Merger Arbitrage Mondays – Three Potential Deals Come To Fruition

  • February 21, 2022

Merger activity increased last week with five new deals announced and five deals completed. Three of the five new deals announced were successful “deals in the works”.

Tower Semiconductor (TSEM)

Founded in 1993 and headquartered in Migdal Haemek, Israel, Tower Semiconductor is an independent foundry of analog semiconductor solutions that provides technology and manufacturing platforms for integrated circuits (ICs) in growing markets such as consumer, industrial, automotive, mobile, infrastructure, medical and aerospace and defense. We added TSEM as a potential deal to our list of deals in the works on February 14, 2022, when The Wall Street Journal reported that Intel (INTC) was close to a deal to buy the Israeli chip company for nearly $6 billion. The deal materialized the next day with Intel announcing that it was acquiring Tower for $53 a share, representing a premium of almost 60% to Tower’s closing price the previous day.

Intel established Intel Foundry Services (IFS) in March 2021 to help meet the growing global demand for semiconductor manufacturing capacity. Intel’s intent is for IFS and Tower to become a fully integrated foundry business.

The deal is trading at a spread of almost 13%, indicating potential risks of an international deal and risks related to consolidation within the semiconductor industry.

MoneyGram International (MGI)

Incorporated in 2003 and based in Dallas, Texas, MoneyGram International, together with its subsidiaries, provides cross-border peer-to-peer payments and money transfer services in the United States and internationally. We added MGI to our list of potential three times since 2019. We first added MGI as a potential deal on January 25, 2019, when Reuters reported that the company was exploring strategic alternatives, including a sale, a year after a U.S. government panel nixed its $1.2 billion sale to China’s Ant Financial. The price of MGI after this announcement was $2.29.

The second time we added MGI as a potential deal was on June 1, 2020, when Bloomberg reported that Western Union (WU) was seeking to acquire the company, in a transaction that would bring together two of the largest U.S. providers of money-transfer services. MGI’s price after this announcement was $2.59.

The third time we added MGI as a potential deal was on July 21, 2021, when Bloomberg reported that the company had received preliminary takeover interest from Stellar Development Foundation and private equity firm Advent International. MGI’s price after this announcement was $11.49.  On December 15, 2021, Reuters reported that private equity firm Madison Dearborn Partners had approached MoneyGram International with an acquisition offer. MGI’s price after this announcement was $7.94. By January 25, 2022, private equity firms Madison Dearborn Partners, Siris Capital Group and Advent International had made competing offers to acquire the company and MGI’s price at this time was $9.14.

The deal finally materialized on February 15, 2022, with Madison Dearborn Partners agreeing to acquire MGI for $11 per share, representing a premium of approximately 50% to MoneyGram’s unaffected closing stock price on December 14, 2021.

A bidding war may not be out of question considering other private equity firms made competing offers for MGI. The termination fee in case in case MGI receives and accepts a superior proposal is $32.8 million.

Preferred Apartment Communities (APTS)

Founded in 2009 and headquartered in Atlanta, Georgia, Preferred Apartment Communities is a real estate investment trust engaged primarily in the ownership and operation of Class A multifamily properties, with select investments in grocery anchored shopping centers. We added APTS as a potential deal on February 9, 2022, when Bloomberg reported that the company was exploring options including a full or partial sale after receiving inbound interest. The price of APTS after this announcement was $21.03. On February 16, APTS entered into a definitive agreement with Blackstone Real Estate Income Trust, under which all outstanding shares of common stock of APTS will be acquired by BREIT for $25.00 per share, representing a premium of approximately 39% over the unaffected closing stock price on February 9, 2022.

There was one new deal announced in the Deals in the Works section last week.

You can find all the active deals listed below in our Merger Arbitrage Tool (MAT) that automatically updates itself during market hours.

If you found this article informative and would like to receive it by email every Monday morning before the market opens, click here to subscribe for free.

SPAC Arbitrage

There were four new SPAC IPOs filed and three new SPAC combinations announced last week. You can find the new SPAC IPO announcements in our SPACs tool here.

  1. Varian Biopharmaceuticals, a private, precision oncology company developing novel therapeutics for the treatment of cancer, and SPK Acquisition (SPKentered into a definitive merger agreement for a business combination that will result in Varian Bio becoming a publicly traded company.
  2. Northern Lights Acquisition (NLIT) and Safe Harbor Financial, a cannabis-focused financial services provider offering access to banking and financing solutions for the cannabis industry, announced the signing of a definitive business combination agreement.
  3. Nogin, a Commerce-as-a-Service technology provider and Software Acquisition Group Inc. III (SWAG) announced that the two companies have entered into a definitive merger agreement.

Weekly Spread Changes:

The table below shows weekly spread changes between February 11 and February 18, 2022.

SymbolQuoteAcquiring
Company
Acquiring
Company Quote
Current
Spread
Last Week
Spread
Spread Change
Weekly
Deal
Type
ZNGA8.84Take-Two Interactive Software, Inc. (TTWO)158.511.54%7.64%3.90%Special Conditions
VG20.14Ericsson (ERIC)10.064.27%1.01%3.26%All Cash
SAFM180Cargill and Continental Grain Company (N/A)12.78%10.36%2.42%All Cash
GSKY10.04The Goldman Sachs Group (GS)346.043.40%1.32%2.08%All Stock
NPTN15.21Lumentum Holdings Inc. (LITE)99.085.19%3.29%1.90%All Cash
OCDX17.08Quidel Corporation (QDEL)97.842.24%3.61%-1.37%Cash Plus Stock
AZPN142.86Emerson Electric Co. (EMR)92.7712.00%14.32%-2.32%Special Conditions
EXTN5.81Enerflex Ltd. (EFX.TO)7.64.76%7.21%-2.45%All Stock
FRTA23.62Quikrete Holdings, Inc. (N/A)1.61%4.62%-3.01%All Cash
JOBS51.8Garnet Faith Limited (N/A)52.61%70.00%-17.39%All Cash

Deal Statistics:

Total Number of Deals Closed in 202225
Total Number of Deals Not Completed in 20222
Total Number of Pending Deals
Cash Deals42
Stock Deals17
Stock & Cash Deals8
Special Conditions8
Total Number of Pending Deals75
Total Deal Size$581.18 billion

New Deals:

  1. The acquisition of BioDelivery Sciences International (BDSI) by Collegium Pharmaceutical (COLL) for $488.65 million or $5.60 per share in cash.
  2. The acquisition of Resonant (RESN) by Murata Electronics North America for $249.15 million or $4.50 per share in cash.
  3. The acquisition of Tower Semiconductor (TSEM) by Intel Corporation (INTC) for $5.4 billion or $53 per share in cash. We added TSEM as a potential deal to the Deals in the Works section on February 14, 2022 and the price after the news of the potential deal came out was $33.13.
  4. The acquisition of MoneyGram International (MGI) by Madison Dearborn Partners for $1.8 billion or $11 per share in cash. We added MGI as a potential deal to the Deals in the Works section on July 21, 2021 and the price after the news of the potential deal came out was $11.49.
  5. The acquisition of Preferred Apartment Communities (APTS) by Blackstone Real Estate Income Trust for $5.8 billion or $25 per share in cash. We added APTS as a potential deal to the Deals in the Works section on February 9, 2022 and the price after the news of the potential deal came out was $21.03.

Deal Updates:

  1. On February 9, 2022, Ortho Clinical Diagnostics Holdings (OCDX) announced, in connection with its proposed transaction with Quidel Corporation (QDEL), the expiration of the waiting period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the “HSR Act”).
  2. On February 11, 2022, the Board of Governors of the Federal Reserve System approved SouthState Corporation’s (SSB) application with respect to the previously announced merger between SouthState and Atlantic Capital Bancshares (ACBI).
  3. On February 17, 2022, Monmouth Real Estate Investment Corporation (MNR) announced that its shareholders voted to approve the acquisition of Monmouth by Industrial Logistics Properties Trust (ILPT).
  4. On February 18, 2022, R. R. Donnelley & Sons Company (RRD) obtained regulatory approvals for the merger with Chatham.
  5. On February 18, 2022, Change Healthcare (CHNG) and United Healthcare (UNH) disclosed that the U.S. Dept of Justice has until February 27 to sue to block the transaction.
  6. On February 18, 2022, M&T Bank Corporation (MTB) and People’s United Financial (PBCT) jointly announced that the two companies have agreed to extend their merger agreement from February 21, 2022 to June 1, 2022.

Closed Deals:

  1. The acquisition of Xilinx (XLNX) by Advanced Micro Devices (AMD) on February 14, 2022. It took 475 days for this deal to be completed.
  2. The acquisition of PAE Incorporated (PAE) by Amentum Government Services Holdings on February 15, 2022. It took 113 days for this deal to be completed.
  3. The acquisition of Independence Holding Company (IHC) by Geneve Holdings on February 15, 2022. It took 98 days for this deal to be completed.
  4. The acquisition of First Midwest Bancorp (FMBI) by Old National Bancorp (ONB) on February 16, 2022. It took 260 days for this deal to be completed.
  5. The acquisition of Castlight Health (CSLT) by Vera Whole Health 0n February 17, 2022. It took 43 days for this deal to be completed.

Top 10 deals with largest updates:

SymbolAnnounced
Date
Acquiring
Company
Closing
Price
Last
Price
Closing
Date
ProfitAnnualized
Profit
MNTV10/28/2021Zendesk (ZEN)$25.89$15.9706/30/202262.11%175.73%
JOBS06/21/2021Garnet Faith Limited (N/A)$79.05$51.803/31/202252.61%505.30%
TMX12/14/2021Rentokil Initial plc (RTOKY)$55.00$42.212/31/202230.33%35.37%
CHNG01/06/2021UnitedHealth Group Incorporated (UNH)$25.75$20.1106/30/202228.05%79.35%
ATVI01/18/2022Microsoft Corporation (MSFT)$95.00$81.0503/31/202317.21%15.59%
TSEM02/15/2022Intel Corporation (INTC)$53.00$46.9402/15/202312.91%13.13%
SAFM08/09/2021Cargill and Continental Grain Company (N/A)$203.00$180.0006/30/202212.78%36.15%
BRG12/20/2021Blackstone Real Estate (N/A)$29.85$26.5106/30/202212.60%35.65%
PNM10/21/2020Avangrid, Inc. (AGR)$50.30$44.706/30/202212.53%35.45%
AZPN10/11/2021Emerson Electric Co. (EMR)$160.00$142.8606/30/202212.00%33.95%

List of all pending deals:

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

TargetAnnounced
Date
AcquirerDeal
Type
Closing
Value
Deal
Price
Last
Price
Target VolumeEstimated
Closing Date
ReturnAnnualized
Return
+MNTV10/28/21Zendesk (ZEN)All Stock$4.21 B$25.89$15.976,031,7506/30/2262.11%175.73%
+JOBS6/21/21Garnet Faith Limited (N/A)All Cash$3.63 B$79.05$51.8268,9253/31/2252.61%505.30%
+TMX12/14/21Rentokil Initial plc (RTOKY)Special Conditions$6.7 B$55.00$42.2433,76812/31/2230.33%35.37%
+CHNG1/06/21UnitedHealth Group Incorporated (UNH)All Cash$13.28 B$25.75$20.111,999,6146/30/2228.05%79.35%
+ATVI1/18/22Microsoft Corporation (MSFT)All Cash$68.7 B$95.00$81.057,742,2393/31/2317.21%15.59%
+TSEM2/15/22Intel Corporation (INTC)All Cash$5.4 B$53.00$46.942,358,6312/15/2312.91%13.13%
+SAFM8/09/21Cargill and Continental Grain Company (N/A)All Cash$4.49 B$203.00$180.00189,4166/30/2212.78%36.15%
+BRG12/20/21Blackstone Real Estate (N/A)Special Conditions$3.6 B$29.85$26.51111,1556/30/2212.60%35.65%
+PNM10/21/20Avangrid, Inc. (AGR)All Cash$8.05 B$50.30$44.7316,6926/30/2212.53%35.45%
+AZPN10/11/21Emerson Electric Co. (EMR)Special Conditions$12.34 B$160.00$142.86265,6856/30/2212.00%33.95%
+ZNGA1/10/22Take-Two Interactive Software, Inc. (TTWO)Special Conditions$12.7 B$9.86$8.8411,998,1066/30/2211.54%32.65%
+SJR3/15/21Rogers Communications Inc. (RCI)Special Conditions$26 B$32.40$29.27338,7246/30/2210.69%30.26%
+SAVE2/07/22Frontier Group Holdings, Inc. (ULCC)Cash Plus Stock$6.6 B$26.63$24.793,848,88512/31/227.42%8.66%
+ARNA12/13/21Pfizer Inc. (PFE)All Cash$4.69 B$100.00$93.13685,5166/30/227.38%20.87%
+COHR3/25/21II-VI Incorporated (IIVI)Cash Plus Stock$6.84 B$285.28$266.01167,5665/31/227.25%26.71%
+ZGNX1/19/22UCB (N/A)Special Conditions$1.28 B$28.00$26.122,055,2196/30/227.20%20.37%
+NPTN11/04/21Lumentum Holdings Inc. (LITE)All Cash$745.24 M$16.00$15.21769,25412/31/225.19%6.06%
+VNE10/04/21Qualcomm Incorporated (QCOM)All Cash$3.87 B$37.00$35.22630,6336/30/225.05%14.30%
+EXTN1/24/22Enerflex Ltd. (EFX.TO)All Stock$735 M$6.10$5.81432,6799/30/224.94%8.17%
+MILE11/08/21Lemonade (LMND)All Stock$201.47 M$1.39$1.331,077,8066/30/224.41%12.48%
+VG11/22/21Ericsson (ERIC)All Cash$6.2 B$21.00$20.144,724,1756/30/224.27%12.08%
+XENT8/06/21Medtronic plc (MDT)All Cash$1.1 billion$28.25$27.16249,3223/31/224.01%38.55%
+CERN12/20/21Oracle Corporation (ORCL)All Cash$28.4 B$95.00$91.456,417,70712/31/223.88%4.53%
+PBCT2/22/21M&T Bank Corporation (MTB)All Stock$7.6 B$21.52$20.763,669,4366/01/223.65%13.31%
+CCMP12/15/21Entegris, Inc. (ENTG)Cash Plus Stock$6.5 B$191.66$185.18240,81812/31/223.50%4.08%
+GSKY9/15/21The Goldman Sachs Group (GS)All Stock$2.24 B$10.38$10.041,550,4013/31/223.40%32.64%
+PTRS11/04/21OceanFirst Financial Corp. (OCFC)Special Conditions$186 M$10.38$10.0558,6686/30/223.28%9.29%
+TLMD2/03/22Patient Square Capital (N/A)All Cash$106.42 M$3.00$2.91348,1486/30/223.09%8.75%
+RESN2/14/22Murata Electronics North America, Inc. (N/A)All Cash$249.15 M$4.50$4.373,985,2603/31/222.97%28.57%
+NES12/13/21Select Energy Services, Inc. (WTTR)All Stock$45 M$1.91$1.8630,0143/31/222.59%24.86%
+NSEC1/26/22VR Insurance Holdings, Inc. (N/A)All Cash$41.4 M$16.35$15.9453766/30/222.54%7.19%
+MGI2/15/22Madison Dearborn Partners, LLC (N/A)All Cash$1.8 B$11.00$10.755,593,68912/31/222.33%2.71%
+OCDX12/23/21Quidel Corporation (QDEL)Cash Plus Stock$8.33 B$17.46$17.082,598,6306/30/222.24%6.33%
+ISBC7/28/21Citizens Financial Group, Inc. (CFG)Cash Plus Stock$3.5 B$17.28$16.91,869,3856/30/222.22%6.28%
+CTXS1/31/22Vista Equity Partners and Elliott Investment Management LP (N/A)All Cash$16.5 B$104.00$101.882,709,8166/30/222.08%5.89%
+ECOL2/09/22Republic Services, Inc. (RSG)All Cash$2.2 B$48.00$47.051,090,5796/30/222.02%5.71%
+LEVL11/04/21First Merchants Corporation (FRME)Cash Plus Stock$323.5 M$41.27$40.49107,6856/30/221.92%5.43%
+FBC4/26/21New York Community Bancorp, Inc. (NYCB)All Stock$2.6 B$46.49$45.62229,2313/31/221.92%18.42%
+STXB11/19/21Simmons First National Corporation (SFNC)All Stock$581 M$29.35$28.8764,6606/30/221.65%4.66%
+FRTA2/22/21Quikrete Holdings, Inc. (N/A)All Cash$2.74 B$24.00$23.62155,8733/31/221.61%15.45%
+ROG11/02/21DuPont de Nemours, Inc. (DD)All Cash$5.2 B$277.00$272.66250,8616/30/221.59%4.50%
+NUAN4/12/21Microsoft Corp (MSFT)All Cash$19.7 B$56.00$55.153,023,6903/31/221.54%14.80%
+UMPQ10/12/21Columbia Banking System, Inc. (COLB)All Stock$4.5 B$21.63$21.311,486,3726/30/221.49%4.22%
+VRS12/19/21BillerudKorsnäs AB (N/A)All Cash$825 M$27.00$26.7187,8956/30/221.12%3.18%
+WBT7/14/21Ali Holding S.r.l. (N/A)All Cash$4.8 B$24.00$23.741,577,4881/31/221.10%0.00%
+GCP12/06/21Saint-Gobain (N/A)All Cash$2.3 B$32.00$31.69505,20512/31/220.98%1.14%
+MIME12/07/21Permira (N/A)All Cash$5.8 B$80.00$79.242,107,5676/30/220.96%2.71%
+TSC10/20/21Raymond James Financial, Inc. (RJF)Cash Plus Stock$1.1 B$33.13$32.83421,4346/30/220.91%2.59%
+ATC7/01/21MKS Instruments, Inc. (MKSI)Cash Plus Stock$6.5 B$24.50$24.291,313,2413/31/220.88%8.47%
+FLOW12/13/21Lone Star Funds (N/A)All Cash$3.8 B$86.50$85.751,011,6376/30/220.87%2.47%
+EPAY12/17/21Thoma Bravo (N/A)All Cash$2.6 B$57.00$56.53918,3386/30/220.83%2.35%
+ESBK10/04/21Community Bank System, Inc. (CBU)All Cash$82.8 M$23.10$22.911,1533/31/220.83%7.97%
+MCFE11/08/21Investor Group comprised of Advent, Permira, Crosspoint Capital, CPP Investments, GIC and ADIA (N/A)All Cash$14 B$26.00$25.811,388,2276/30/220.74%2.08%
+FOE5/11/21Prince International Corporation (N/A)All Cash$2.1 B$22.00$21.84196,4553/31/220.73%7.04%
+BDSI2/14/22Collegium Pharmaceutical, Inc. (COLL)All Cash$488.65 M$5.60$5.562,800,1563/31/220.72%6.91%
+APR1/10/22Owens & Minor, Inc. (OMI)All Cash$1.62 B$37.50$37.25180,7316/30/220.67%1.90%
+CONE11/15/21KKR and Global Infrastructure Partners (N/A)All Cash$15 B$90.50$89.961,833,0556/30/220.60%1.70%
+MGP8/04/21VICI Properties Inc. (VICI)All Stock$17.2 billion$38.14$37.92379,7786/30/220.58%1.63%
+KRA9/27/21DL Chemical Co., Ltd. (N/A)All Cash$2.5 B$46.50$46.24212,8046/30/220.56%1.59%
+STFC7/12/21Liberty Mutual Holding Company Inc. (N/A)All Cash$2.48 B$52.00$51.7629,5733/31/220.46%4.45%
+FTSI10/22/21ProFrac Holdings (N/A)All Cash$407.5 M$26.52$26.4235,4413/31/220.38%3.64%
+RRD12/14/21Chatham Asset Management, LLC (N/A)All Cash$2.3 B$10.85$10.812,287,4992/25/220.37%33.77%
+INFO11/30/20S&P Global (SPGI)All Stock$44 B$107.47$107.112,040,6016/30/220.33%0.94%
+PSXP10/27/21Phillips 66 (PSX)All Stock$14.5 B$42.54$42.4376,0493/31/220.32%3.06%
+BPMP12/20/21BP p.l.c. (BP)All Stock$2.45 B$18.27$18.22363,9393/31/220.26%2.52%
+TACO12/06/21Jack in the Box Inc. (JACK)All Cash$575 M$12.51$12.48218,0783/31/220.24%2.31%
+MNR11/05/21Industrial Logistics Properties Trust (ILPT)All Cash$3.72 B$21.00$20.953,393,7376/30/220.24%0.68%
+ANAT8/09/21Brookfield Asset Management Reinsurance Partners Ltd. (BAMR)All Cash$5.1 B$190.00$189.7732,1836/30/220.12%0.34%
+ACBI7/23/21SouthState Corporation (SSB)All Stock$542 M$31.61$31.5759,7283/31/220.12%1.16%
+VCRA1/06/22Stryker (SYK)All Cash$3.09 B$79.25$79.172,415,1193/31/220.10%0.97%
+CPLG11/08/21Highgate and Cerberus Capital Management, L.P. (N/A)Special Conditions$1.5 B$15.65$15.711,046,9383/31/22-0.38%-3.67%
+GNOG8/09/21DraftKings Inc. (DKNG)All Stock$1.52 B$6.31$6.342,101,3893/31/22-0.46%-4.42%
+ABTX11/10/21CBTX, Inc. (CBTX)All Stock$1.5 B$42.99$43.2479,7726/30/22-0.57%-1.62%
+PVG11/09/21Newcrest Mining Limited (NCMGY)All Stock$2.8 B$14.06$14.16518,2393/31/22-0.72%-6.91%
+APTS2/16/22Blackstone Real Estate Income Trust, Inc. (N/A)All Cash$5.8 B$25.00$25.373,898,8576/30/22-1.46%-4.13%

Conclusion:

SPAC activity declined last week with four new SPAC IPOs filed. SPAC business combinations picked up a little on the other hand, with three new SPAC business combination announced.

Multiple active deals received required approvals last week. Change Healthcare on the other hand continues to trade at a large spread of over 28% due to the timing agreement with the U.S. Department of Justice that states that the companies will not consummate the merger before February 22, 2022, unless they have received written notice from the DOJ prior to such date that the DOJ has closed its investigation of the merger. The timing agreement also provides that UnitedHealth Group and Change Healthcare will provide the DOJ with ten days’ notice before the consummation of the merger, during which time the DOJ may seek to block the consummation of the merger through the filing of a lawsuit. Effective February 17, 2022, UnitedHealth Group and Change Healthcare provided such notice to the DOJ. Accordingly, the DOJ now has until February 27, 2022 to initiate litigation to block the consummation of the merger.

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.