Merger Arbitrage Mondays – OpenText Acquires Micro Focus At 99% Premium

Merger activity increased last week with two new deals announced and four deals completed.

Micro Focus International (MFGP)

Founded in 1976 and headquartered in Newbury, the United Kingdom, Micro Focus International is one of the few remaining technology firms in Britain, listed in London, that is now being acquired by Ontario-based software company OpenText (OTEX). Micro Focus is an enterprise software provider.

The company entered into a definitive agreement to be acquired by OpenText on August 25, 2022, in a transaction valued at $6 billion, for 532 pence per share or USD$6.21, representing a premium of 99% to Micro Focus’s closing price the day before the announcement.  The deal is expected to be completed in the first quarter of 2023.

Hill International (HIL) – Global Infrastructure Solutions deal amended

Another highlight from last week was Global Infrastructure Solutions and Hill International announcing enhancements to their definitive agreement. Following the receipt of an unsolicited proposal from a third party, Hill and GISI negotiated an amended and restated Merger Agreement under the terms of which the per-share price has been increased to $3.40 from $2.85, a 19.3% increase from the previous price. The transaction structure has also been changed to a merger requiring the approval of Hill’s stockholders rather than a tender offer to Hill stockholders.

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 four new potential deals added to the Deals in the Works section last week.

  1. On August 22, 2022, Genetron Holdings Limited (GTH) announced that its Board of Directors has received a preliminary non-binding proposal letter from Sizhen Wang, co-founder, chairman of the Board, and chief executive officer of the company to acquire all of the outstanding ordinary shares of the company for US$0.272 per ordinary share or US$1.36 per ADS in cash.
  2. On August 23, 2022, Fang Holdings Limited announced that it has submitted to the board of directors of China Index Holdings Limited (CIH), a preliminary non-binding proposal to acquire all outstanding shares of the company at a purchase price of US$0.84 per share or per ADS.
  3. On August 24, 2022, CSC Generation submitted a proposal to acquire Flexsteel Industries (FLXS) for $20.80 per share in cash.
  4. On August 25, 2022, American Virtual Cloud Technologies, (AVCT) announced changes to its board of directors and management team, along with the launch of a review to explore the sale of the entire business or selected assets.

SPAC Arbitrage

Two new SPAC combinations were announced last week and one completed. You can find new SPAC IPO announcements in our SPACs tool here.

New Business Combinations

  1. On August 23, 2022, Biolog-id, a digital health solution provider focusing on value-chain optimization, and Genesis Growth Tech Acquisition Corp. (GGAAentered into a memorandum of understanding in connection with a proposed merger of Biolog-id and Genesis.
  2. On August 25, 2022, Lux Vending LLC dba Bitcoin Depot, a U.S.-based Bitcoin ATM operator, and GSR II Meteora Acquisition (GSRMannounced a definitive agreement for a business combination that would result in Bitcoin Depot becoming a publicly listed company.

Completed

  1. The acquisition of Rattler Midstream (RTLR) by Diamondback Energy (FANG) on August 24, 2022. It took 100 days for this deal to be completed.

Merger Arbitrage

Weekly Spread Changes:

The table below shows weekly spread changes between August 19, 2022, and August 26, 2022.

Symbol Quote Acquiring
Company
Acquiring
Company Quote
Current
Spread
Last Week
Spread
Spread Change
Weekly
Deal
Type
TWTR 40.46 Elon Musk (N/A) 33.96% 23.21% 10.75% All Cash
SAVE 23.34 JetBlue Airways Corporation (JBLU) 8.03 43.53% 38.20% 5.33% All Cash
ROG 254.56 DuPont de Nemours, Inc. (DD) 57.82 8.82% 4.06% 4.76% All Cash
LOTZ 0.437 Shift Technologies, Inc. (SFT) 0.9214 45.94% 41.85% 4.09% All Stock
VMW 118.71 Broadcom Inc. (AVGO) 520.86 20.04% 17.21% 2.83% Special Conditions
AUY 4.76 Gold Fields Limited (GFI) 8.6 8.40% 10.32% -1.92% All Stock
HLG 14.26 Hailiang Education International Limited (N/A) 0.35% 2.51% -2.16% All Cash
PCSB 19.03 Brookline Bancorp, Inc. (BRKL) 13.14 -8.28% -5.78% -2.50% All Stock
PTRS 9.28 OceanFirst Financial Corp. (OCFC) 19.94 -3.05% -0.48% -2.57% All Stock
EXTN 5 Enerflex Ltd. (EFX.TO) 6.68 4.67% 7.28% -2.61% All Stock

Deal Statistics:

Total Number of Deals Closed in 2022 127
Total Number of Deals Not Completed in 2022 6
Total Number of Pending Deals
Cash Deals 57
Stock Deals 20
Stock & Cash Deals 3
Special Conditions 9
Total Number of Pending Deals 89
Total Deal Size $1.04 trillion

New Deals:

  1. The acquisition of Aerie Pharmaceuticals (AERI) by Alcon (ALC) for $770 million or $15.25 per share in cash.
  2. The acquisition of Micro Focus International (MFGP) by OpenText (OTEX) for $6 billion or 532 pence per share or USD$6.21.

Deal Updates:

  1. Evergreen Coast, Brookfield, and WindAcre entered into an agreement on August 17, 2022, to invest $500 million into Nielsen (NLSN) as part of the private equity buyout. The parties to the agreement, anticipate that the acquisition will close on October 11, 2022.
  2. August 23, 2022: According to The Wall Street Journal, Twitter’s (TWTR) former head of security filed a whistleblower complaint against the company, accusing it of failing to protect sensitive user data and lying about its security problems, just weeks ahead of the social-networking platform’s courtroom battle with Elon Musk.
  3. On August 23, 2022, Enerflex (EFX.TO) announced that it has set the date for the special shareholder meeting to consider and vote on the resolution in connection with the proposed acquisition of Exterran Corporation (EXTN). The special meeting will be held on October 11, 2022, for Enerflex shareholders of record at the close of business on September 9, 2022.
  4. August 24, 2022: Between July 26, 2022, and August 10, 2022, CynergisTek (CTEKreceived six demand letters from putative stockholders alleging that there were material disclosure deficiencies in the Proxy Statement and demanding that certain corrective disclosures be made by amendment or supplement to the Proxy Statement.
  5. August 24, 2022: According to a Bloomberg report, Pfizer (PFE) is said to have been involved in a bidding war with Johnson & Johnson (JNJ) to acquire Global Blood Therapeutics (GBT) before Pfizer won with its $5.4 billion offer.
  6. On August 25, 2022, Zymergen (ZYannounced a further reduction in force that is expected to result in the termination of approximately 80 additional employees. Zach Serber, the company’s Co-Founder and Chief Science Officer and a member of the company’s board of directors, will be stepping down from his position as Chief Science Officer, effective September 22, 2022.
  7. On August 25, 2022, Allegiance Bancshares (ABTXannounced that regulatory approval from the Board of Governors of the Federal Reserve System for the merger had not yet been received by the parties. The parties have entered into the amendment to provide additional time to obtain such approval from the Federal Reserve Board. The parties have received regulatory approvals from the Federal Deposit Insurance Corporation and the Texas Department of Banking for the merger with CBTX Inc. (CBTX).
  8. On August 26, 2022, Bluerock Residential Growth REIT (BRG) and Blackstone Real Estate announced that the completion of the company’s proposed acquisition by Blackstone, and the proposed spin-off of the company’s single-family rental business to its shareholders, is expected to occur on or about October 6, 2022.
  9. On August 26, 2022, Hanger (HNGR) announced that the special meeting of stockholders will be on September 30, 2022.
  10. On August 27, 2022, Global Infrastructure Solutions and Hill International (HILannounced enhancements to their definitive agreement. Amendment provides for a price increase from US$2.85 to $3.40 per share, a 19.3% increase from the previous price.
  11. On August 22, 2022, Steel Connect (STCN) announced that the special meeting of stockholders will be on September 30, 2022.

Closed Deals:

  1. The acquisition of La Jolla Pharmaceutical Company (LJPC) by Innoviva (INVA) on August 22, 2022. It took 42 days for this deal to be completed.
  2. The acquisition of Cedar Realty Trust (CDR) by Wheeler Real Estate Investment Trust (WHLR) on August 22, 2022. It took 173 days for this deal to be completed.
  3. The acquisition of Sharps Compliance (SMED) by Aurora Capital Partners on August 23, 2022. It took 42 days for this deal to be completed.
  4. The acquisition of Tufin Software Technologies (TUFN) by Turn/River Capital on August 25, 2022. It took 141 days for this deal to be completed.

Top 10 deals with the 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
LOTZ 08/09/2022 Shift Technologies, Inc. (SFT) $0.64 $0.437 12/31/2022 45.94% 134.14%
SAVE 07/28/2022 JetBlue Airways Corporation (JBLU) $33.50 $23.34 06/30/2024 43.53% 23.64%
SIMO 05/05/2022 MaxLinear, Inc. (MXL) $108.50 $78.02 06/30/2023 39.06% 46.60%
TWTR 04/25/2022 Elon Musk (N/A) $54.20 $40.46 12/31/2022 33.96% 99.16%
BKI 05/04/2022 Intercontinental Exchange, Inc. (ICE) $85.00 $67.23 06/30/2023 26.43% 31.53%
IS 07/13/2022 Unity (U) $4.85 $3.89 12/31/2022 24.80% 72.42%
HIL 08/16/2022 Global Infrastructure Solutions Inc. (N/A) $3.40 $2.8000 12/31/2022 21.43% 62.57%
SJR 03/15/2021 Rogers Communications Inc. (RCI) $32.40 $26.78 09/30/2022 20.99% 232.12%
MITO 08/01/2022 Stealth Parent Limited (N/A) $0.38 $0.3144 11/30/2022 20.87% 81.02%
ATVI 01/18/2022 Microsoft Corporation (MSFT) $95.00 $78.63 06/30/2023 20.82% 24.83%

List of all pending deals:

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

Disclaimer: I have long positions in Atlas Air Worldwide (AAWW), Biohaven Pharmaceutical (BHVN), Twitter (TWTR), First Horizon (FHN), Tower Semiconductor (TSEM), 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.

Leave A Comment

You must be logged in to post a comment.