Merger Arbitrage Mondays – Stryker Pays A Pretty Penny For Vocera

Merger activity increased last week with two new deals announced and six active deals completed. SPAC business combinations continued to be muted.

The year 2022 kicked off with two healthcare tech deals, continuing the trend of the 35 health care sector deals announced in 2021, with a total value of over $157 billion.

Incorporated in 2000 and headquartered in San Jose, California, Vocera Communications (VCRA) specializes in workflow platforms for healthcare providers. The  company provides software that offers digital care coordination and communication, which includes the hands-free Vocera Smartbadge. Vocera’s workflow solutions enables mobile workers to choose devices based on their role or task, that includes smartphones or one of the company’s wearable communication devices, and use voice commands to reach people by name, role or group.

(Source: Vocera Communications Investor Presentation)

Vocera entered into a definitive agreement to be acquired by Stryker Corporation (SYK) for an enterprise value of $3.09 billion. This is an unusual move for a medical devices company like Stryker but it looks like everyone wants to have a slice of the connected/digital healthcare pie. While the deal seems large, it is a small fraction compared to Stryker’s enterprise value of $110 billion. Considering Stryker already has more than $10 billion in debt on its balance sheet, it is surprising the company did not use its expensive stock (EV/EBITDA of 24) to purchase Vocera and instead opted to pay all cash for the deal. Stryker is paying 12 times sales and a whopping 69 times forward EBITDA for this deal.

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

SPAC activity was low with only four new SPAC IPOs filed. There were no 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 December 31, 2021 and January 7, 2022.

Symbol Quote Acquiring
Company
Acquiring
Company Quote
Current
Spread
Last Week
Spread
Spread Change
Weekly
Deal
Type
NES 2.25 Select Energy Services, Inc. (WTTR) 6.6 -25.17% -47.72% 22.55% All Stock
JOBS 45.39 Garnet Faith Limited (N/A) 74.16% 61.56% 12.60% All Cash
AJRD 44.43 Lockheed Martin Corporation (LMT) 360.14 14.79% 9.07% 5.72% All Cash
UMPQ 20.44 Columbia Banking System, Inc. (COLB) 36.05 5.08% 0.24% 4.84% All Stock
TMX 43.57 Rentokil Initial plc (RTOKY) 37.3875 26.23% 21.60% 4.63% Special Conditions
PNM 45.97 Avangrid, Inc. (AGR) 50.14 9.42% 10.28% -0.86% All Cash
VNE 35.92 Qualcomm Incorporated (QCOM) 180.41 3.01% 4.28% -1.27% All Cash
MNTV 19.88 Zendesk (ZEN) 97.92 10.82% 13.14% -2.32% All Stock
PVG 14.1 Newcrest Mining Limited (NCMGY) 17.23 -1.21% 2.18% -3.39% All Stock
PTRS 10.38 OceanFirst Financial Corp. (OCFC) 23.7 0.00% 5.92% -5.92% Special Conditions

Deal Statistics:

Total Number of Deals Closed in 2022 6
Total Number of Pending Deals
Cash Deals 44
Stock Deals 24
Stock & Cash Deals 7
Special Conditions 6
Total Number of Pending Deals 81
Total Deal Size $460.86 billion

New Deals:

  1. The acquisition of Castlight Health (CSLT) by Vera Whole Health for $261.35 million or $2.05 per share in cash.
  2. The acquisition of Vocera Communications (VCRA) by Stryker Corporation (SYK) for $3.09 billion or $79.25 per share in cash.

Deal Updates:

  1. On January 3, 2022, PNM Resources (PNM) and Avangrid (AGRentered into an amendment of their merger agreement extending the end date to April 20, 2023. Additionally, the companies have filed a Notice of Appeal with the New Mexico Supreme Court of the December 2021 New Mexico Public Regulation Commission (NMPRC) order to reject a stipulated agreement reached with parties in the companies’ application for approval of the merger.
  2. On January 3, 2022, JANA Partners announced that it has sent a letter to the Zendesk (ZEN) Board of Directors highlighting shareholder opposition, revealing new concerns regarding the proposed acquisition of Momentive (MNTV), and calling on the Board to immediately terminate the transaction.
  3. On January 4, 2022, Marlin Business Services (MRLN) announced that it has been working diligently to satisfy all conditions necessary to complete the proposed merger with a subsidiary of funds managed by HPS Investment Partners LLC, including the condition that the Company’s wholly-owned subsidiary Marlin Business Bank surrender its banking licenses and authority and terminate its Federal Deposit Insurance Corporation (“FDIC”) deposit insurance.
  4. On January 6, 2022, Corvus Gold (KOR) announced that shareholders and option holders of Corvus voted overwhelmingly in favour of the resolution approving the previously announced plan of arrangement between Corvus and AngloGold Ashanti Holdings (AU).
  5. On January 7, 2022, New Frontier Health Corporation (NFH) announced that the company’s shareholders voted in favor of the proposal to authorize and approve the previously announced agreement and plan of merger.
  6. On January 7, 2022, FTS International (FTSI) announced that the Company received a notice from NYSE American on January 4, 2022 that the Company is not in compliance with the continued listing standards set forth in Section 704 of the NYSE American Company Guide due to the Company’s failure to hold an annual meeting for the fiscal year ended December 31, 2020 on or before December 31, 2021.

Closed Deals:

  1. The acquisition of Bryn Mawr Bank Corporation (BMTC) by WSFS Financial Corporation (WSFS) on January 3, 2022. It took 299 days for this deal to be completed.
  2. The acquisition of Athene Holding (ATH) by Apollo Global Management (APO) on January 3, 2022. It took 301 days for this deal to be completed.
  3. The acquisition of Reliant Bancorp (RBNC) by United Community Banks (UCBI) on January 3, 2022. It took 172 days for this deal to be completed.
  4. The acquisition of CIT Group (CIT) by First Citizens BancShares (FCNCA) on January 4, 2022. It took 445 days for this deal to be completed.
  5. The acquisition of Magellan Health (MGLN) by Centene Corporation (CNC) on January 4, 2022. It took 445 days for this deal to be completed.
  6. The acquisition of 1st Constitution Bancorp (FCCY) by Lakeland Bancorp (LBAI) on January 6, 2022. It took 178 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
JOBS 06/21/2021 Garnet Faith Limited (N/A) $79.05 $45.39 03/31/2022 74.16% 334.17%
TMX 12/14/2021 Rentokil Initial plc (RTOKY) $55.00 $43.57 12/31/2022 26.23% 26.90%
CHNG 01/06/2021 UnitedHealth Group Incorporated (UNH) $25.75 $21.1 06/30/2022 22.04% 46.77%
XLNX 10/27/2020 Advanced Micro Devices, Inc. (AMD) $227.49 $193.07 03/31/2022 17.83% 80.33%
AJRD 12/20/2020 Lockheed Martin Corporation (LMT) $51.00 $44.43 03/31/2022 14.79% 66.63%
BRG 12/20/2021 Blackstone Real Estate (N/A) $29.85 $26.4 06/30/2022 13.07% 27.73%
MNTV 10/28/2021 Zendesk (ZEN) $22.03 $19.88 06/30/2022 10.82% 22.97%
PNM 10/21/2020 Avangrid, Inc. (AGR) $50.30 $45.97 06/30/2022 9.42% 19.99%
AZPN 10/11/2021 Emerson Electric Co. (EMR) $160.00 $147.44 06/30/2022 8.52% 18.08%
SAFM 08/09/2021 Cargill and Continental Grain Company (N/A) $203.00 $188.31 01/31/2022 7.80% 129.43%

List of all pending deals:

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

Conclusion:

It was good to see six deals close in the perceived challenging regulatory environment. The consolidation in the banking industry continues and the entire industry is now rising on expectations of rising interest rates in 2022. We are likely to see more banking deals in 2022, especially among the smaller regional banks.

Disclaimer: I have long positions in Arena Pharmaceuticals (ARNA), Bluerock Residential Growth REIT (BRG), Change Healthcare (CHNG) and Pfizer (PFE). 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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