Merger Arbitrage Mondays – Johnson & Johnson To Buy Heart Pump Maker Abiomed

Merger activity remained steady last week with three new deals announced and five deals completed and one terminated. One of the three new deals announced was a potential deal in the works.

DuPont (DD) received a “get out of jail” free card for its acquisition of Rogers Corporation (ROG) after Chinese regulators were taking their time to approve the deal. Considering Rogers earned $108 million in 2021, DuPont was paying a significant premium with its $5.2 billion deal announced on November 2, 2021. In a scenario reminiscent of Qualcomm’s (QCOM) decision to walk away from the NXP Semiconductors (NXPI) deal in mid-2018 because they could not get Chinese approval, the Rogers deal collapsed last week. The spread had already widened to nearly 21% before the deal failed and the stock dropped significantly after deal failure, closing last Friday at $105.62, a drop of 54% from the pre-failure price of $229.49. The stock is also trading well below its pre-acquisition price of $208.23 and below where it was trading five years ago.

I started a small position in the company after failure and plan to write about the performance of failed deals in general and Rogers in specific for our next mid-month update.

Abiomed (ABMD) to be acquired by Johnson & Johnson (JNJ)

Abiomed, a medical technology company entered into a definitive agreement to be acquired by Johnson & Johnson on November 1, 2022. The Impella heart pump platform, owned by Abiomed is a breakthrough technology that has been approved exclusively by the FDA, for patients with severe coronary artery disease and heart failure. Impella, the smallest heart pump in the world, is inserted through a minimally invasive procedure and guided through an artery to the heart. The pump sits in the heart, spinning up to 50,000 revolutions per minute, sending blood throughout the body, and allowing the heart to rest and recover.

Cardiovascular disease is the leading cause of death today. Through the acquisition of Abiomed, Johnson & Johnson plans to strengthen its MedTech business. In addition to Impella, J&J also plans to acquire Abiomed’s pipeline of upcoming therapies. The deal comes almost a year after J&J decided to spin off the company’s consumer health business, which is expected to be completed next year.

Under the terms of the agreement, shareholders of Abiomed will receive an upfront payment of $380 per share in cash, and a non-tradeable contingent value right (CVR) entitling the holder to receive up to $35 per share in cash if certain commercial and clinical milestones are achieved. The deal is expected to close prior to the end of the first quarter of 2023.

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:

New Deals:

1. The acquisition of Abiomed (ABMD) by Johnson & Johnson (JNJ) for $16.6 billion. Under the terms of the agreement, shareholders of Abiomed will receive $380 per share in cash, along with one non-tradeable CVR that entitles them to up to an additional $35 per share in cash if certain clinical and commercial milestones are achieved.
2. The acquisition of Atlas Corp. (ATCO) by Poseidon Acquisition Corp. for $10.9 billion or $15.50 per share in cash. We added ATCO 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 $11.57.
3. The acquisition of Benefitfocus (BNFT) by Voya Financial (VOYA) for $570 million or $10.50 per share in cash.

Deal Updates:

1. On October 31, 2022, Tenneco (TEN) announced the expected appointment of Jeff Stafeil as Executive Vice President and Chief Financial Officer, contingent upon the close of the transaction with Apollo Global Management (APO).
2. October 31, 2022: According to Bloomberg, plans by Albertsons (ACI) to pay $4 billion to shareholders as a special dividend were developed before the company started talking about a potential merger with Kroger (KR), according to a letter from the grocery-store chain to a group of state attorneys general that raised concerns about the payout.
3. On November 1, 2022, Rio Tinto (RIO) reached an agreement with some shareholders who had publicly opposed the sale of Turquoise Hill Resources (TRQ). Pentwater Capital, the largest holder of Turquoise Hill after Rio Tinto, and SailingStone Capital agreed to withhold their votes at the shareholder meeting.
4. On November 2, 2022, Turquoise Hill Resources (TRQ) acknowledged the announcement by Rio Tinto International Holdings Limited (RIO) of agreements entered into between Rio Tinto, and certain shareholders of the company related to Pentwater Capital Management LP and SailingStone Capital Partners LLC holding in aggregate 32,617,578 common shares of the company.

Superior Bid

1. On November 4, 2022, Yamana Gold (AUY) confirmed that it has received an unsolicited binding proposal from Agnico Eagle Mines Limited (AEM) and Pan American Silver Corp. (PAAS). Under the New Offer, shareholders of the company would receive $1.0406 in cash, 0.0376 of an Agnico Share, and 0.1598 of a Pan American Share for each common share held. The Board of Directors of the company has has notified Gold Fields (GFI) that the Board has determined that the new offer constitutes a Yamana Superior Proposal and that the five business day matching period has commenced.

Approvals

1. U.S. Well Services (USWS) received shareholders approval
2. Resolute Forest Products (RFP) received shareholders approval
3. Signify Health (SGFY) received shareholders approval
4. Hill International (HIL) received shareholders approval
5. VMware (VMW) received shareholders approval
6. Global Payments (GPN) announced that it has received Hart-Scott-Rodino clearance for the acquisition of EVO Payments (EVOP).
7. Tenneco (TEN) conditions to closing with respect to antitrust and/or foreign direct investment laws under Tenneco’s merger agreement with Apollo Global Management (APO) have been satisfied or waived in accordance with the terms and conditions of the merger agreement.
8. South Jersey Industries (SJI) announced that its transaction with Infrastructure Investments Fund was unanimously approved by the Federal Energy Regulatory Commission, the Federal Communications Commission and has cleared the waiting period under Hart-Scott-Rodino. The transaction remains subject to regulatory approval by the New Jersey Board of Public Utilities.

Hurdles

1. October 31, 2022: According to Reuters, Canada Federal Court Chief Justice Paul Crampton has directed counsel for Rogers Communication (RCI) , Shaw Communications (SJR) and the Competition Bureau to convene for a further case management conference on Tuesday.
2. Pursuant to a request by CFIUS, on October 31, 2022, F-star Therapeutics (FSTX) and invoX Pharma voluntarily withdrew and immediately refiled the Notice in order to provide CFIUS with more time to complete its assessment.
3. November 1, 2022: According to Reuters, Washington State Attorney General Bob Ferguson filed a lawsuit on Tuesday to block grocery chain Albertsons (ACI) from paying dividends to shareholders before the closure of its proposed merger with Kroger (KR).
4. November 3, 2022: According to Bloomberg, Justice Department officials are scrutinizing whether Standard General’s proposed purchase of broadcaster Tegna (TGNA) could lead to higher cable prices.
5. On November 3, 2022. Albertsons Companies (ACI) announced that the Attorney General of the State of Washington has been granted a temporary restraining order, that restrains the company from paying the previously announced $6.85 per common share special dividend, originally scheduled to be paid on November 7, 2022. Albertsons intends to seek to overturn the restraint as quickly as possible because the temporary order was based on the incorrect assertion that payment of the special dividend would impair its ability to compete while its proposed merger with The Kroger Co. (KR) is under antitrust review. A hearing on the State of Washington’s request for a preliminary injunction is scheduled for November 10, 2022.
6. On November 4, 2022, Sen. Elizabeth Warren (D-MA), Sen. Bernie Sanders (I-Vt.) and four other lawmakers have asked private equity firm Cerberus to halt the payment of a $4 billion Albertsons (ACI) dividend connected to its deal with Kroger (KR).

Shareholders Meeting Schedule

1. Renovacor (RCOR) – November 30, 2022
2. STORE Capital Corporation (STOR) – December 9, 2022
3. Partners Bancorp (PTRS) – December 14, 2022.
4. Turquoise Hill Resources (TRQ) announced that pursuant to a request from Rio Tinto International Holdings Limited (RIO), the company has postponed to on November 8, 2022 the special meeting of Turquoise Hill shareholders.

Closed Deals:

1. The acquisition of Pzena Investment Management (PZN) by Pzena Investment Management on October 31, 2022. It took 97 days for this deal to be completed.
2. The acquisition of Sprague Resources (SRLP) by Hartree Partners on November 1, 2022. It took 152 days for this deal to be completed.
3. The acquisition of U.S. Well Services (USWS) by ProFrac Holding Corp. (PFHC) on November 1, 2022. It took 133 days for this deal to be completed.
4. The acquisition of CyberOptics Corporation (CYBE) by Nordson Corporation (NDSN) on November 3, 2022. It took 87 days for this deal to be completed.
5. The acquisition of StoneMor (STON) by Axar Capital Management on November 3, 2022. It took 162 days for this deal to be completed.

Terminated Deals:

1. On November 1, 2022, DuPont (DD) called off its planned acquisition of Rogers Corporation (ROG), saying it was unable to get timely clearance from regulators.

Weekly Spread Changes:

The table below shows weekly spread changes between October 28, 2022, and November 4, 2022.

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.

Deals In The Works

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

1. On October 31, 2022, Sierra Metals (SMTS) confirmed that it received an unsolicited, non-binding letter of intent from Compañia Minera Kolpa S.A.
2. On November 2, 2022, Bloomberg reported that Garrett Motion (GTX) is exploring strategic options including a sale.
3. On November 3, 2022, Bloomberg reported that American Axle & Manufacturing Holdings (AXL) is attracting preliminary interest from suitors including Melrose Industries.
4. On November 3, 2022, Bloomberg reported that the top shareholder in Nano Dimension (NNDM) has made a proposal to acquire the rest of the 3D printing company it doesn’t already own in a transaction that would value the company at roughly $995 million.
5. On November 4, 2022, Yamana Gold (AUY) confirmed in a joint press release by Agnico Eagle Mines Limited (AEM) and Pan American Silver Corp. (PAAS), that it has received an unsolicited binding proposal from the New Offerors.

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.

1. Iron Horse Acquisitions Corp. (IRON) filed its S-1 on November 1, 2022 for a $100 million IPO as the first SPAC to file for an IPO in November thus far.

New Business Combinations

1. On October 31, 2022, WHC Worldwide, doing business as zTrip, and Spree Acquisition Corp. 1 Limited (SHAP), a special purpose acquisition company entered into a business combination agreement.
2. On October 31, 2022, Intrinsic Medicine, a therapeutics company and Phoenix Biotech Acquisition Corp. (PBAX) entered into a definitive business combination agreement.
3. On October 31, 2022, WaveTech Group and Welsbach Technology Metals Acquisition Corp. (WTMA) entered into a definitive merger agreement for a proposed business combination.
4. On November 1, 2022, Breeze Holdings Acquisition Corp. (BREZ) entered into a definitive agreement to merge with TV Ammo, Inc. Following the closing, Breeze Holdings will be renamed “True Velocity, Inc.”
5. On November 2, 2022, African Agriculture and 10X Capital Venture Acquisition Corp. II (VCXA) announced the execution of a definitive Business Combination Agreement.
6. Flame Acquisition Corp. (FLME) announced an agreement to enter into a business combination with Sable Offshore Corp.

Completed

1. On October 31, 2022, Perfect Corp. (PERF) and Provident Acquisition Corp. announced the completion of their previously announced business combination.
2. On October 31, 2022, Coeptis Therapeutics, Inc. (COEP) announced the completion of its business combination with Bull Horn Holdings Corp.
3. On November 2, 2022, Peak Bio Co., Ltd. (PKBO) announced the completion of its business combination with Ignyte Acquisition Corp.

Terminated

1. On November 1, 2022, Future Health ESG (FHLT) terminated its combination agreement with medical technology company Excelera Health.

Updates

1. On October 31, 2022, One Equity Partners Open Water I Corp. (OEPW) announced that it has filed a preliminary proxy statement to seek stockholder approval to adopt amendments to its Amended and Restated Certificate of Incorporation to allow the company to redeem all of its outstanding public shares and liquidate no later than December 30, 2022.
2. On October 31, 2022, Z-Work Acquisition Corp. (ZWRK) announced that it will dissolve and liquidate its trust due to its inability to complete a business combination.
3. On November 1, 2022, Natural Order Acquisition Corporation (NOAC) announced that due to its inability to complete a business combination, it intends to dissolve and liquidate its trust.
4. On November 3, 2022, Gores Technology Partners (GTPA) filed a preliminary proxy statement to seek stockholder approval to Liquidate in 2022.
5. On November 3, 2022, Gores Technology Partners II (GTPB) filed a preliminary proxy statement to seek stockholder approval to Liquidate in 2022.
6. On November 3, 2022, Gores Holdings VII (GSEV) filed a preliminary proxy statement to seek stockholder approval to Liquidate in 2022.
7. On November 3, 2022, The Music Acquisition Corporation (TMAC) will be holding a virtual special meeting of stockholders on November 30, 2022 to obtain stockholder approval to liquidate trust account before year-end.

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 Rogers Corporation (ROG), 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.