Merger Arbitrage Mondays – Altra Industrial Motion To Be Acquired By Regal Rexnord

Merger activity declined last week with three new deals announced and one deal completed.

On Friday, October 28, 2022, Elon Musk finally completed the acquisition of Twitter after over six months of controversies and legal battles. After completing his takeover of the company, Musk fired several executives of Twitter including Chief Executive Parag Agrawal and Chief Financial Officer Ned Segal. The company generated annualized returns of 2% for its public shareholders during its entire existence as a public company. The stock went public at $26 per share and closed its first day of trading at $44.90. Arbitrageurs who stayed the course probably earned better returns than long-term Twitter shareholders. I discussed this in an article titled The Twitter Fiasco And The Case For Increased Activism earlier this month.

Twitter Deal completed

 

 

Altra Industrial Motion (AIMC)

Altra Industrial Motion is a manufacturer of mechanical power transmission products, with a portfolio that consists of 26 brands including Bauer Gear Motor, Boston Gear, Kollmorgen, Portescap, Stromag, Svendborg Brakes, TB Wood’s, Thomson and Warner Electric. It operates through two segments, Power Transmission Technologies (PTT) and Automation & Specialty (A&S).

For the third quarter 2022, Altra’s revenue was was $466.3 million, down less than 1%, compared to $469.3 million in the third quarter 2021.

Altra Demand across end markets

Source: Altra Industrial Motion Investor Presentation

On Thursday, October 27, 2022, the company agreed to be acquired by Regal Rexnord Corporation (RRX), a manufacturer of industrial powertrain solutions for $5 billion including debt. Shareholders of Altra will receive $62.00 in cash for each share of Altra common stock, representing a 54% premium to Altra’s closing price on October 26, 2022.

The deal is expected to be completed in the first half of 2023. The current spread on the deal is 3.16% for an annualized return of 4.75%.

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 2022 167
Total Number of Deals Not Completed in 2022 5
Total Number of Pending Deals
Cash Deals 47
Stock Deals 18
Stock & Cash Deals 2
Special Conditions 11
Total Number of Pending Deals 78
Aggregate Deal Consideration $1.13 trillion

New Deals:

  1. The acquisition of Limestone Bancorp (LMST) by Peoples Bancorp (PEBO) for $208.2 million in an all-stock deal. Under the terms of the agreement, shareholders of Limestone will receive 0.90 shares of Peoples common stock for each share of common stock. The Merger is expected to qualify as a tax-free reorganization for Limestone shareholders.
  2. The acquisition of Altra Industrial Motion (AIMC) by Regal Rexnord Corporation (RRX) for $5 billion or $62.00 per share in cash.
  3. The acquisition of UserTesting (USER) by Thoma Bravo and Sunstone Partners for $1.3 billion or $7.50 per share in cash.

Deal Updates:

  1. According to Reuters, Gold Fields (GFItalked up support for it proposed takeover of Yamana Gold (AUY) with shareholders set to vote on the deal in four weeks’ time.
  2. Rio Tinto (RIO) has issued an open letter to the shareholders of Turquoise Hill Resources (TRQ), stating that Turquoise Hill Resources will need an additional $3.6B in funding over the next two years to unlock the long-term potential of the Oyu Tolgoi copper and gold project in Mongolia. Against that backdrop, Rio said its bid for Turquoise Hill is its best and final offer, which fully values the long-term potential of Oyu Tolgoi and the company.
  3. October 26, 2022: According to The Wall Street Journal, banks have started to send $13 billion in cash backing Elon Musk’s takeover of Twitter (TWTR), the latest sign the $44 billion deal for the social-media company is on track to close by the end of the week after months of twists and turns.
  4. On October 27, 2022, The Paper Excellence Group and Resolute Forest Products (RFPannounced their intention to sell Resolute’s Thunder Bay pulp and paper mill to further facilitate the regulatory review process.
  5. On October 28, 2022, the Board of Directors of Flagstar Bancorp (FBCdeclared a special dividend of $2.50 per share. The dividend will be paid on November 17, 2022, to shareholders of record at the close of business on November 7, 2022.

Approvals

  1. On October 24, 2022, the Board of Directors of Turquoise Hill (TRQ) unanimously recommended that minority shareholders vote FOR the arrangement resolution with Rio Tinto (RIO).
  2. On October 26, 2022, The Board of Governors of the Federal Reserve System approved the application of Columbia Banking System (COLB) with respect to the previously announced combination of Columbia and Umpqua Holdings Corporation  (UMPQ).
  3. On October 26, 2022, EVO Payments (EVOP) received shareholders approval.
  4. On October 27, 2022, Glory Star New Media Group Holdings Limited (GSMG) received shareholders approval.
  5. On October 27, 2022, Pzena Investment Management (PZN) received stockholders approval.
  6. On October 28, 2022, the European Commission issued its approval of the merger between Tenneco (TEN) and Apollo Global Management (APO) under the applicable provisions of the EU merger regulations.
  7. On October 28, 2022, Flagstar (FBC) and New York Community Bancorp (NYCBannounced the receipt of the requisite approval of the Office of the Comptroller of the Currency to convert Flagstar Bank, FSB to a national bank to be known as Flagstar Bank and to merge New York Community Bank into Flagstar Bank. The companies also mutually agreed to extend their merger agreement from October 31, 2022, to December 31, 2022.

Hurdles

  1. On October 24, 2022, the New Jersey Board of Public Utilities pushed out rate counsel/intervenor testimony about 20 days until November 20, 2022 from an original schedule of October 20, 2022 to allow for further “settlement negotiations,” over the sale of South Jersey Industries (SJI) to Infrastructure Investments Fund.
  2. On October 25, 2022, Canada imposed conditions on Rogers Communications’ (RCI) proposed remedy to overcome competition bureau concerns about its planned purchase of Shaw Communications (SJR).
  3. October 26, 2022: According to Bloomberg, Attorney General Karl Racine on behalf of a bipartisan group of attorneys general said that Albertsons (ACI) should hold off on the $4 billion dividend payment to shareholders while the pending merger with Kroger (KR) is reviewed.
  4. On October 27, 2022,  Joe Foster, who manages active gold funds at investment firm VanEck, which is Yamana’s biggest shareholder came out against Gold Fields’ (GFI) proposed takeover of Canada’s Yamana Gold (AUY).
  5. On October 27, 2022, Rogers Communications (RCI), Shaw Communications (SJR) and Quebecor issued a statement saying mediation with Canada’s Competition Bureau to settle Rogers’ planned takeover of Shaw has failed.
  6. October 28, 2022: Bloomberg reported that South Africa’s Gold Fields (GFI) is seeking investor approval for its all-stock deal to buy Canadian miner Yamana Gold (AUY). Some shareholders, however, have balked at the premium and structure of the transaction.

Shareholders Meeting Schedule

  1. PBF Logistics (PBFX) – November 30, 2022
  2. Steel Connect (STCN) announced that it intends to reconvene the company’s 2021 Annual Meeting of Stockholders on November 14, 2022.

Closed Deals:

  1. The acquisition of Twitter (TWTR) by Elon Musk on October 28, 2022. It took 186 days for this deal to be completed.

Weekly Spread Changes:

The table below shows weekly spread changes between October 21, 2022, and October 28, 2022.

Symbol Quote Acquiring
Company
Acquiring
Company Quote
Current
Spread
Last Week
Spread
Spread Change
Weekly
Deal
Type
PTRS 9.3 OceanFirst Financial Corp. (OCFC) 22.42 8.77% -0.50% 9.27% All Stock
FSTX 5.76 invoX Pharma (N/A) 23.61% 15.40% 8.21% All Cash
SIMO 54.29 MaxLinear, Inc. (MXL) 31.82 95.04% 88.35% 6.69% Cash Plus Stock
PCSB 19.39 Brookline Bancorp, Inc. (BRKL) 13.65 -6.48% -11.13% 4.65% All Stock
ACI 20.38 The Kroger Co. (KR) 46.77 33.71% 29.27% 4.44% Special Conditions
LOTZ 0.28 Shift Technologies, Inc. (SFT) 0.5331 31.78% 38.43% -6.65% All Stock
AYLA 0.6899 Advaxis, Inc. (ADXS) 2.03 -44.86% -37.53% -7.33% All Stock
TEN 19.65 Apollo Global Management, Inc. (APO) 55.63 1.78% 9.59% -7.81% All Cash
SAVE 21.59 JetBlue Airways Corporation (JBLU) 7.76 55.16% 65.02% -9.86% All Cash
FBC 38.41 New York Community Bancorp, Inc. (NYCB) 9.26 -3.20% 7.64% -10.84% 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.

Symbol Announced
Date
Acquiring
Company
Closing
Price
Last
Price
Closing
Date
Profit Annualized
Profit
SIMO 05/05/2022 MaxLinear, Inc. (MXL) $105.89 $54.29 06/30/2023 95.04% 142.75%
SAVE 07/28/2022 JetBlue Airways Corporation (JBLU) $33.50 $21.59 06/30/2024 55.16% 33.06%
BKI 05/04/2022 Intercontinental Exchange, Inc. (ICE) $85.00 $60.27 06/30/2023 41.03% 61.63%
ACI 10/14/2022 The Kroger Co. (KR) $27.25 $20.38 03/31/2024 33.71% 23.75%
LOTZ 08/09/2022 Shift Technologies, Inc. (SFT) $0.37 $0.28 12/31/2022 31.78% 187.10%
ATVI 01/18/2022 Microsoft Corporation (MSFT) $95.00 $72.85 06/30/2023 30.40% 45.67%
VMW 05/26/2022 Broadcom Inc. (AVGO) $142.50 $113.15 04/30/2023 25.94% 52.02%
TSEM 02/15/2022 Intel Corporation (INTC) $53.00 $42.75 02/15/2023 23.98% 81.03%
FSTX 06/23/2022 invoX Pharma (N/A) $7.12 $5.76 12/31/2022 23.61% 139.00%
SJR 03/15/2021 Rogers Communications Inc. (RCI) $29.78 $24.95 12/31/2022 19.36% 113.95%

Deals In The Works

Four new potential deals were added to the ‘Deals In The Works‘ section last week.

  1. On October 24, 2022, BDT Capital offered to buy the remaining shares of Weber (WEBR) that it does not already own for $6.25 per share in cash.
  2. On October 25, 2022, Diffusion Pharmaceuticals (DFFN), a biopharmaceutical company announced that its Board of Directors has authorized a thorough review and evaluation of a range of potential strategic opportunities in the interest of enhancing stockholder value.
  3. On October 25, 2022, Reuters reported that Aerojet Rocketdyne Holdings (AJRD), is soliciting offers from potential suitors, including private equity firms.
  4. On October 27, 2022, AgroFresh Solutions (AGFS) agreed with Paine Schwartz Partners to pursue a transaction pursuant to which Paine Schwartz would acquire all of the outstanding common stock of the company for $3.00 per share in cash.

SPAC Arbitrage

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

New Business Combinations

  1. On October 22, 2022, International Media Acquisition Corp. (IMAQentered into a stock purchase agreement by which it will acquire Risee Entertainment and Reliance Studios for $102 million in cash and $38 million in investment.
  2. On October 24, 2022, European Lithium AT Limited, a wholly owned subsidiary of European Lithium Ltd, and Sizzle Acquisition Corp (SZZL) have entered into a definitive agreement for a business combination that will result in the formation of Critical Metals Corp.
  3. On October 25, 2022, NaturalShrimp, Incorporated, a Biotechnology Aquaculture Company and Yotta Acquisition Corporation (YOTAannounced the signing of a definitive agreement for a proposed merger of the two companies.
  4. On October 25, 2022, Jupiter Wellness Acquisition (JWAC) announced the signing of a definitive business combination agreement with Chijet Motor Company, Inc.

Updates

  1. The Music Acquisition Corp. (TMAC) filed a proxy seeking shareholder approval to liquidate its trust early.
  2. Health Assurance Acquisition Corp. (HAAC) announced that due to its inability to complete a business combination, it will dissolve and liquidate its trust.
  3. Climate Real Impact Solutions II Acquisition Corporation (CLIM) filed a preliminary proxy statement relating to a special meeting of stockholders to approve an amendment to CLIM’s certificate of incorporation which would, if implemented, allow CLIM to unwind and redeem all of its outstanding public shares prior to December 30, 2022.

Completed

  1. Grey Rock Investment Partners (GRNT) and Executive Network Partnering Corporation successfully closed the previously announced business combination.
  2. Cardio Diagnostics Holdings (CDIO) announced the completion of its business combination with Mana Capital Acquisition Corp.
  3. Selina (SLNA) and BOA Acquisition Corp. (BOAS) announced the closing of their business combination.
  4. SatixFy Communications (SATXcompleted its previously-announced business combination with Endurance Acquisition Corp.

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 Activision Blizzard (ATVI), Spirit Airlines (SAVE), Atlas Air Worldwide (AAWW), First Horizon (FHN), Tower Semiconductor (TSEM) and TEGNA (TGNA). 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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