Merger Arbitrage Mondays – Google Acquires Cybersecurity Firm Mandiant

Merger activity declined last week with three new deals announced and five deals completed. Two of the three new deals announced were potential deals in the works. I was surprised to see that four SPAC combinations were terminated. Clearly the SPAC bubble continues to deflate due to unfavorable market conditions. Things are however starting to look very interesting on the merger arbitrage front. We have identified three deals that look attractive to us and we will be writing about them in our March mid-month update for premium subscribers.

When we launched Inside Arbitrage in 2018 we were tracking two strategies including merger arbitrage and insider trading. Since then we have expanded both the breath and depth of the service including adding new verticals like SPACs, spinoffs and stock buybacks as well as adding new tools within each vertical. The latest upgrade is to our Merger Arbitrage Tool and our Deal Metrics page, which now display the termination fee for deals including details about what the acquiring company may have to pay if the deal fails and what the target may have to pay if they find a better offer or they breach a key condition of the merger. You can see an example of our deal metrics page for the $6.8 billion acquisition of Coherent (COHR) by II-VI Incorporated (IIVI) here.

Mandiant (MNDT)

Founded in 2004 and based in Milpitas, California, Mandiant is a cybersecurity firm. The company has a history of uncovering severe cybersecurity threats, including a report it published in 2013, that implicated China in cyber espionage. This report helped Mandiant garner a reputation for its incident response services. Mandiant was acquired by FireEye in 2013. The company, however split last year, with FireEye being sold to a private equity consortium.

We added Mandiant as a potential deal in the works on February 8, 2022, when Bloomberg reported that Microsoft (MSFT) was in talks to acquire the company. MNDT’s price after this announcement was $17.75. According to a report, Microsoft ended its takeover discussions on concerns that Mandiant’s collection of security businesses wasn’t a good enough strategic fit.

Google announced its intent to acquire Mandiant on March 7, 2022 and the companies entered into a definitive merger agreement the following day. Upon closing, Mandiant will become part of Google Cloud. Google is paying $5.4 billion to acquire the company, representing a 57% premium to the undisturbed 10-day trailing volume weighted average price as of February 7, 2022. According to a report, Google Cloud head Thomas Kurian pointed out that companies were facing unprecedented security threats, and Mandiant gives the company a platform of security services to add to the Google Cloud platform.

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

Deals In The Works

There were three new deals announced in the Deals in the Works section last week.

  1. On March 9, 2022, Reuters reported that Hedge fund Third Point LLC is pushing Cano Health (CANO) to put itself up for sale. We briefly wrote about Cano Health last September following purchases by two insiders including the CEO and the Chief Clinical Officer. While growth at the company looked attractive, low patient ratings for the company on Yelp and low employee ratings on Indeed were potential red flags.
  2. On March 9, 2022, Reuters reported that Merit Medical Systems (MMSI), a U.S. medical device manufacturer with a market value of $3.5 billion, is exploring options that include an outright sale to a private equity firm.
  3. On March 10, 2022, Lazydays Holdings (LAZY) received a $25 per share offer from shareholder B. Riley (RILY). B. Riley already has a position of 1 million shares and has given LAZY until 5 PM ET on March 16, 2022 to accept its offer.

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SPAC Arbitrage

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

  1. SatixFy Communications, a satellite communication systems based on in-house developed chipsets and Endurance Acquisition (EDNCannounced a definitive merger agreement that will result in SatixFy becoming a publicly listed company.
  2. LanzaTech NZ, a carbon capture and transformation company and AMCI Acquisition Corp. II (AMCIhave agreed to combine through a business combination transaction.

Terminated SPAC Business Combinations:

  1. Pine Technology Acquisition (PTOC) and The Tomorrow Companies terminated the previously announced agreement and plan of merger due to market conditions.
  2. Aerami Therapeutics Holdings and FoxWayne Enterprises Acquisition (FOXW)  mutually terminated their previously announced business combination agreement.
  3. MedTech Acquisition Corporation (MTAC) and Memic Innovative Surgery mutually agreed to terminate their previously announced business combination agreement due to market conditions and associated volatility as a result of recent world events.
  4. Gett and Rosecliff Acquisition Corp I (RCLF) announced that, as a result of recent market volatility, they have mutually agreed to terminate their previously announced business combination agreement.

Weekly Spread Changes:

The table below shows weekly spread changes between March 4 and March 11, 2022.

Symbol Quote Acquiring
Company
Acquiring
Company Quote
Current
Spread
Last Week
Spread
Spread Change
Weekly
Deal
Type
AZPN 139.48 Emerson Electric Co. (EMR) 93 14.71% 6.57% 8.14% Special Conditions
ATC 22.32 MKS Instruments, Inc. (MKSI) 142.24 7.76% 2.40% 5.36% Cash Plus Stock
TMX 40.32 Rentokil Initial plc (RTOKY) 31.02 36.41% 32.12% 4.29% Special Conditions
TEN 18.18 Apollo Global Management, Inc. (APO) 63.05 10.01% 6.04% 3.97% All Cash
FHN 23.08 The Toronto-Dominion Bank (TD) 76.96 8.32% 5.49% 2.83% Special Conditions
UMPQ 20.86 Columbia Banking System, Inc. (COLB) 35.26 0.71% 1.51% -0.80% All Stock
XENT 27.53 Medtronic plc (MDT) 103.82 2.62% 3.67% -1.05% All Cash
GSKY 9.64 The Goldman Sachs Group (GS) 327 1.76% 2.81% -1.05% All Stock
VG 20.06 Ericsson (ERIC) 8.45 4.69% 6.33% -1.64% All Cash
PBCT 20.31 M&T Bank Corporation (MTB) 172.22 0.06% 2.79% -2.73% All Stock

Deal Statistics:

Total Number of Deals Closed in 2022 41
Total Number of Deals Not Completed in 2022 3
Total Number of Pending Deals
Cash Deals 43
Stock Deals 11
Stock & Cash Deals 10
Special Conditions 8
Total Number of Pending Deals 72
Total Deal Size $648.79 billion

New Deals:

  1. The acquisition of Whiting Petroleum Corporation (WLL) by Oasis Petroleum (OAS) for $2.82 billion in a cash plus stock deal. Under the terms of the agreement, Whiting shareholders will receive 0.5774 shares of Oasis common stock and $6.25 in cash for each share of Whiting common stock owned. In connection with the closing of the transaction, Oasis shareholders will receive a special dividend of $15.00 per share.
  2. The acquisition of Cornerstone Building Brands (CNR) by affiliates of Clayton, Dubilier & Rice for $5.8 billion or $24.65 per share in cash. We added CNR as a potential deal to the Deals in the Works section on February 10, 2022,  and the price after the news of the potential deal came out was $18.66.
  3. The acquisition of Mandiant (MNDT) by Alphabet (GOOG) for $5.4 billion or $23 per share in cash. We added MNDT as a potential deal to the Deals in the Works section on February 8, 2022,  and the price after the news of the potential deal came out was $17.75.

Deal Updates:

  1. March 8, 2022: According to The Wall Street Journal, Federal prosecutors and securities regulators are investigating large bets that Barry Diller, Alexander von Furstenberg and David Geffen made on Activision Blizzard (ATVI) shares in January, days before the videogame maker agreed to be acquired by Microsoft (MSFT).
  2. On March 8, 2022, the chief executive of Rogers Communications (RCI) said that the company will work with regulators to ensure that the takeover of Shaw Communications (SJR) doesn’t eliminate Canada’s fourth-largest wireless carrier.
  3. On March 9, 2022, shareholders of Bottomline Technologies (EPAYapproved the company’s merger with Thoma Bravo at a special meeting of shareholders.
  4. On March 9, 2022, shareholders of GCP Applied Technologies (GCPapproved the company’s merger with Saint-Gobain.
  5. On March 9, 2022, 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 Arena Pharmaceuticals (ARNA) and Pfizer (PFE).
  6. On March 10, 2022, shareholders of Partners Bancorp (PTRSapproved the company’s merger with OceanFirst Financial (OCFC).
  7. March 10, 2022: Legislators including Sen. Elizabeth Warren, Bernie Sanders and Rep. Alexandria Ocasio-Cortez are asking for the Department of Justice to investigate Frontier Airlines (ULCC) planned purchase of Spirit Airlines (SAVE) to see if would hurt competition.
  8. On March 11, 2022, Kraton Corporation (KRA) and DL Chemical confirmed to each other that all closing conditions set out in the Merger Agreement had been satisfied or been waived by the parties. Accordingly, the parties currently expect to consummate the Merger on March 15, 2022.
  9. On March 11, 2022, Verso Corporation (VRS) announced that its stockholders voted to approve the previously announced merger with BillerudKorsnäs AB. The companies now expect the merger to close in late-March or April of 2022.
  10. On March 11, 2022, Mimecast Limited (MIME) announced that its shareholders voted to approve the company’s pending acquisition by funds advised by Permira.

Closed Deals:

  1. The acquisition of Zogenix (ZGNX) by UCB on March 7, 2022. It took 47 days for this deal to be completed.
  2. The acquisition of Del Taco Restaurants (TACO) by Jack in the Box (JACK) on March 8, 2022. It took 92 days for this deal to be completed.
  3. The acquisition of Pretium Resources (PVG) by Newcrest Mining Limited (NCMGY) on March 9, 2022. It took 120 days for this deal to be completed.
  4. The acquisition of Phillips 66 Partners LP (PSXP) by Phillips 66 (PSX) on March 9, 2022. It took 133 days for this deal to be completed.
  5. The acquisition of Arena Pharmaceuticals (ARNA) by Pfizer (PFE) on March 11, 2022. It took 88 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
TMX 12/14/2021 Rentokil Initial plc (RTOKY) $55.00 $40.32 12/31/2022 36.41% 45.36%
CHNG 01/06/2021 UnitedHealth Group Incorporated (UNH) $25.75 $21.42 06/30/2022 20.21% 67.69%
ATVI 01/18/2022 Microsoft Corporation (MSFT) $95.00 $80.31 06/30/2023 18.29% 14.09%
AZPN 10/11/2021 Emerson Electric Co. (EMR) $160.00 $139.48 06/30/2022 14.71% 49.26%
SAFM 08/09/2021 Cargill and Continental Grain Company (N/A) $203.00 $179 06/30/2022 13.41% 44.90%
TSEM 02/15/2022 Intel Corporation (INTC) $53.00 $47.15 02/15/2023 12.41% 13.36%
BRG 12/20/2021 Blackstone Real Estate (N/A) $29.85 $26.64 06/30/2022 12.05% 40.35%
JOBS 06/21/2021 Garnet Faith Limited (N/A) $61.00 $55.23 03/31/2022 10.45% 211.85%
SAVE 02/07/2022 Frontier Group Holdings, Inc. (ULCC) $21.89 $19.87 12/31/2022 10.15% 12.65%
PNM 10/21/2020 Avangrid, Inc. (AGR) $50.30 $45.72 06/30/2022 10.02% 33.54%

List of all pending deals:

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

Target Announced
Date
Acquirer Deal
Type
Closing
Value
Deal
Price
Last
Price
Target Volume Estimated
Closing Date
Return Annualized
Return
+ TMX 12/14/21 Rentokil Initial plc (RTOKY) Special Conditions $6.7 B $55.00 $40.32 623,789 12/31/22 36.41% 45.51%
+ CHNG 1/06/21 UnitedHealth Group Incorporated (UNH) All Cash $13.28 B $25.75 $21.42 664,154 6/30/22 20.21% 68.32%
+ ATVI 1/18/22 Microsoft Corporation (MSFT) All Cash $68.7 B $95.00 $80.31 7,117,822 6/30/23 18.29% 14.12%
+ AZPN 10/11/21 Emerson Electric Co. (EMR) Special Conditions $12.34 B $160.00 $139.48 405,403 6/30/22 14.71% 49.72%
+ SAFM 8/09/21 Cargill and Continental Grain Company (N/A) All Cash $4.49 B $203.00 $179 260,924 6/30/22 13.41% 45.31%
+ TSEM 2/15/22 Intel Corporation (INTC) All Cash $5.4 B $53.00 $47.15 1,223,705 2/15/23 12.41% 13.40%
+ BRG 12/20/21 Blackstone Real Estate (N/A) Special Conditions $3.6 B $29.85 $26.64 132,242 6/30/22 12.05% 40.72%
+ JOBS 6/21/21 Garnet Faith Limited (N/A) All Cash $3.63 B $61.00 $55.23 646,425 3/31/22 10.45% 224.31%
+ SAVE 2/07/22 Frontier Group Holdings, Inc. (ULCC) Cash Plus Stock $6.6 B $21.89 $19.87 6,636,509 12/31/22 10.15% 12.69%
+ PNM 10/21/20 Avangrid, Inc. (AGR) All Cash $8.05 B $50.30 $45.72 349,102 6/30/22 10.02% 33.86%
+ TEN 2/23/22 Apollo Global Management, Inc. (APO) All Cash $7.1 B $20.00 $18.18 1,067,568 12/31/22 10.01% 12.51%
+ WLL 3/07/22 Oasis Petroleum Inc. (OAS) Cash Plus Stock $2.82 B $87.84 $80.26 443,110 12/31/22 9.44% 11.80%
+ ZNGA 1/10/22 Take-Two Interactive Software, Inc. (TTWO) Special Conditions $12.7 B $9.86 $9.05 17,254,385 6/30/22 8.95% 30.25%
+ COHR 3/25/21 II-VI Incorporated (IIVI) Cash Plus Stock $6.84 B $279.78 $258.25 114,307 5/31/22 8.34% 39.01%
+ FHN 2/28/22 The Toronto-Dominion Bank (TD) Special Conditions $13.4 B $25.00 $23.08 12,027,150 11/27/22 8.32% 11.77%
+ ATC 7/01/21 MKS Instruments, Inc. (MKSI) Cash Plus Stock $6.5 B $24.05 $22.32 2,577,143 3/31/22 7.76% 166.57%
+ TGNA 2/22/22 Standard General L.P. (N/A) Special Conditions $8.6 B $24.00 $22.3 2,857,741 12/31/22 7.62% 9.53%
+ SJR 3/15/21 Rogers Communications Inc. (RCI) Special Conditions $26 B $32.40 $30.23 223,864 6/30/22 7.18% 24.26%
+ PTRS 11/04/21 OceanFirst Financial Corp. (OCFC) Special Conditions $186 M $10.38 $9.7 12,582 6/30/22 7.01% 23.69%
+ PBIP 3/02/22 Fulton Financial Corporation (FULT) All Cash $142.1 M $18.01 $16.85 360,501 9/30/22 6.88% 12.56%
+ NPTN 11/04/21 Lumentum Holdings Inc. (LITE) All Cash $745.24 M $16.00 $15.1 1,302,137 12/31/22 5.96% 7.45%
+ MNDT 3/08/22 Alphabet Inc. (GOOG) All Cash $5.4 B $23.00 $21.78 19,380,398 12/31/22 5.60% 7.00%
+ VG 11/22/21 Ericsson (ERIC) All Cash $6.2 B $21.00 $20.06 3,333,015 6/30/22 4.69% 15.84%
+ EXTN 1/24/22 Enerflex Ltd. (EFX.TO) All Stock $735 M $6.50 $6.21 146,980 9/30/22 4.67% 8.52%
+ VNE 10/04/21 Qualcomm Incorporated (QCOM) All Cash $3.87 B $37.00 $35.4 1,642,237 6/30/22 4.52% 15.28%
+ CCMP 12/15/21 Entegris, Inc. (ENTG) Cash Plus Stock $6.5 B $187.42 $180.86 278,718 12/31/22 3.63% 4.53%
+ HTA 2/28/22 Healthcare Realty Trust Incorporated (HR) Cash Plus Stock $10.74 B $31.64 $30.61 2,738,045 9/30/22 3.36% 6.14%
+ MTOR 2/22/22 Cummins Inc. (CMI) All Cash $3.7 B $36.50 $35.34 1,536,884 12/31/22 3.28% 4.10%
+ SJI 2/24/22 Infrastructure Investments Fund (N/A) All Cash $8.1 B $36.00 $34.86 1,021,204 12/31/22 3.27% 4.09%
+ MILE 11/08/21 Lemonade (LMND) All Stock $201.47 M $0.99 $0.96 1,212,683 6/30/22 3.17% 10.72%
+ TLMD 2/03/22 Patient Square Capital (N/A) All Cash $106.42 M $3.00 $2.91 434,697 6/30/22 3.09% 10.45%
+ CTXS 1/31/22 Vista Equity Partners and Elliott Investment Management LP (N/A) All Cash $16.5 B $104.00 $101.02 2,341,720 6/30/22 2.95% 9.97%
+ XENT 8/06/21 Medtronic plc (MDT) All Cash $1.1 billion $28.25 $27.53 208,931 3/31/22 2.62% 56.15%
+ MGI 2/15/22 Madison Dearborn Partners, LLC (N/A) All Cash $1.8 B $11.00 $10.74 3,222,386 12/31/22 2.42% 3.03%
+ OCDX 12/23/21 Quidel Corporation (QDEL) Cash Plus Stock $8.33 B $17.61 $17.22 1,175,430 6/30/22 2.24% 7.57%
+ FBC 4/26/21 New York Community Bancorp, Inc. (NYCB) All Stock $2.6 B $44.53 $43.57 356,746 3/31/22 2.20% 47.18%
+ CDR 3/02/22 Wheeler Real Estate Investment Trust, Inc. (WHLR) All Cash $291.3 M $29.00 $28.4 367,532 6/30/22 2.11% 7.14%
+ IIN 2/28/22 Altaris Capital Partners, LLC (N/A) All Cash $183.22 M $24.25 $23.75 92,101 6/30/22 2.11% 7.12%
+ GCP 12/06/21 Saint-Gobain (N/A) All Cash $2.3 B $32.00 $31.37 463,581 12/31/22 2.01% 2.51%
+ RESN 2/14/22 Murata Electronics North America, Inc. (N/A) All Cash $249.15 M $4.50 $4.42 1,464,749 3/31/22 1.81% 38.86%
+ NSEC 1/26/22 VR Insurance Holdings, Inc. (N/A) All Cash $41.4 M $16.35 $16.06 353 6/30/22 1.81% 6.10%
+ FRTA 2/22/21 Quikrete Holdings, Inc. (N/A) All Cash $2.74 B $24.00 $23.58 131,777 3/31/22 1.78% 38.24%
+ GSKY 9/15/21 The Goldman Sachs Group (GS) All Stock $2.24 B $9.81 $9.64 2,256,665 3/31/22 1.76% 37.86%
+ CNR 3/07/22 Clayton, Dubilier & Rice (N/A) All Cash $5.8 B $24.65 $24.23 3,614,602 9/30/22 1.73% 3.16%
+ STXB 11/19/21 Simmons First National Corporation (SFNC) All Stock $581 M $29.07 $28.58 87,805 6/30/22 1.71% 5.79%
+ CERN 12/20/21 Oracle Corporation (ORCL) All Cash $28.4 B $95.00 $93.4 2,215,220 12/31/22 1.71% 2.14%
+ ROG 11/02/21 DuPont de Nemours, Inc. (DD) All Cash $5.2 B $277.00 $273.01 131,896 6/30/22 1.46% 4.94%
+ ECOL 2/09/22 Republic Services, Inc. (RSG) All Cash $2.2 B $48.00 $47.39 392,236 6/30/22 1.29% 4.35%
+ WBT 7/14/21 Ali Holding S.r.l. (N/A) All Cash $4.8 B $24.00 $23.71 1,954,745 6/30/22 1.22% 4.13%
+ TSC 10/20/21 Raymond James Financial, Inc. (RJF) Cash Plus Stock $1.1 B $30.03 $29.68 148,443 6/30/22 1.19% 4.01%
+ FOE 5/11/21 Prince International Corporation (N/A) All Cash $2.1 B $22.00 $21.78 531,179 3/31/22 1.01% 21.69%
+ REGI 2/28/22 Chevron Corporation (CVX) All Cash $2.75 B $61.50 $60.89 3,693,023 12/31/22 1.00% 1.25%
+ FLOW 12/13/21 Lone Star Funds (N/A) All Cash $3.8 B $86.50 $85.73 1,282,396 6/30/22 0.90% 3.04%
+ MIME 12/07/21 Permira (N/A) All Cash $5.8 B $80.00 $79.32 1,824,135 6/30/22 0.86% 2.90%
+ EPAY 12/17/21 Thoma Bravo (N/A) All Cash $2.6 B $57.00 $56.59 800,792 6/30/22 0.72% 2.45%
+ UMPQ 10/12/21 Columbia Banking System, Inc. (COLB) All Stock $4.5 B $21.01 $20.86 1,718,892 6/30/22 0.71% 2.40%
+ MGP 8/04/21 VICI Properties Inc. (VICI) All Stock $17.2 billion $37.06 $36.83 585,295 6/30/22 0.62% 2.11%
+ VRS 12/19/21 BillerudKorsnäs AB (N/A) All Cash $825 M $27.00 $26.84 716,596 6/30/22 0.60% 2.01%
+ ANAT 8/09/21 Brookfield Asset Management Reinsurance Partners Ltd. (BAMR) All Cash $5.1 B $190.00 $188.95 81,617 6/30/22 0.56% 1.88%
+ BDSI 2/14/22 Collegium Pharmaceutical, Inc. (COLL) All Cash $488.65 M $5.60 $5.57 1,109,478 3/31/22 0.54% 11.56%
+ ESBK 10/04/21 Community Bank System, Inc. (CBU) All Cash $82.8 M $23.10 $22.98 879 3/31/22 0.52% 11.21%
+ CONE 11/15/21 KKR and Global Infrastructure Partners (N/A) All Cash $15 B $90.50 $90.18 1,990,586 6/30/22 0.35% 1.20%
+ ISBC 7/28/21 Citizens Financial Group, Inc. (CFG) Cash Plus Stock $3.5 B $15.38 $15.33 1,467,381 6/30/22 0.35% 1.18%
+ APR 1/10/22 Owens & Minor, Inc. (OMI) All Cash $1.62 B $37.50 $37.38 436,859 6/30/22 0.32% 1.08%
+ HMHC 2/22/22 Veritas Capital (N/A) All Cash $2.8 B $21.00 $20.96 3,973,167 6/30/22 0.19% 0.64%
+ PBCT 2/22/21 M&T Bank Corporation (MTB) All Stock $7.6 B $20.32 $20.31 2,949,022 4/01/22 0.06% 1.19%
+ KRA 9/27/21 DL Chemical Co., Ltd. (N/A) All Cash $2.5 B $46.50 $46.48 1,035,060 3/15/22 0.04% 15.71%
+ GNOG 8/09/21 DraftKings Inc. (DKNG) All Stock $1.52 B $5.88 $5.88 721,823 3/31/22 0.00% 0.05%
+ LEVL 11/04/21 First Merchants Corporation (FRME) Cash Plus Stock $323.5 M $41.25 $41.29 43,460 6/30/22 -0.11% -0.36%
+ BPMP 12/20/21 BP p.l.c. (BP) All Stock $2.45 B $16.26 $16.31 454,317 3/31/22 -0.34% -7.21%
+ ABTX 11/10/21 CBTX, Inc. (CBTX) All Stock $1.5 B $44.24 $44.51 52,367 6/30/22 -0.61% -2.05%
+ APTS 2/16/22 Blackstone Real Estate Income Trust, Inc. (N/A) All Cash $5.8 B $25.00 $25.32 1,315,990 6/30/22 -1.26% -4.27%

Conclusion:

There have been 28 M&A deals announced in the first quarter of the year so far, with 20 of them being multi-billion dollar deals. SPAC Activity has been slow and we continue to see multiple business combinations being terminated due to current market conditions that have been affected by the volatility caused by recent world events.

Disclaimer: I have long positions in Healthcare Trust of America (HTA), TEGNA (TGNA) 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.

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