Merger Arbitrage Mondays – Pfizer To Acquire Global Blood Therapeutics

Merger activity decreased last week with six new deals announced and six deals completed. One of the deals announced last week was a potential deal in the works.

Beyond the standard M&A related news, an event that stood out last week was Elon Musk selling an additional $6.89 billion of Tesla (TSLA) stock just in case he was forced to perform on the Twitter (TWTR) deal by the Delaware Chancery Court. It was also interesting to see Chicken Soup for the Soul Entertainment (CSSE) close its acquisition of Redbox Entertainment just 92 days after announcing the deal. For much of the time after the deal was announced, Redbox traded at a massive premium to the deal price but it was near impossible to find enough shares to short the stock.

Global Blood Therapeutics (GBT)

Incorporated in 2011 and headquartered in South San Francisco, California, Global Blood Therapeutics  is a biopharmaceutical company that engages in the treatment for underserved patient communities with sickle cell disease (SCD).

Sickle cell disease is an inherited blood disorder caused by a defective gene, called the sickle cell gene. It results in an abnormality in the oxygen-carrying protein haemoglobin found in red blood cells, which restricts blood flow through the body and can lead to serious problems, including stroke, eye problems, infections, and episodes of pain called pain crises. Stem cell or bone marrow transplants are the only cure for sickle cell disease, but are not done very often because of the significant risks involved.

Global Blood Therapeutics won approval in the U.S. for a sickle-cell drug named Oxbryta in 2019. The company has two other sickle-cell drugs in development. Vertex Pharmaceuticals (VRTX), a portfolio company that we wrote about in December 2020, also has a sickle-cell disease drug in phase 3 development in collaboration with CRISPR Therapeutics (CRSP).

Global Blood Therapeutics Pipeline

We added Global Blood Therapeutics as a potential deal in the works on August 5, 2022, when Bloomberg reported that the company was attracting takeover interest. On August 8, 2022, Pfizer (PFE) and Global Blood Therapeutics, entered into a definitive agreement under which Pfizer will acquire GBT, in a transaction valued at $68.50 per share in cash, for a total enterprise value of approximately $5.4 billion, representing a premium of over 100% to GBT’s price on August 3, 2022, before the potential deal was announced.

Pfizer plans to boost its pipeline with this acquisition in order to combat the potential slowdown in the sales of Covid-19 drugs. Pfizer acquired Arena Pharmaceuticals and Trillium Therapeutics last year and is in the process of completing the acquisition of Biohaven Pharmaceutical (BHVN).

According to an article on The Wall Street Journal,

The acquisition continues a string of deals for Pfizer, which is flush with cash from sales of its Covid-19 vaccine and drug. It has said it wants to add $25 billion in revenue from business-development moves like mergers and acquisitions by 2030.

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 8, 2022, Horizon Global Corporation (HZN) announced that the company’s Board of Directors has authorized the review of strategic alternatives to enhance shareholder value. Such strategic alternatives could involve a sale of a portion or the entirety of the business.
  2. On August 9, 2022, Shalom Auerbach, a significant stockholder of AIkido Pharma (AIKI) beneficially owning approximately 3.8% of its common stock,  sent a letter proposing to acquire the Company for $8.00 per share in cash.
  3. On August 9, 2022, AppLovin (APPsubmitted a compelling non-binding proposal to the Board of Directors of Unity Software (U) to combine AppLovin with Unity, in a transaction where each outstanding share of Unity common stock would be exchanged for 1.152 shares of AppLovin Class A voting common stock and 0.314 shares of AppLovin Class C non-voting common stock.
  4. On August 12, 2022, Reuters reported that gaming equipment provider Inspired Entertainment (INSEhas made a $370 million offer to acquire slot machine maker PlayAGS (AGS).

SPAC Arbitrage

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

New Business Combinations

  1. NUBURU and Tailwind Acquisition (TWNDannounced a definitive agreement that puts NUBURU on the path to becoming a publicly listed company.
  2. Captura Biopharma and OceanTech Acquisitions I Corp. (OTEC), entered into a definitive business combination agreement that will result in Captura Biopharma becoming a publicly listed company.
  3. Caspi Oil Gas and Liberty Resources Acquisition (LIBYentered into a binding amendment to a previously executed nonbinding acquisition letter with Caspi’s owner, Markmore Energy Limited, for a transaction that will result in Caspi becoming a publicly traded company.

Completed

  1. Wag Labs (PETannounced the closing of its business combination with CHW Acquisition Corporation on August 9, 2022.

Terminated

  1. On August 9, 2022, Blue Nile terminated the Merger Agreement with Mudrick Capital Acquisition Corp II (MUDS) in order to enter into a definitive transaction agreement with Sterling Jewelers.
  2. On August 10, 2022, Pono Capital (PONOterminated its previously announced agreement and plan of merger with Benuvia. by mutual agreement of all relevant parties.

Merger Arbitrage

Weekly Spread Changes:

The table below shows weekly spread changes between August 5, 2022 and August 12, 2022.

Symbol Quote Acquiring
Company
Acquiring
Company Quote
Current
Spread
Last Week
Spread
Spread Change
Weekly
Deal
Type
IS 4.01 Unity (U) 58.47 58.79% 8.58% 50.21% All Stock
HMTV 7.14 Gato Investments LP (N/A) -1.96% -10.26% 8.30% All Cash
TYME 0.3415 Syros Pharmaceuticals, Inc. (SYRS) 0.9551 20.60% 14.14% 6.46% All Stock
EMCF 33 Farmers National Banc Corp. (FMNB) 15 -2.27% -4.18% 1.91% All Stock
FSTX 6.5 invoX Pharma (N/A) 9.54% 7.88% 1.66% All Cash
VMW 121.96 Broadcom Inc. (AVGO) 558.23 16.84% 21.54% -4.70% Special Conditions
TWTR 44.26 Elon Musk (N/A) 22.46% 27.47% -5.01% All Cash
BKI 67.14 Intercontinental Exchange, Inc. (ICE) 109.68 26.60% 31.76% -5.16% Special Conditions
MITO 0.3041 Stealth Parent Limited (N/A) 0.00 24.96% 31.94% -6.98% All Cash
NLSN 27.58 Evergreen Coast Capital Corporation (N/A) 1.52% 21.53% -20.01% All Cash

Deal Statistics:

Total Number of Deals Closed in 2022 116
Total Number of Deals Not Completed in 2022 6
Total Number of Pending Deals
Cash Deals 62
Stock Deals 22
Stock & Cash Deals 4
Special Conditions 9
Total Number of Pending Deals 97
Total Deal Size $1.03 trillion

New Deals:

  1. The acquisition of Global Blood Therapeutics (GBT) by Pfizer (PFE) for $5.4 billion or $68.50 per share in cash. We added GBT as a potential deal to the Deals in the Works section on August 4, 2022 and the price after the news of the potential deal came out was $47.99.
  2. The acquisition of Avalara (AVLR) by Vista Equity Partners for $8.4 billion or $93.50 per share in cash.
  3. The acquisition of CyberOptics Corporation (CYBE) by Nordson Corporation (NDSN) for $380 million or $54.00 per share in cash.
  4. The acquisition of Professional Holding (PFHD) by Seacoast Banking Corporation of Florida (SBCF) for $488.6 million in an all stock deal. Under the terms of the acquisition agreement, Professional shareholders are to receive 0.8909 shares of Seacoast common stock for each share of Professional common stock.
  5. The acquisition of BBQ Holdings (BBQ) by MTY Food Group for $200 million or $17.25 per share in cash.
  6. The merger of CarLotz (LOTZ) and Shift Technologies (SFT) for a negative enterprise value considering net cash on the balance sheet exceeds the company’s market cap. Under the terms of the merger agreement, CarLotz shareholders are expected to receive approximately 0.692158 shares of Shift common stock for each share of CarLotz common stock.

Deal Updates:

  1. On August 4, 2022, shareholders of Switch (SWCHapproved the company’s merger with DigitalBridge Group (DBRG) at a special meeting of shareholders.
  2. On August 8, 2022, VAALCO Energy (EGY) and TransGlobe Energy Corporation (TGA) announced that VAALCO’s Board has approved a share buy-back program of up to US$30 million, equivalent to up to US$0.27/share, to be commenced promptly subject to completion of the proposed combination of VAALCO and TransGlobe taking place.
  3. On August 9, 2022, AppLovin (APP) announced it has submitted a compelling non-binding proposal to the Board of Directors of Unity Software (U) to combine AppLovin with Unity. The execution of a definitive merger agreement between AppLovin and Unity would be subject to approval by each company’s Board of Directors, the termination of the proposed acquisition of ironSource  (IS), and other customary signing conditions.
  4. On August 9, 2022, Redbox Entertainment (RDBX) announced that Redbox stockholders approved the merger proposal in connection with the previously announced merger with Chicken Soup for the Soul Entertainment (CSSE).
  5. On August 9, 2022, Gold Standard Ventures (GSV) announced that it’s security holders approved the previously announced acquisition of Gold Standard by Orla Mining (ORLA).
  6. On August 9, 2022, shareholders of Nomad Royalty Company (NSRapproved the company’s merger with Sandstorm Gold (SAND)) at a special meeting of shareholders.
  7. On August 9, 2022, Cedar Realty Trust (CDR) announced that Cedar and Wheeler Real Estate Investment Trust (WHLRjointly determined that the proceeds to Cedar common shareholders from the sale of Cedar’s assets and subsequent merger in a series of related all-cash transactions will total $29.00 per share.
  8. On August 9, 2022, Nielsen Holdings (NLSN) announced that the court meeting and the special meeting of its shareholders have been postponed.
  9. August 11, 2022, According to Bloomberg, the Department of Justice argued that a 2021 internal audit of UnitedHealth Group’s (UNH) data practices demonstrates that the health insurer’s proposed acquisition of Change Healthcare (CHNGshould be stopped.
  10. On August 11, 2022, The Australian Competition & Consumer Commission reported that it will not oppose the proposed acquisition of Mandiant (MNDT) by Google (GOOG).
  11. On August 11, 2022, Covetrus (CVET) announced that Matthew Foulston, the company’s Executive Vice President and Chief Financial Officer, has informed the company that he will be retiring from the company effective December 31, 2022.
  12. On August 11, 2022, Hailiang Education Group (HLG) announced that it has called an extraordinary general meeting of shareholders, to be held on September 15, 2022.
  13. On August 12, 2022, Höegh LNG Partners (HMLP) announced that it has established a record date of August 22, 2022 for a special meeting of its unitholders currently planned to take place on September 20, 2022.
  14. On August 12, 2022, Nomad Royalty Company (NSR) announced that the Superior Court of Québec has issued a final order approving the previously announced acquisition of the company by Sandstorm Gold.
  15. On August 12, 2022, Rogers Communications (RCI), Shaw Communications (SJR) and Quebecor announced that they have entered into a definitive agreement for the sale of Freedom Mobile to Videotron, a subsidiary of Quebecor.

Closed Deals:

  1. The acquisition of Ocean Bio-Chem (OBCI) by OneWater Marine (ONEW) on August 9, 2022. It took 48 days for this deal to be completed.
  2. The acquisition of American Campus Communities (ACC) by Blackstone (BX) on August 9, 2022. It took 112 days for this deal to be completed.
  3. The acquisition of Redbox Entertainment (RDBX) by Chicken Soup for the Soul Entertainment (CSSE) on August 11, 2022. It took 92 days for this deal to be completed.
  4. The acquisition of Gold Standard Ventures (GSV) by Orla Mining (ORLA) on August 12, 2022. It took 60 days for this deal to be completed.
  5. The acquisition of BlueCity Holdings Limited (BLCT) by Multelements Limited on August 12, 2022. It took 104 days for this deal to be completed.
  6. The acquisition of Epizyme (EPZM) on Ipsen on August 12, 2022. It took 46 days for this deal to be completed.

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
IS 07/13/2022 Unity (U) $6.37 $4.01 12/31/2022 58.79% 154.37%
LOTZ 08/09/2022 Shift Technologies, Inc. (SFT) $0.85 $0.6000 12/31/2022 41.89% 110.01%
SAVE 07/28/2022 JetBlue Airways Corporation (JBLU) $33.50 $24.57 06/30/2024 36.35% 19.34%
SIMO 05/05/2022 MaxLinear, Inc. (MXL) $109.62 $82.61 06/30/2023 32.69% 37.29%
BKI 05/04/2022 Intercontinental Exchange, Inc. (ICE) $85.00 $67.14 06/30/2023 26.60% 30.34%
MITO 08/01/2022 Stealth Parent Limited (N/A) $0.38 $0.3041 12/31/2022 24.96% 65.54%
TWTR 04/25/2022 Elon Musk (N/A) $54.20 $44.26 12/31/2022 22.46% 58.97%
TYME 07/05/2022 Syros Pharmaceuticals, Inc. (SYRS) $0.41 $0.3415 12/31/2022 20.60% 54.09%
SJR 03/15/2021 Rogers Communications Inc. (RCI) $32.40 $27.41 09/30/2022 18.21% 141.38%
ATVI 01/18/2022 Microsoft Corporation (MSFT) $95.00 $80.79 06/30/2023 17.59% 20.06%

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.

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