Merger activity declined last week with one new deal announced and three deals completed.
The pace of M&A activity continued to stay low for the third week in a row, after The Wall Street Journal reported on August 15, 2022, that under Chairwoman Lina Khan, the Federal Trade Commission was questioning mergers that likely would have gone unchallenged in the past years. Ms. Khan said in an interview,
“In all too many areas of our economy, including agriculture, airlines, healthcare, we’ve seen significant consolidation and reduction of competition. Mergers have played a role in that.”
I discussed how Ms. Khan’s decision to block Meta’s acquisition of Within Unlimited is a game changer in an article titled The FTC Throws A Wrench Into The Meta Machine in early August and wrote the following,
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 FTCin 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.
Some of the active deals in our MAT faced scrutiny last week as well. On Friday, September 2, 2022, One Medical (ONEM) and Amazon (AMZN) received a request for additional information and documentary materials from the FTC in connection with the FTC’s review of the merger. The following day, Reuters reported that the FTC has begun a review of Amazon’s takeover of iRobot (IRBT) to decide if the deal violates antitrust law.
Microsoft’s (MSFT) planned acquisition of Activision Blizzard (ATVI) is expected to go through an in-depth review by UK’s Competition and Markets Authority and the merger of MaxLinear (MXL) and Silicon Motion Technology Corporation (SIMO) remains subject to review and clearance by the State Administration for Market Regulation in the People’s Republic of China. The two parties were asked to refile for their planned acquisition last week.
On the bright side, four active deals received shareholders approval and we saw an increase in the number of potential deals in the works.
New Deal: Forma Therapeutics, Holdings (FMTX)
Headquartered in Watertown, Massachusetts, Forma Therapeutics Holdings is a clinical-stage biopharmaceutical company, that focuses on transforming the lives of patients with sickle cell disease (SCD) and rare blood disorders.
On August 8, 2022, Pfizer (PFE) entered into a definitive agreement to acquire Global Blood Therapeutics (GBT), another company that engages in the treatment for underserved patient communities with sickle cell disease (SCD). We had written the following about sickle cell disease in our Merger Arbitrage Mondays post that week.
“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.”
Forma Thearapeutics’ lead development candidate, Etavopivat is an investigational, once-daily, selective pyruvate kinase-R (PKR) activator, that is designed to be a disease-modifying therapy with the potential to improve red blood cell health and transform the lives of people living with SCD.
On September 1, 2022, Novo Nordisk (NVO) entered into a definitive agreement to acquire Forma Therapeutics in order to expand its scientific presence in sickle cell disease and rare blood disorders. This deal comes in almost a month after Pfizer announced its acquisition of Global Blood Therapeutics. Under the terms of the agreement, Novo Nordisk will acquire Forma Therapeutics for $20 per share in cash, representing a premium of 92% to Forma Therapeutics’ volume-weighted average price per share over the past 30 days ended August 31, 2022. The deal is expected to be completed in the fourth quarter of 2022.
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.
Four new SPAC combinations were announced last week, two completed and one terminated. You can find new SPAC IPO announcements in our SPACs tool here.
New Business Combinations
Weekly Spread Changes:
The table below shows weekly spread changes between August 26, 2022, and September 2, 2022.
|SIMO||71.18||MaxLinear, Inc. (MXL)||35.83||50.94%||39.06%||11.88%||Cash Plus Stock|
|SAVE||22.09||JetBlue Airways Corporation (JBLU)||7.63||51.65%||43.53%||8.12%||All Cash|
|TWTR||38.63||Elon Musk (N/A)||40.31%||33.96%||6.35%||All Cash|
|AXU||0.426||Hecla Mining Company (HL)||3.9||6.20%||0.27%||5.93%||All Stock|
|SJR||25.88||Rogers Communications Inc. (RCI)||42.57||25.19%||20.99%||4.20%||Special Conditions|
|RMO||0.5909||Nikola Corporation (NKLA)||5.27||5.77%||7.75%||-1.98%||All Stock|
|LOTZ||0.3969||Shift Technologies, Inc. (SFT)||0.8165||42.39%||45.94%||-3.55%||All Stock|
|SRLP||19.9||Hartree Partners, LP (N/A)||-4.52%||0.16%||-4.68%||All Cash|
|BRG||26.76||Blackstone Real Estate (N/A)||11.55%||17.71%||-6.16%||Special Conditions|
|IS||3.84||Unity (U)||40.79||15.68%||24.80%||-9.12%||All Stock|
|Total Number of Deals Closed in 2022||130|
|Total Number of Deals Not Completed in 2022||6|
|Total Number of Pending Deals|
|Stock & Cash Deals||3|
|Total Number of Pending Deals||87|
|Aggregate Deal Consideration||$1.04 trillion|
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.
|SAVE||07/28/2022||JetBlue Airways Corporation (JBLU)||$33.50||$22.09||06/30/2024||51.65%||28.35%|
|SIMO||05/05/2022||MaxLinear, Inc. (MXL)||$107.44||$71.18||06/30/2023||50.94%||62.19%|
|LOTZ||08/09/2022||Shift Technologies, Inc. (SFT)||$0.57||$0.3969||12/31/2022||42.39%||131.12%|
|TWTR||04/25/2022||Elon Musk (N/A)||$54.20||$38.63||12/31/2022||40.31%||124.67%|
|BKI||05/04/2022||Intercontinental Exchange, Inc. (ICE)||$85.00||$66.36||06/30/2023||28.09%||34.29%|
|SJR||03/15/2021||Rogers Communications Inc. (RCI)||$32.40||$25.88||09/30/2022||25.19%||353.67%|
|VMW||05/26/2022||Broadcom Inc. (AVGO)||$142.50||$115.66||04/30/2023||23.21%||35.59%|
|ATVI||01/18/2022||Microsoft Corporation (MSFT)||$95.00||$77.53||06/30/2023||22.53%||27.51%|
|MITO||08/01/2022||Stealth Parent Limited (N/A)||$0.38||$0.3151||11/30/2022||20.60%||86.41%|
|TYME||07/05/2022||Syros Pharmaceuticals, Inc. (SYRS)||$0.34||$0.2849||12/31/2022||18.28%||56.55%|
List of all pending deals:
List of all pending deals:
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.