 million or $57 per share in cash.
  8. The acquisition of Allegiance Bancshares (ABTX) by CBTX Inc. (CBTX) for $1.5 billion in an all stock deal. Under the terms of the definitive merger agreement, Allegiance shareholders will receive 1.4184 shares of CBTX common stock for each share of Allegiance common stock they own.

Deal Updates:

  1. On November 7, 2021, AbbVie delivered notice to Soliton (SOLY) of the exercise of AbbVie’s right under the Merger Agreement to extend the date by which either party has a right to terminate the Merger Agreement if the consummation of the Merger has not occurred from November 8, 2021 to February 8, 2022.
  2. On November 8, 2021, Merck (MRK) announced that its pending acquisition of Acceleron Pharma (XLRNhas been cleared by the competition authorities in Germany and Austria.
  3. On November 9, 2021, shareholders of Howard Bancorp (HBMDapproved the company’s merger with F.N.B. Corporation (FNB) at a special meeting of shareholders.
  4. On November 9, 2021, The ExOne Company (XONE) announced that its stockholders voted to approve the acquisition of ExOne by Desktop Metal (DM).
  5. On November 11, 2021, Independent Proxy Advisory Firm ISS recommended Kirkland Lake Gold (KL) shareholders vote in favour of proposed merger of equals with Agnico Eagle Mines Limited (AEM).
  6. November 12, 2021: According to the Justice Department, S&P Global (SPGI) and IHS Markit (INFOhave won U.S. antitrust approval for their planned merger, on condition it sell some businesses and scrap a non-compete agreement with GasBuddy.
  7. On November 12, 2021, shareholders of JMP Group (JMPapproved the company’s merger with Citizens Financial Group (CFG) at a special meeting of shareholders. The closing of the merger is anticipated to take place on November 15, 2021.
  8. On November 13, 2021, PNM Resources (PNM) and Avangrid (AGR) said that they will accept all conditions recommended by a Public Regulation Commission hearing examiner if the five-member commission decides to approve their proposed merger.

Closed Deals:

  1. The acquisition of Kadmon Holdings (KDMN) by Sanofi (SNY) on November 9, 2021. It took 62 days for this deal to be completed.
  2. The acquisition of Century Bancorp (CNBKA) by Eastern Bankshares (EBC) on November 12, 2021. It took 219 days for this deal to be completed.
  3. The acquisition of The ExOne Company (XONE) by Desktop Metal (DM) on November 12, 2021. It took 93 days for this deal to be completed.
  4. The acquisition of Meridian Bancorp (EBSB) by Independent Bank (INDB) on November 12, 2021. It took 203 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
TEDU 04/30/2021 Kidedu Holdings Limited (N/A) $4.00 $0.7992 12/31/2021 400.50% 3110.27%
MX 03/26/2021 South Dearborn Limited (N/A) $29.00 $18.2 12/31/2021 59.34% 460.84%
JOBS 06/21/2021 Garnet Faith Limited (N/A) $79.05 $54.28 12/31/2021 45.63% 354.39%
CHNG 01/06/2021 UnitedHealth Group Incorporated (UNH) $25.75 $21.36 02/28/2022 20.55% 70.77%
XLNX 10/27/2020 Advanced Micro Devices, Inc. (AMD) $254.87 $213.80 12/31/2021 19.21% 149.19%
AJRD 12/20/2020 Lockheed Martin Corporation (LMT) $51.00 $43.64 12/31/2021 16.87% 130.97%
SOLY 05/10/2021 Allergan Aesthetics (N/A) $22.60 $20.52 03/31/2022 10.14% 27.01%
SJR 03/15/2021 Rogers Communications Inc. (RCI) $32.40 $29.49 06/30/2022 9.87% 15.80%
SAFM 08/09/2021 Cargill and Continental Grain Company (N/A) $203.00 $186.8 01/31/2022 8.67% 40.58%
NFH 08/04/2021 Unicorn II Holdings Limited (N/A) $12.00 $11.06 12/31/2021 8.50% 66.00%

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 12 new SPAC IPOs filed. Multiple active deals continued to  receive required shareholder and regulatory approvals, which included S&P Global (SPGI) and IHS Markit (INFO) winning U.S. antitrust approval. With eight new deals announced last week, the total value of active deals is edging closer to $1 trillion.

Disclaimer: I have long positions in Magnachip Semiconductor (MX), Nuance Communications (NUAN), Change Healthcare (CHNG) and Trillium Therapeutics (TRIL). 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.

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