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Merger activity increased last week with four new deals announced and one deal completed. There was a significant increase in SPAC activity as well with five new SPAC business combinations announced.
Duke Realty Corporation (DRE)
Duke Realty is an industrial REIT, with 153 million square feet of operating properties in 19 major logistics markets across the United States. In order to focus on its industrial properties, the company sold its medical office properties to Healthcare Trust of America (HTA) for $2.8 billion in May 2017. Duke Realty has an outstanding development pipeline of 9.7 million square feet totaling $1.4 billion that is 84% pre-leased. The REIT is down about 20% year-to-date, sports a yield of 2.18% and trades at 29 times trailing twelve months funds from operations (FFO).
After rejecting two prior offers from Prologis (PLD), Duke Realty entered into a definitive agreement to be acquired by Prologis in an all stock deal valued at $26 billion. Prologis had initially offered 0.465 of its shares in exchange for one equity share of Duke Realty on November 29, 2021 and again on May 10, 2022 offering 0.466 shares of Prologis common stock for each share of Duke Realty. Duke rejected both the offers claiming they were insufficient.
On June 13, 2022, Duke accepted an enhanced offer of $26 billion from Prologis, under which Duke Realty shareholders will receive 0.475 of a Prologis share for each share held. Unfortunately for Duke shareholders, Prologis is trading well below where it was trading last November and in May. The transaction is expected to close in the fourth quarter of 2022. According to the merger agreement, the termination fee to be paid Duke Realty in case of deal termination is $775 million and the termination fee to be paid by Prologis is $1.5 billion.
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.
On June 14, 2022, oil and natural gas fracking company, Continental Resources (CLR) received a non-binding proposal from its founder, Harold Hamm to acquire all outstanding shares of Continental for $70 per share, representing a 9% premium over Continental’s closing price on June 13, 2022. Mr. Hamm and his family already own 83% of CLR stock.
We wrote in detail about Continental Resources in our Special Situations Newsletter in August 2020, following a series of purchases of CLR by Harold Hamm. We also added CLR to our model portfolio and it has been one of our best performing stocks.
SPAC Arbitrage
There was one new SPAC IPO filed and five new SPAC combinations announced last week. You can find new SPAC IPO announcements in our SPACs tool here.
Terminated
Weekly Spread Changes:
The table below shows weekly spread changes between June 10 and June 17, 2022.
Symbol | Quote | Acquiring Company | Acquiring Company Quote | Current Spread | Last Week Spread | Spread Change Weekly | Deal Type |
---|---|---|---|---|---|---|---|
VG | 16.78 | Ericsson (ERIC) | 7.43 | 25.15% | 14.69% | 10.46% | All Cash |
NLSN | 22.41 | Evergreen Coast Capital Corporation (N/A) | 24.94% | 14.75% | 10.19% | All Cash | |
MILE | 0.7911 | Lemonade (LMND) | 17.48 | 16.22% | 7.10% | 9.12% | All Stock |
VMW | 116.22 | Broadcom Inc. (AVGO) | 498.65 | 22.61% | 13.63% | 8.98% | Special Conditions |
TEN | 15.51 | Apollo Global Management, Inc. (APO) | 48.25 | 28.95% | 20.48% | 8.47% | All Cash |
RDBX | 12.01 | Chicken Soup for the Soul Entertainment, Inc. (CSSE) | 6.16 | -95.54% | -94.23% | -1.31% | All Stock |
MGI | 9.89 | Madison Dearborn Partners, LLC (N/A) | 11.22% | 12.94% | -1.72% | All Cash | |
SAFM | 208.31 | Cargill and Continental Grain Company (N/A) | -2.55% | 0.04% | -2.59% | All Cash | |
SUMR | 11.98 | Kids2, Inc. (N/A) | 0.17% | 3.99% | -3.82% | All Cash | |
CDR | 26.51 | Wheeler Real Estate Investment Trust, Inc. (WHLR) | 2.34 | 9.39% | 13.68% | -4.29% | All Cash |
Deal Statistics:
Total Number of Deals Closed in 2022 | 81 |
Total Number of Deals Not Completed in 2022 | 4 |
Total Number of Pending Deals | |
Cash Deals | 58 |
Stock Deals | 17 |
Stock & Cash Deals | 8 |
Special Conditions | 8 |
Total Number of Pending Deals | 91 |
Aggregate Deal Consideration | $959.93 billion |
New Deals:
Deal Updates:
Closed Deals:
Top 10 deals with largest spreads:
Please do your own due diligence on deals with large spreads. Some of these large spreads might be related to regulatory issues or because of the way the deal is structured. We classify some of these deals as “special situation” deals in our merger arbitrage tool and provide additional details to help with the analysis. There may be unique situations related to special dividends, spinoffs, proration, etc. that need to be accounted for when looking at these spreads.
Symbol | Announced Date | Acquiring Company | Closing Price | Last Price | Closing Date | Profit | Annualized Profit |
---|---|---|---|---|---|---|---|
TWTR | 04/25/2022 | Elon Musk (N/A) | $54.20 | $37.78 | 12/31/2022 | 43.46% | 81.35% |
BKI | 05/04/2022 | Intercontinental Exchange, Inc. (ICE) | $85.00 | $64.69 | 06/30/2023 | 31.40% | 30.48% |
TEN | 02/23/2022 | Apollo Global Management, Inc. (APO) | $20.00 | $15.51 | 12/31/2022 | 28.95% | 54.19% |
ATVI | 01/18/2022 | Microsoft Corporation (MSFT) | $95.00 | $74.71 | 06/30/2023 | 27.16% | 26.36% |
SIMO | 05/05/2022 | MaxLinear, Inc. (MXL) | $106.95 | $84.21 | 06/30/2023 | 27.01% | 26.22% |
VG | 11/22/2021 | Ericsson (ERIC) | $21.00 | $16.78 | 08/22/2022 | 25.15% | 143.43% |
NLSN | 03/29/2022 | Evergreen Coast Capital Corporation (N/A) | $28.00 | $22.41 | 12/31/2022 | 24.94% | 46.69% |
VMW | 05/26/2022 | Broadcom Inc. (AVGO) | $142.50 | $116.22 | 04/30/2023 | 22.61% | 26.20% |
SJR | 03/15/2021 | Rogers Communications Inc. (RCI) | $32.40 | $26.63 | 06/30/2022 | 21.67% | 718.96% |
CHNG | 01/06/2021 | UnitedHealth Group Incorporated (UNH) | $27.75 | $22.96 | 12/31/2022 | 20.86% | 39.05% |
List of all pending deals:
Conclusion:
As we come closer to the end of the second quarter of 2022, multiple deals received required approvals last week while some continue to face hurdles. SPAC activity picked up last week with five new business combinations announced but two active business combinations were terminated.
Disclaimer: I have long positions in Biohaven Pharmaceutical (BHVN), Twitter (TWTR), First Horizon (FHN), Tower Semiconductor (TSEM), 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.