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Merger Arbitrage Mondays – Court Denies DOJ’s Request To Block United-Change Deal

  • September 26, 2022

Given the current market environment, it is not surprising to see deal volume dip sharply with just one new deal announced last week and one completed. In fact, there have only been 7 new deals announced this month compared to 18 last month and 13 new deals in September 2021. If the Fed continues on its current course of interest rate increases, we are likely to see new deal volume dip again in Q4 2022. The silver lining is that we have seen a large number of deals close in recent weeks and many have received regulatory approvals or have successfully challenged regulators as discussed below.

The Change Healthcare (CHNG) – UnitedHealth Group Incorporated (UNH) Deal

On January 6, 2021, Optum, a part of UnitedHealth Group and Change Healthcare entered into an agreement to combine, in a transaction that called for the acquisition of Change Healthcare’s common stock for $25.75 per share in cash. The deal has been facing challenges from the Department of Justice since March 2021 and UnitedHealth decided to sweeten the deal in April 2022 by adding a $2 per share special dividend and increasing the termination fee.

We wrote the following in a SeekingAlpha article titled, “The FTC Throws A Wrench Into The Meta Machine

Unbridled capitalism with no checks and balances is not good for consumers or society at large. Unfortunately, you could also go to the other extreme where onerous regulations and red tape stifle growth and innovation. If the Federal Trade Commission (FTC) or the Department of Justice (DOJ) decide to step in and sue to block a merger of large public companies, most companies give up and the deal falls apart. Every once in a while you end up with a situation like UnitedHealth Group’s acquisition of Change Healthcare (CHNG) where the companies decided to take their slim chances in court.

When the Biden administration named Lina Khan as the Chair of the FTC in June 2021, arbitrageurs who focus on picking up the spread between where a company is currently trading and the price an acquirer will pay for the company when the announced acquisition closes, realized that the regulatory environment is going to change and deals will go through increased scrutiny.

Here is the timeline of all the events related to the UnitedHealth – Change Healthcare deal.

Merger Spread Changes

  • March 24, 2021: Change Healthcare (CHNG) and UnitedHealth Group (UNH) each received a request for additional information and documentary materials from the DOJ in connection with the DOJ’s review of the Merger.
  • April 14, 2021: Change Healthcare (CHNG) announced that during a special meeting its stockholders voted to approve the previously announced combination with OptumInsight, part of UnitedHealth Group (UNH).
  • May 6, 2021: The American Antitrust Institute (AAI) warned that UnitedHealth Group’s (UNH) planned acquisition of Change Healthcare (CHNG) could stifle competition. The nonprofit wrote in a letter to the Department of Justice (DOJ) that the deal is “likely to harm competition and consumers.”
  • August 12, 2021: Change Healthcare (CHNG) and UnitedHealth Group (UNH) entered into a timing agreement with the DOJ pursuant to which they agreed, among other things, not to consummate the Merger before 120 days following the date on which both parties have certified substantial compliance with the Second Request unless they have received written notice from the DOJ prior to the end of such 120-day period that the DOJ has closed its investigation of the pending Merger.
  • November 1, 2021: Change Healthcare (CHNG) and UnitedHealth Group (UNHentered into an amendment to the Timing Agreement with the DOJ pursuant to which they agreed not to 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.
  • December 9, 2021: UnitedHealth Group Incorporated (UNH) delivered written notice to Change Healthcare (CHNG) that it was exercising its unilateral right to extend the Outside Date to April 5, 2022.
  • 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.
  • February 24, 2022: Change Healthcare (CHNG) issued the following statement regarding the announcement that DOJ intends to pursue litigation to block the proposed merger between Change Healthcare and UnitedHealth Group (UNH): “We are aware and disappointed that DOJ has filed litigation to prevent Change Healthcare from closing our merger with UHG. As we previously disclosed, UHG extended our merger agreement through April 5, 2022. We will continue our support of UHG in working toward closing the merger as we comply with our obligations under the merger agreement.
  • April 5, 2022: Optum and Change Healthcare (CHNG) agreed to extend their merger agreement to December 31, 2022. As part of the extension, Optum will pay a $650 million fee to Change Healthcare in the event the merger is unable to be completed because of the court’s decision. Change Healthcare will pay a special cash dividend of $2.00 per share to its shareholders at or about the time of the closing.
  • April 25, 2022: UnitedHealth Group Incorporated (UNHentered into an equity purchase agreement and related agreements relating to the sale of the claims editing business (ClaimsXten) of Change Healthcare (CHNG) to an affiliate of investment funds of TPG Capital for a base purchase price in cash equal to $2.2 billion.
  • 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.
  • September 8, 2022: Change Healthcare (CHNG) rose in regular trading amid closing arguments in the Dept. of Justice’s lawsuit to block UnitedHealth’s (UNH) planned purchase.
  • September 19, 2022: UnitedHealth Group (UNHwon court approval for its acquisition of Change Healthcare (CHNG), defeating a Justice Department lawsuit that sought to block the deal. The opinion and final appealable order also require UnitedHealth Group and the Company to divest ClaimsXten to TPG Capital.

The court issued a memo stating that “the Government has not met its burden of proving that the transaction is likely to substantially lessen competition in the relevant markets”.

On September 20, 2022, Change Healthcare declared a one-time special dividend of $2.00 per share. The special dividend will be paid to shareholders on record immediately prior to the closing of the merger and will be paid on or about the first business day following the closing of the merger.

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

Merger Arbitrage

Deal Statistics:

Total Number of Deals Closed in 2022138
Total Number of Deals Not Completed in 20225
Total Number of Pending Deals
Cash Deals54
Stock Deals19
Stock & Cash Deals3
Special Conditions9
Total Number of Pending Deals85
Aggregate Deal Consideration$1.07 trillion

New Deals:

  1. The acquisition of Renovacor (RCOR) by Rocket Pharmaceuticals (RCKT) for an implied equity value of $53 million in an all stock deal. Under the terms of the definitive agreement, Renovacor shareholders will receive approximately 0.1676 shares of Rocket in exchange for each of their shares in Renovacor. Renovacor has $62 million in cash on its balance sheet, giving it a negative enterprise value.

Deal Updates:

  1. On September 18, 2022, Biohaven Pharmaceutical Holding Company (BHVN) announced that it has set a record date of September 26, 2022 for the previously announced spin-off by Biohaven of its Biohaven Ltd. subsidiary.
  2. On September 19, 2022, STORE Capital Corporation (STORdeclared a regular quarterly cash dividend on its common stock of $0.41 per share for the third quarter ending September 30, 2022, which represents an increase of 6.5% over the previous quarterly dividend. The dividend will be paid on October 17, 2022, to STORE Capital stockholders of record as of the close of business on September 30, 2022. This will be the last dividend paid by the company before the merger is consummated.
  3. On September 19, 2022, The Board of Directors of Bluerock Residential Growth REIT (BRGapproved the completion of the proposed spin-off of Bluerock Homes Trust, the company’s single-family rental business. Completion of the spin-off is expected on October 6, 2022. Bluerock Homes Trust, Inc. is expected to be listed on the New York Stock Exchange American under the symbol “BHM”. For every 8 shares of BRG, shareholders will receive one share of BHM.
  4. On September 20, 2022, Nikola (NKLA) reminded Romeo Power (RMO) stockholders to tender shares in exchange offer before the deadline on September 26, 2022.
  5. September 20, 2022: According to Bloomberg, CEO Chris Griffith is confident that investors will support Gold Fields’ (GFI) offer to buy Yamana Gold (AUY).
  6. On September 21, 2022, Bloomberg reported that Rio Tinto (RIO) Chief Executive Jakob Stausholm made it clear that its offer is final to take over a company that is behind one of the world’s largest copper mines.
  7. On September 21, 2022, Bloomberg reported that Elliott Investment Management bought about $1 billion of the junk-bond deal supporting its own buyout of software company Citrix Systems (CTXS). Apollo Global Management also bought $500 million of the debt.
  8. September 22, 2022: Bloomberg reported that a group of banks led by Citigroup and Bank of America are planning to kick off a $5.4 billion debt sale in mid-October to help fund Apollo Global Management’s (APO) buyout of Tenneco (TEN).
  9. On September 22, 2022, Microsoft (MSFT) Chief Executive Officer Satya Nadella said he’s confident the company can gain regulatory approval for its purchase of Activision Blizzard (ATVI)  even in the face of an in-depth regulatory probe in the UK.


  1. On September 19, 2022, UnitedHealth Group (UNH) won court approval for its acquisition of Change Healthcare (CHNG), defeating a Justice Department lawsuit that sought to block the deal. (Bloomberg)
  2. Zendesk (ZEN) – received stockholders approval (Press Release)
  3. ChemoCentryx (CCXI) – waiting period under the HSR Act expired (Press Release)
  4. Emclaire Financial Corp (EMCF) – approval by The Pennsylvania Department of Banking and Securities (Bizjournals)
  5. Hanger (HNGR) – waiting period under the HSR Act expired (Press Release)
  6. Höegh LNG Partners (HMLP) – received stockholders approval (Press Release)
  7. PCSB Financial Corporation (PCSB) – received stockholders approval (Press Release)
  8. GCP Applied Technologies (GCP) – The UK Competition and Markets Authority approved the company’s merger (Press Release)
  9. 1Life Healthcare (ONEM) – received stockholders approval (Press Release)
  10. Avalara (AVLR) – waiting period under the HSR Act expired (Press Release)
  11. Black Knight (BKI) – received stockholders approval (Press Release)


  1. On September 20, 2022, iRobot (IRBT) and Amazon (AMZN) each received a request for additional information and documentary materials from the FTC.
  2. September 20, 2022: Jack Dorsey, co-founder of Twitter (TWTR), to be questioned under oath in the social media company’s lawsuit against Elon Musk. Twitter will question Elon Musk under oath in Delaware next week as part of the litigation in the billionaire’s bid to walk away from his $44 billion deal for the social media company.
  3. On September 20, 2022, Altair US, a large shareholder in Avalara (AVLR) asked the company’s shareholders to vote against the proposed takeover by Vista Equity Partners.

Shareholders Meeting Schedule

  1. TransGlobe Energy Corporation (TGA) – September 29, 2022
  2. Steel Connect (STCN) – September 30, 2022
  3. Micro Focus International (MFGP) – October 18, 2022
  4. StoneMor (STON) – November 1, 2022
  5. Resolute Forest Products (RFP) – October 31, 2022
  6. Glory Star New Media Group Holdings Limited (GSMG) – October 27, 2022

Closed Deals:

  1. The acquisition of Höegh LNG Partners (HMLP) by Höegh LNG Holdings on September 23, 2022. It took 121 days for this deal to be completed.

Weekly Spread Changes:

The table below shows weekly spread changes between September 16, 2022, and September 23, 2022.

Company Quote
Last Week
Spread Change
FSTX5.41invoX Pharma (N/A)31.61%19.26%12.35%All Cash
TEN17.68Apollo Global Management, Inc. (APO)49.613.12%4.77%8.35%All Cash
SAVE21.48JetBlue Airways Corporation (JBLU)6.9155.96%47.97%7.99%All Cash
MN11.82Callodine (N/A)8.71%3.71%5.00%All Cash
TSEM43.67Intel Corporation (INTC)27.5221.36%17.73%3.63%All Cash
GCP31.99Saint-Gobain (N/A)0.03%1.75%-1.72%All Cash
EMCF38.32Farmers National Banc Corp. (FMNB)13.69-23.19%-17.83%-5.36%All Stock
CHNG27.32UnitedHealth Group Incorporated (UNH)513.611.57%8.87%-7.30%All Cash
GSMG1.47Cheers Inc (N/A)0.005.44%14.81%-9.37%All Cash
RMO0.4423Nikola Corporation (NKLA)3.894.31%14.55%-10.24%All Stock
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.

SAVE07/28/2022JetBlue Airways Corporation (JBLU)$33.50$21.4806/30/202455.96%31.72%
SIMO05/05/2022MaxLinear, Inc. (MXL)$106.32$68.8406/30/202354.45%71.49%
LOTZ08/09/2022Shift Technologies, Inc. (SFT)$0.45$0.326412/31/202238.35%144.29%
FSTX06/23/2022invoX Pharma (N/A)$7.12$5.4112/31/202231.61%118.94%
TWTR04/25/2022Elon Musk (N/A)$54.20$41.5812/31/202230.35%114.21%
VMW05/26/2022Broadcom Inc. (AVGO)$142.50$109.604/30/202330.02%50.49%
BKI05/04/2022Intercontinental Exchange, Inc. (ICE)$85.00$66.2206/30/202328.36%37.24%
ATVI01/18/2022Microsoft Corporation (MSFT)$95.00$74.9506/30/202326.75%35.12%
MITO08/01/2022Stealth Parent Limited (N/A)$0.38$0.312511/30/202221.60%119.45%
TSEM02/15/2022Intel Corporation (INTC)$53.00$43.6702/15/202321.36%54.53%

Deals In The Works

Last week, four new potential deals were added to the ‘Deals In The Works‘ section.

  1. On September 19, 2022, Purple Innovation (PRPLreceived an unsolicited, non-binding proposal from Coliseum Capital Management to acquire all of the outstanding capital stock of Purple for $4.35 per share.
  2. On September 19, 2022, KnowBe4 (KNBEconfirmed the receipt of a non-binding proposal from Vista Equity Partners to acquire all outstanding shares of the company for $24 per share in cash.
  3. On September 21, 2022, Bloomberg reported that DXC Technology (DXC) is working with advisers after receiving takeover interest.
  4. On September 22, 2022, Calyxt (CLXT) announced that its Board of Directors is evaluating potential strategic alternatives to maximize shareholder value.


  1. On September 22, 2022, The Wall Street Journal reported that Humana (HUM), CVS (CVS), and other possible buyers are circling Cano Health (CANO).

SPAC Arbitrage

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


  1. Global Star Acquisition (GLSTU) announces pricing of $80 million Initial Public Offering

New Business Combinations

  1. On September 20, 2022, Clover and FoxWayne Enterprises Acquisition (FOXWentered into a definitive business combination agreement.
  2. On September 21, 2022,  Avalon Acquisition (AVAC) announced a definitive merger agreement with The Beneficient Company Group.
  3. On September 22, 2022, PlayUp Limited, an online betting operator and IG Acquisition (IGACentered into a business combination agreement.


  1. Social Capital IV (IPOD) and Social Capital VI (IPOF) each announced that they intend to not complete business combinations and will instead liquidate their trusts on October 17, 2022.
  2. North Mountain Merger (NMMC) announced that it will redeem all of its outstanding shares of Class A common stock, on September 30, 2022, as it will not consummate an initial business combination.
  3. 5:01 Acquisition (FVAM) announced that it will redeem all of its outstanding shares of Class A common stock, on October 17, 2022, because the company will not consummate an initial business combination.


  1. On September 16, 2022, Golden Path Acquisition Corporation announced closing of business combination; Microcloud Hologram to trade on Nasdaq Under the Symbol (HOLO).
  2. On September 16, 2022, Rumble (RUM) and CF Acquisition Corp. VI (CFVIannounced the completion of their previously announced business combination.
  3. On September 22, 2022, Presto Automation (PRSTcompleted its previously announced business combination with Ventoux CCM Acquisition.

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.