Merger Arbitrage Mondays – Four Potential Deals Become Successful

  • December 19, 2022

Merger activity increased significantly last week with eight new deals announced, and two deals completed. Four of the seven new deals announced were large rumored deals that came to fruition.

Aerojet Rocketdyne Holdings (AJRD)

We have written multiple articles about failed deals and one of the failed deals at the start of 2022 was Lockheed Martin’s (LMT) acquisition of Aerojet Rocketdyne (AJRD) on account of regulatory issues.

We added Aerojet as a potential deal in the works on October 25, 2022, when Reuters reported that the company was soliciting offers from potential suitors, including private equity firms. On Sunday, December 18, 2022, L3Harris Technologies (LHX) entered into a definitive agreement to acquire Aerojet for or $4.7 billion, inclusive of net debt, or $58 per share in cash. Lockheed Martin’s acquisition price for Aerojet in December 2020 was $56, inclusive of a $5.00 per share pre-closing special dividend.

According to The Wall Street Journal,

Aerojet was put back up for sale after federal regulators in January sued to block its planned $4.4 billion purchase by Lockheed Martinon antitrust grounds, sparking a bitter internal board battle. L3Harris’s all-cash bid of $58 a share won out over competing offers from General Electric (GE) and Textron (TXT) according to people involved in the negotiations. A deal is expected to face intense regulatory scrutiny at a time when Aerojet has also wrestled with production problems.

This reminds us about the Frontyard Residential (RESI) deal that had failed and received a new offer a year later. On May 4, 2020, Front Yard terminated its $2.3 billion deal with Amherst Residential and entered into an agreement to be acquired by Pretium and Ares Management on October 19, 2020 for $2.5 billion.

Horizon Therapeutics Public Limited Company (HZNP)

Horizon Therapeutics, a biotech company focused on rare, autoimmune, and severe inflammatory diseases entered into a definitive agreement to be acquired by Amgen (AMGN) for $28.3 billion on December 12, 2022. We added Horizon as a potential deal in the works on November 29, 2022, when the company reported that it was engaged in highly preliminary discussions with Amgen (AMGN), Janssen Global Services and Sanofi (SNY).  Johnson & Johnson’s (JNJ) unit Janssen Global Services and Sanofi opted out of the bidding, leaving Amgen as the sole possible offeror for the deal.

Horizon’s leading product TEPEZZA is the first and only medicine approved by the FDA for the treatment of Thyroid Eye Disease (TED). In addition to TEPEZZA, the main reason behind the acquisition, Amgen is also enhancing its portfolio with multiple growth products and a decent portfolio.

Horizon Therapeutics Pipeline

The current spread on the deal is 3.21%. The transaction is expected to be completed in the first half of 2023.

Coupa Software Incorporated (COUP)

Another massive deal announced last week was the acquisition of Coupa Software, a cloud-based BSM (business spend management) solutions provider. We added Coupa Software as a potential deal in the works on November 23, 2022, when Bloomberg reported that Vista Equity Partners was exploring a potential acquisition of the company. Coupa’s price before this announcement was $45.72.

Thoma Bravo outbid Vista Equity on December 12, adding another feather to its hat by entering into a definitive agreement to acquire Coupa Software for $8 billion or $81 per share in cash, representing a premium of 77% to Coupa’s closing stock price on November 22, 2022.

The deal is expected to be completed in the first quarter of 2023 and the current spread on the deal is 2.9%.

Weber (WEBR)

The domed charcoal grill maker Weber is going private through a planned acquisition by BDT Capital Partners, 16 months after it went public. We added Weber as a potential deal in the works on October 24, 2022, when its controlling shareholder BDT Capital (89% stake) offered to buy the remaining shares of Weber that it did not already own for $6.25 per share in cash. Weber’s price on the day of this announcement was $5.03.

The deal was finalized on December 12, 2022, at a closing price of $8.05, representing a a premium of 60% to Weber’s closing price October 24, 2022. The deal is expected to close in the first half 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:

Total Number of Deals Closed in 2022189
Total Number of Deals Not Completed in 20229
Total Number of Pending Deals
Cash Deals44
Stock Deals16
Stock & Cash Deals3
Special Conditions13
Total Number of Pending Deals76
Aggregate Deal Consideration$1.22 trillion

New Deals:

  1. The acquisition of Horizon Therapeutics Public Limited Company (HZNP) by Pillartree Limited, a newly formed private limited company wholly owned by Amgen (AMGN) for $28.3 billion or $116.50 per share in cash. We added HZNP as a potential deal to the Deals in the Works section on November 29, 2022, and the price after the news of the potential deal came out was $100.29.
  2. The acquisition of Coupa Software Incorporated (COUP) by Thoma Bravo for $8 billion or $81 per share in cash. We added COUP as a potential deal to the Deals in the Works section on November 23, 2022, and the price after the news of the potential deal came out was $58.93.
  3. The acquisition of Weber (WEBR) by BDT Capital Partners LLC for $3.7 billion or $8.05 per share in cash. We added WEBR as a potential deal to the Deals in the Works section on October 24, 2022, and the price after the news of the potential deal came out was $6.56.
  4. The acquisition of Malvern Bancorp (MLVF) by First Bank (FRBA) for $149.5 million in a cash plus stock deal. Under the terms of the agreement, shareholders will receive 0.7733 shares of First Bank common stock and $7.80 in cash per each Malvern Bancorp, Inc. common share outstanding.
  5. The merger of The Community Financial Corporation (TCFC) and Shore Bancshares (SHBI) for $254.4 million in an all stock merger of equals. Under the terms of the definitive agreement, holders of TCFC common stock will have the right to receive 2.3287 shares of Shore common stock.
  6. The acquisition of Maxar Technologies (MAXR) by Advent International for $6.4 billion or $53 per share in cash.
  7. The acquisition of Trean Insurance Group (TIG) by Altaris Capital Partners for $316 million or $6.15 per share in cash.
  8. The acquisition of Aerojet Rocketdyne Holdings (AJRD) by L3Harris Technologies (LHX) for $4.7 billion or $58 per share in cash. We added AJRD as a potential deal to the Deals in the Works section on October 25, 2022, and the price after the news of the potential deal came out was $47.49.

New Deals:

  1. On December 12, 2022, Meridian Bioscience (VIVO) announced that it has entered into a side letter with the buyer, setting the closing date of Meridian’s pending merger for January 31, 2023.
  2. On December 12, 2022, Imago BioSciences (IMGO) announced that the tender offer launched by Merck (MRK) will expire on January 10, 2023.
  3. On December 13, 2022, Brookline Bancorp (BRKL) and PCSB Financial Corporation (PCSB) announced that the deadline for stockholders of PCSB to elect the form of consideration that they wish to receive in PCSB’s pending merger with Brookline has been extended to December 20, 2022.
  4. December 13, 2022: Bloomberg reported that Rogers Communications’ (RCI) deal with Shaw Communications (SJRis crawling toward the finish line. The legal battle over deal will be settled within weeks, possibly days.
  5. On December 14, 2022, Johnson & Johnson (JNJ) announced that Athos Merger Sub, has extended the expiration date of its offer to acquire all of the outstanding shares of common stock of Abiomed (ABMD) from December 13, 2022 to December 21, 2022.
  6. December 14, 2022: According to a definitive proxy statement filed, Altra Industrial Motion (AIMC) and Regal Rexnord Corporation (RRX) made the filings required under the HSR Act on November 9, 2022. Regal Rexnord Corporation withdrew its filing on December 9, 2022, and refiled as of December 13, 2022, such that the initial 30-day waiting period is scheduled to expire on January 12, 2023. The special meeting of stockholders of Altra Industrial Motion will be held on January 17, 2023.
  7. Spirit (SAVE) and JetBlue (JBLU) each received a request for additional information and documentary material (the “Second Request”) from the Antitrust Division of the Department of Justice pursuant to the HSR Act, on September 12, 2022. On December 12, 2022, the companies certified substantial compliance with the Second Request.
  8. On December 15, 2022, Euronav (EURN) acknowledged the receipt from CMB NV of a letter to its Supervisory Board asking it to terminate the Combination Agreement with Frontline (FRO) and reaffirmed its commitment to the combination.

Approvals

  1. On December 10, 2022, UserTesting (USER) announced that the  “go-shop” period expired on December 10, 2022.
  2. On December 13, 2022, BTRS Holdings (BTRS) announced that its stockholders voted to approve the definitive merger agreement with an affiliate of EQT X Fund.
  3. On December 13, 2022, Archaea Energy (LFG) announced that its stockholders voted to approve the definitive merger agreement with BP p.l.c. (BP).
  4. On December 13, 2022, The California’s Department of Financial Protection and Innovation disclosed on its website that MoneyGram (MGI) received approval from the California’s Department of Financial Protection and Innovation for the planned acquisition by Madison Dearborn Partners.
  5. On December 14, 2022, Turquoise Hill Resources (TRQ) announced that the Supreme Court of Yukon has granted the final order, pursuant to which Rio Tinto International Holdings Limited (RIO) will acquire Turquoise Hill. The Arrangement is expected to be completed on or about December 16, 2022.
  6. The waiting period with respect to the merger between UserTesting (USER) and Thoma Bravo and Sunstone Partners, under the HSR Act, expired on December 9, 2022.
  7. On December 14, 2022, the waiting period with respect to the merger between Benefitfocus (BNFT) and Voya Financial (VOYA), under the HSR Act, expired.
  8. On December 15, 2022, The Australian Competition and Consumer Commission provided notice that it does not intend to conduct a public review of the merger between UserTesting (USER) and Thoma Bravo and Sunstone Partners.
  9. On December 15, 2022, Abiomed (ABMD) and Johnson & Johnson (JNJreceived clearance for their merger from the German Federal Cartel Office and the Japan Fair Trade Commission.

Hurdles

  1. December 13, 2022: According to Reuters, Microsoft (MSFT) President Brad Smith said that the company had offered to sign a legally-binding consent decree with the U.S. Federal Trade Commission to provide “Call of Duty” games to rivals including Sony and others for a decade.
  2. December 13, 2022: According to Reuters, the attorneys general of California, Illinois and Washington D.C., said they would appeal a federal court’s refusal to temporarily prevent Albertsons Companies (ACI) from paying a $4 billion dividend to shareholders.
  3. On December 14, 2022, SeekingAlpha reported that Intel (INTC) and Tower Semiconductor (TSEM) are said to be reviewing potentially asking China for a clock suspension in the antitrust regulator’s review of the acquisition of Tower. The parties are still most likely to pull and refile the deal with China’s State Administration for Marker Regulation.
  4. On December 14, 2022, Belgium’s Saverys family called for an end to the plan to combine tanker giants Euronav (EURN) and Frontline (FRO). In a letter to the Euronav board, family-controlled shipowner CMB’s chief executive Alexander Saverys called the combination unworkable and value-destructive.

Shareholders Meeting Schedule

  1. Ayala Pharmaceuticals (AYLA) – January 13, 2023.
  2. Altra Industrial Motion (AIMC) – January 17, 2023
  3. O2Micro International Limited (OIIM) – January 31, 2023.

Closed Deals:

  1. The acquisition of Turquoise Hill Resources (TRQ) by Rio Tinto (RIO) on December 16, 2022. It took 101 days for this deal to be completed.
  2. The acquisition of BTRS Holdings (BTRS) by EQT on December 16, 2022. It took 79 days for this deal to be completed.

Weekly Spread Changes:

The table below shows weekly spread changes between December 9, 2022, and December 16, 2022.

SymbolQuoteAcquiring
Company
Acquiring
Company Quote
Current
Spread
Last Week
Spread
Spread Change
Weekly
Deal
Type
HVBC27.18Citizens Financial Services, Inc. (CZFS)76.3312.33%6.17%6.16%All Stock
FSTX5.28invoX Pharma (N/A)34.85%29.22%5.63%All Cash
FCRD4.155Crescent Capital BDC, Inc. (CCAP)1315.28%10.37%4.91%Special Conditions
ACI20.66The Kroger Co. (KR)44.3231.90%27.46%4.44%Special Conditions
IRBT47.91Amazon (AMZN)87.8627.32%23.01%4.31%All Cash
OIIM4.48FNOF Precious Honour Limited and Rim Peak Technology Limited (N/A)0.0011.61%13.90%-2.29%All Cash
PCSB19.83Brookline Bancorp, Inc. (BRKL)13.22-11.44%-7.33%-4.11%All Stock
EMCF33.44Farmers National Banc Corp. (FMNB)14.2-8.70%-3.48%-5.22%All Stock
VIVO32.9SD Biosensor and SJL Partners (N/A)3.34%9.15%-5.81%All Cash
AYLA0.5002Advaxis, Inc. (ADXS)1.27-52.42%-46.11%-6.31%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.

SymbolAnnounced
Date
Acquiring
Company
Closing
Price
Last
Price
Closing
Date
ProfitAnnualized
Profit
SIMO05/05/2022MaxLinear, Inc. (MXL)$107.03$64.7206/30/202365.38%123.00%
SAVE07/28/2022JetBlue Airways Corporation (JBLU)$31.00$20.0106/30/202454.92%35.80%
BKI05/04/2022Intercontinental Exchange, Inc. (ICE)$85.00$58.6305/04/202344.98%119.83%
FSTX06/23/2022invoX Pharma (N/A)$7.12$5.2812/31/202234.85%978.44%
ACI10/14/2022The Kroger Co. (KR)$27.25$20.6603/31/202431.90%24.82%
IRBT08/05/2022Amazon (AMZN)$61.00$47.9112/31/202227.32%767.12%
ATVI01/18/2022Microsoft Corporation (MSFT)$95.00$76.0806/30/202324.87%46.79%
TGNA02/22/2022Standard General L.P. (N/A)$24.00$19.8212/31/202221.09%592.14%
SPNE10/11/2022Orthofix (OFIX)$8.52$7.1803/31/202318.63%66.01%
VMW05/26/2022Broadcom Inc. (AVGO)$142.50$121.7604/30/202317.03%46.75%

Deals In The Works

Updates

  1. On December 12, 2022, the Board of Veris Residential (VRE) its letter, stated its unanimous rejection of each of Kushner Companies’ latest unsolicited proposals to acquire the company.
  2. On December 14, 2022, AWH Capital urged Purple Innovation’s (PRPL) board of directors to reject the acquisition proposal by Coliseum Capital Management.
  3. On December 15, 2022, Jana Partners told Freshpet (FRPT) to consider selling itself and that it plans to launch a proxy fight and run for board seats.

SPAC Arbitrage

SPAC Business Combination

  1. On December 12, 2022, GigCapital5 (GIA) and QT Imaging entered into a definitive business combination agreement that would result in QT Imaging becoming a publicly listed company.
  2. On December 12, 2022, Infinite Reality and Newbury Street Acquisition Corporation (NBST) entered into a definitive Business Combination agreement.
  3. On December 13, 2022, Lifezone Metals entered into a definitive agreement for a business combination with GoGreen Investments (GOGN).
  4. On December 13, 2022, Wellous Group Limited and Kairous Acquisition Corp. Limited (KACLentered into a definitive merger agreement that will result in Wellous becoming a publicly listed company.
  5. On December 13, 2022, AEON Biopharma and Priveterra Acquisition Corp. (PMGMentered into a definitive business combination agreement.
  6. On December 13, 2022, Fifth Wall Acquisition Corp. III (FWACentered into a definitive business combination agreement with Mobile Infrastructure Corp.
  7. On December 14, 2022, Rice Acquisition Corp. II (RONI) and NET Power announced a definitive agreement to enter into a business combination.
  8. On December 15, 2022, DarkPulse announced the signing of a definitive business combination agreement with Global System Dynamics (GSD).
  9. On December 15, 2022, Greenfire Resources and M3-Brigade Acquisition III Corp. (MBSCentered into a definitive agreement for a business combination.

Completed

  1. On December 13, 2022, Venus Acquisition Corporation closed the previously announced business combination with VIYI Algorithm. As part of the transaction, the company changed its name to “MicroAlgo Inc.” As a result, the company expects that its ordinary shares will begin trading on The Nasdaq Capital Market under the ticker symbol (MLGO), starting on or about December 13, 2022.
  2. On December 13, 2022, ZyVersa Therapeutics (ZVSA) and Larkspur Health Acquisition Corp. announced the closing of their previously announced business combination.
  3. On December 16, 2022, Pacifico Acquisition Corp. and Caravelle Group (CACO) announced the completion of their previously announced business combination.

Terminated

  1. On December 12, 2022, Americas Technology Acquisition Corp. (ATAmutually agreed to terminate the previously announced Agreement and Plan of Merger with Rally Communitas Corp.
  2. On December 16, 2022, Aries I Acquisition Corp. (RAMterminated its combination agreement with metaverse technology firm Infinite Assets.

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 Abiomed (ABMD), 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.