Merger Arbitrage Mondays – Zendesk Shareholders Unhappy About Momentive Deal

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

We added Momentive Global (MNTV) as a potential deal in the works on October 6, 2021, when Bloomberg reported that Activist investor Legion Partners Asset Management was calling for a strategic review including a potential sale of the company. Momentive’s price after this announcement was $20.61.

Momentive Global, formerly known as SurveyMonkey was founded in 1999. Dave Goldberg joined SurveyMonkey as CEO in 2009 and in the same year Spectrum Equity and Bain Capital acquired a majority interest in the company. The company is headquartered in San Mateo, California and operates as an experience management company, providing cloud-based software solutions to companies.

On October 28, 2021, Zendesk (ZEN) announced that it will acquire Momentive, including its iconic SurveyMonkey platform in an all stock deal. Zendesk stock fell 14% and Momentive fell 8% after this deal was announced. In its most recent quarter, Zendesk grew its earnings by 32% while Momentive grew its revenue by just 20%.  Zendesk is also profitable, while Momentive has been posting losses. Zendesk investors are clearly not happy with this deal and the stock received multiple downgrades after the deal was announced. Shareholder approval is likely to be the key hurdle with this deal considering Momentive stock is now trading below where it was before the deal was announced.

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 15 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. FaZe Clan announced that it has entered into a definitive merger agreement to combine with B. Riley Principal 150 Merger (BRPM).
  2. Tailwind Two Acquisition (TWNT) and Terran Orbital Corporation, the global leader and pioneer in the development, innovation and operation of small satellites and earth observation solutions, jointly announced that they have entered into a definitive business combination agreement.

Weekly Spread Changes:

The table below shows weekly spread changes between October 22 and October 29, 2021.

Symbol Quote Acquiring
Company
Acquiring
Company Quote
Current
Spread
Last Week
Spread
Spread Change
Weekly
Deal
Type
TEDU 0.8712 Kidedu Holdings Limited (N/A) 359.14% 277.36% 81.78% All Cash
JOBS 59.56 Garnet Faith Limited (N/A) 0.00 32.72% 23.55% 9.17% All Cash
CLDB 29.15 Farmers National Banc Corp. (FMNB) 17.82 6.98% 2.89% 4.09% All Stock
FBC 47.19 New York Community Bancorp, Inc. (NYCB) 12.43 5.76% 2.07% 3.69% All Stock
SPWH 17.26 The Great American Outdoors Group (N/A) 4.29% 1.93% 2.36% All Cash
HBMD 20.71 F.N.B. Corporation (FNB) 11.65 1.26% 3.98% -2.72% All Stock
MRLN 22.92 HPS Investment Partners LLC (N/A) 2.53% 5.57% -3.04% All Cash
XLNX 180 Advanced Micro Devices, Inc. (AMD) 120.16 15.05% 19.65% -4.60% All Stock
XONE 23.02 Desktop Metal, Inc. (DM) 6.99 10.77% 15.49% -4.72% Special Conditions
MX 18.96 South Dearborn Limited (N/A) 52.95% 61.38% -8.43% All Cash

Deal Statistics:

Total Number of Deals Closed in 2021 158
Total Number of Deals Not Completed in 2021 12
Total Number of Pending Deals
Cash Deals 48
Stock Deals 31
Stock & Cash Deals 6
Special Conditions 5
Total Number of Pending Deals 90
Total Deal Size $943.94 billion

New Deals:

  1. The acquisition of PAE Inc. (PAE) by Amentum Government Services Holdings for $1.9 billion or $10.05 per share in cash.
  2. The acquisition of Dawson Geophysical Company (DWSN) by Wilks Brothers for $18.56 million or $2.34 per share in cash.
  3. The merger of Oasis Midstream Partners (OMP) with Crestwood Equity Partners (CEQP) for $1.8 billion in an all stock deal. Under the terms of the agreement, OMP unitholders will receive 0.87 units of Crestwood common units for each unit of OMP owned.
  4. The acquisition of Phillips 66 Partners (PSXP) by Phillips 66 (PSX) for $14.5 billion in an all stock deal. Under the terms of the agreement, each outstanding PSXP common unitholder would receive 0.50 shares of PSX common stock for each PSXP common unit.
  5. The acquisition of Momentive Global (MNTV) by Zendesk (ZEN) for $4.21 billion in an all stock deal. Under the terms of the agreement, Momentive stockholders will receive 0.225 shares of Zendesk stock for each share of Momentive stock. We added MNTV as a potential deal to the Deals in the Works section on October 6, 2021, and the price after the news of the potential deal came out was $20.61.

Deal Updates:

  1. On October 27, 2021, Sanderson Farms (SAFM) has received regulatory approvals from each of the Ministry of Commerce of the People’s Republic of China and the Federal Economic Competition Commission of Mexico in connection with the transactions contemplated by the Agreement and Plan of Merger.
  2. On October 27, 2021, Trillium Therapeutics (TRIL) announced that it has received a final order from the Supreme Court of British Columbia approving the previously announced plan of arrangement with PF Argentum, a wholly-owned, indirect subsidiary of Pfizer (PFE).
  3. On October 28, 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 The ExOne Company (XONE) and Desktop Metal (DM).
  4. On October 28, 2021, the Acting CFIUS Staff Chairperson notified Magnachip Semiconductor Corporation (MX) and South Dearborn Limited that CFIUS is undertaking an investigation of the Merger pursuant to Section 721(b)(2) of the Defense Production Act of 1950, as amended, which will be completed no later than December 13, 2021. There can be no assurance that the Company and Parent will develop or agree to any proposals that would result in CFIUS clearance.
  5. On October 29, 2021, shareholders of Extraction Oil & Gas (XOGapproved the company’s merger with Bonanza Creek Energy (BCEI) at a special meeting of shareholders.
  6. On October 29, 2021, Canadian Pacific Railway Limited (CP) and Kansas City Southern (KSU) announced that they have jointly filed a railroad control application with the Surface Transportation Board regarding the proposed transaction to create Canadian Pacific Kansas City.

Closed Deals:

  1. The acquisition of Cadence Bancorporation (CADE) by BancorpSouth Bank (BXS) on October 29, 2021. It took 200 days for this deal to be completed.
  2. The acquisition of Misonix (MSON) by Bioventus (BVS) on October 29, 2021. It took 92 days for this deal to be completed.
  3. The acquisition of Medallia (MDLA) by Thoma Bravo on October 29, 2021. It took 95 days for this deal to be completed.
  4. The acquisition of Severn Bancorp (SVBI) by Shore Bancshares (SHBI) on October 29, 2021. It took 240 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 $0.8712 12/31/2021 359.14% 2148.93%
MX 03/26/2021 South Dearborn Limited (N/A) $29.00 $18.96 12/31/2021 52.95% 316.85%
JOBS 06/21/2021 Garnet Faith Limited (N/A) $79.05 $59.56 12/31/2021 32.72% 195.80%
CHNG 01/06/2021 UnitedHealth Group Incorporated (UNH) $25.75 $21.53 12/31/2021 19.60% 117.28%
AJRD 12/20/2020 Lockheed Martin Corporation (LMT) $51.00 $44.01 12/31/2021 15.88% 95.04%
XLNX 10/27/2020 Advanced Micro Devices, Inc. (AMD) $207.08 $180 12/31/2021 15.05% 90.03%
SJR 03/15/2021 Rogers Communications Inc. (RCI) $32.40 $28.84 06/30/2022 12.34% 18.62%
XONE 08/11/2021 Desktop Metal, Inc. (DM) $25.50 $23.02 12/31/2021 10.77% 64.46%
SOLY 05/10/2021 Allergan Aesthetics (N/A) $22.60 $20.59 12/31/2021 9.76% 58.41%
COHR 03/25/2021 II-VI Incorporated (IIVI) $275.06 $254.4 12/31/2021 8.12% 48.60%

List of all pending deals:

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

Conclusion:

SPAC activity seems to be picking up pace once again with 57 SPAC IPOs filed in the month of October. SPAC business combinations continue to grow as well. One of the significant SPAC business combinations in October was the merger agreement between Trump Media & Technology Group and Digital World Acquisition (DWAC) to create a new social media network. DWAC skyrocketed after the announcement of this combination, highlighting the opportunities and pitfalls that lurk in SPACs.

Disclaimer: I have long positions in 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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