Merger activity remained steady last week with two new deals announced and four deals completed. With two deals announced each week, there have been a total of eight new deals announced so far in the month of January.
You can find all the active deals listed below in our Merger Arbitrage Tool (MAT) that automatically updates itself during market hours.
There were five new deals announced in the Deals in the Works section last week.
We added Centene Corporation (CNC) as a potential deal in the works on January 26, 2022, after Bloomberg reported that Centene had been drawing takeover interest from Cigna Corporation (CI) in recent months. In the past couple of years, we tracked the acquisitions of WellCare Health Plans and Magellan Health by Centene. Before completing the acquisition of WellCare Health Plans in 2019, Dan Loeb’s Third Point and activists Corvex and Sachem Head were encouraging Centene to sell itself. The deal could face hurdles in the current challenging regulatory and competitive environment. Wells Fargo analyst Stephen Baxter said in a note , “While this could certainly be revisited, at this point we see more potential obstacles than obvious reasons to push forward. These include relatively modest accretion, CI’s historical ambivalence toward Medicaid, the disconnect between CNC’s current profitability and long-term earnings power, and antitrust concerns.”
Another potential deal in the works that we added last week was DouYu (DOYU). We tracked the acquisition of DOYU by Huya (HUYA) from the announcement in October 2020 until China’s market regulator blocked Tencent Holdings’s plan to merge the country’s top two videogame streaming sites, on antitrust grounds in mid-2021. After the announcement of two of the biggest gaming industry deals in history in January including the acquisition of Zynga by Take-Two and Activision by Microsoft, Tencent Holdings, owner of games like ‘Honor of Kings’ and ‘PUBG’, announced that it plans to take DouYu private in order to have a firm grip on its core gaming affiliates. Tencent already holds a 37% stake in DouYu and might have better luck taking the company private than it did with attempting to merge it with Huya. DouYu’s stock is down an astounding 84% during the last year.
LXP Industrial Trust (LXP) was another addition to our list of potential deals last week. The company, a real estate investment trust focused on single-tenant warehouse and distribution investments, received a letter from Jonathan Litt’s Land & Buildings Investment Management offering to acquire the company for $$16 per share, at a premium of 22%.
SPAC activity declined with two new SPAC IPOs filed. There were five new SPAC combinations announced last week. You can find the new SPAC IPO announcements in our SPACs tool here.
Weekly Spread Changes:
The table below shows weekly spread changes between January 21 and January 28, 2022.
|AJRD||38.44||Lockheed Martin Corporation (LMT)||393.15||32.67%||18.80%||13.87%||All Cash|
|JOBS||49.2||Garnet Faith Limited (N/A)||60.67%||52.61%||8.06%||All Cash|
|NES||1.61||Select Energy Services, Inc. (WTTR)||6.45||2.20%||-4.60%||6.80%||All Stock|
|ZNGA||8.67||Take-Two Interactive Software, Inc. (TTWO)||158.74||13.73%||9.68%||4.05%||Special Conditions|
|ATVI||79.14||Microsoft Corporation (MSFT)||308.26||20.04%||16.78%||3.26%||All Cash|
|MNR||21.06||Industrial Logistics Properties Trust (ILPT)||22.71||-0.28%||0.72%||-1.00%||All Cash|
|ABTX||42.85||CBTX, Inc. (CBTX)||29.31||-2.98%||-1.59%||-1.39%||All Stock|
|MNTV||16.96||Zendesk (ZEN)||94.51||25.38%||28.80%||-3.42%||All Stock|
|XLNX||177.95||Advanced Micro Devices, Inc. (AMD)||105.24||1.92%||9.04%||-7.12%||All Stock|
|PVG||13.41||Newcrest Mining Limited (NCMGY)||14.97||-9.76%||-0.02%||-9.74%||All Stock|
|Total Number of Deals Closed in 2022||14|
|Total Number of Deals Not Completed in 2022||1|
|Total Number of Pending Deals|
|Stock & Cash Deals||7|
|Total Number of Pending Deals||78|
|Total Deal Size||$546.59 billion|
Top 10 deals with largest spreads:
|JOBS||06/21/2021||Garnet Faith Limited (N/A)||$79.05||$49.2||03/31/2022||60.67%||369.08%|
|AJRD||12/20/2020||Lockheed Martin Corporation (LMT)||$51.00||$38.44||03/31/2022||32.67%||198.77%|
|CHNG||01/06/2021||UnitedHealth Group Incorporated (UNH)||$25.75||$19.55||06/30/2022||31.71%||76.66%|
|TMX||12/14/2021||Rentokil Initial plc (RTOKY)||$55.00||$42.47||12/31/2022||29.50%||32.15%|
|ATVI||01/18/2022||Microsoft Corporation (MSFT)||$95.00||$79.14||03/31/2023||20.04%||17.21%|
|ZNGA||01/10/2022||Take-Two Interactive Software, Inc. (TTWO)||$9.86||$8.67||06/30/2022||13.73%||33.18%|
|PNM||10/21/2020||Avangrid, Inc. (AGR)||$50.30||$44.49||06/30/2022||13.06%||31.57%|
|BRG||12/20/2021||Blackstone Real Estate (N/A)||$29.85||$26.5||06/30/2022||12.64%||30.56%|
|AZPN||10/11/2021||Emerson Electric Co. (EMR)||$160.00||$142.35||06/30/2022||12.40%||29.97%|
List of all pending deals:
List of all pending deals:
Antitrust issues continue to be roadblocks to deals being completed. Earlier last week, the U.S. Federal Trade Commission (FTC) sued to block Lockheed Martin’s (LMT) planned purchase of Aerojet Rocketdyne (AJRD) and Department of Justice antitrust chief Jonathan Kanter said the following in a virtual speech, “I am concerned that merger remedies short of blocking a transaction too often miss the mark. Complex settlements, whether behavioral or structural, suffer from significant deficiencies. Therefore, in my view, when the division concludes that a merger is likely to lessen competition, in most situations we should seek a simple injunction to block the transaction. It is the surest way to preserve competition.”
In this challenging regulatory environment, I exercised the put options I had purchased in Change Healthcare (CHNG) to exit the position.
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Disclaimer: I have long positions in Arena Pharmaceuticals (ARNA) and Bluerock Residential Growth REIT (BRG). 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.