Merger Arbitrage Mondays – Multiple Deals Face Regulatory Hurdles

  • December 26, 2022

Heading into the end of the year, merger activity decreased significantly last week with three new deals announced, and two deals completed. One of the three deals announced was a potential deal in the works. All three new deals were small with deal sizes below $100 million.

China Index Holdings Limited (CIH)

China Index Holdings operates a real estate information and analytics service platform in China. We added CIH as a potential deal in the works on August 23, 2022, when Fang Holdings Limited, a real estate internet portal in China, submitted to the board of directors of China Index Holdings Limited, a preliminary non-binding proposal to acquire CIH for US$0.84 per share. The company’s closing price before this announcement was $0.70.

On October 13, 2022, CIH received a revised preliminary non-binding proposal letter from a consortium that included Fang Holdings for a purchase price of US$0.84 in cash. The revised proposal updated the previously announced preliminary non-binding proposal letter submitted by Fang to CIH, stating that the members of the consortium had agreed to work exclusively with each other in pursuing the proposed transaction and that the consortium owned in aggregate approximately 61.0% of all the issued and outstanding Class A Shares and approximately 100% of all the issued and outstanding Class B Shares, which in aggregate represented approximately 91.4% of the total voting power of the company.

The deal was finalized on December 22, 2022. China Index Holdings Limited entered into an agreement and plan of merger with CIH Holdings Limited and CIH Merger Sub Holdings Limited, in a ‘going-private’ transaction, under which CIH shareholders will receive US$1.0 in cash per share without interest and net of any applicable withholding tax. The deal is expected to be completed in the first quarter of 2023.

Deals Facing Regulatory Issues

Multiple deals have been running into regulatory bottlenecks from the FTC and international antitrust regulators.

The Federal Trade Commission and CFIUS

  1. Kroger’s (KR) acquisition of Albertsons (ACI) is expected to face an in-depth review by the Federal Trade Commission, after the US regulator sent a so-called second request seeking additional information on the deal. Attorney generals of several states have been urging a Washington state court judge to block a $4 billion dividend proposed to be paid to shareholders ahead of the merger.
  2. Black Knight (BKI) and Intercontinental Exchange (ICE), received a Request for Additional Information and Documentary Material, referred to as a “Second Request,” from the FTC on July 17, 2022. The FTC has been asked to conduct a robust review of Intercontinental Exchange’s planned purchase of Black Knight by Congresswoman Maxine Waters (D-CA).
  3. Regulators have asked for additional comments on Standard General’s proposed purchase of Tegna (TGNA) after the hedge fund agreed to make concessions to get the deal done. The Federal Communications Commission said in a notice Friday that it wants comments by January 13 on recent letters Standard General sent the regulator.
  4. F-star Therapeutics (FSTX) and invoX Pharma extended the expiration date for their tender offer twice last week to facilitate the ongoing CFIUS review of the proposed transaction.
  5. The Federal Trade Commission has been sending out questions concerning Amazon’s (AMZN) planned takeover of One Medical (ONEM).
  6.  Microsoft (MSFT) filed a rebuttal to a Federal Trade Commission lawsuit that is aimed at blocking the it’s purchase of Activision Blizzard (ATVI) saying the deal will not hurt competition in the videogaming industry.

International Regulators

  1. The European Commission is opening an in-depth investigation into Microsoft’s (MSFT) acquisition of Activision Blizzard (ATVI) on fears that the deal may “significantly reduce competition.”
  2. The European antitrust regulators have opened an in-depth investigation into Broadcom’s (AVGO) proposed bid for VMware (VMW).
  3. A a nonprofit tech watchdog group has urged the U.K.’s competition regulator to investigate iRobot’s (IRBT) planned sale to Amazon (AMZN).
  4. Canada’s competition tribunal said that it had not arrived at a decision regarding the merger between Rogers Communications (RCI) and Shaw Communications (SJR).
  5. 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.

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 2022191
Total Number of Deals Not Completed in 20229
Total Number of Pending Deals
Cash Deals45
Stock Deals17
Stock & Cash Deals3
Special Conditions12
Total Number of Pending Deals77
Aggregate Deal Consideration$1.22 trillion

New Deals:

  1. The acquisition of Qumu Corporation (QUMU) by Enghouse Systems for $6.69 million or $0.90 per share in cash.
  2. The acquisition of IsoPlexis Corporation (ISO) by Berkeley Lights (BLI) for $57.8 million in an all stock deal. Under the terms of the agreement, IsoPlexis shareholders will receive 0.612 shares of Berkeley Lights stock for each IsoPlexis share they hold.
  3. The acquisition of China Index Holdings Limited (CIH) by CIH Holdings Limited in a ‘going-private’ transaction for $26.68 million or $1 per share in cash. We added CIH as a potential deal to the Deals in the Works section on August 23, 2022, and the price after the news of the potential deal came out was $1.

Deal Updates:

  1. On December 19, 2022, Standard General issued a statement regarding its pending acquisition of TEGNA (TGNA), stating that it has committed to waiving certain contractual rights it would have had as a result of the transaction.
  2. On December 19, 2022, Lakeland Bancorp (LBAI) and Provident Financial Services (PFS) announced that the initial submissions of regulatory applications with respect to the Federal Reserve Board, the FDIC and the New Jersey Department of Banking and Insurance (NJDOBI) occurred on October 31, 2022.
  3. On December 19, 2022, Taylor Maritime Investments Limited and Grindrod Shipping Holdings (GRIN) jointly announced the expiration of the subsequent offering period.
  4. On December 21, 2022, AgroFresh Solutions (AGFS) and Paine Schwartz Partners filed their notification and report forms under the HSR Act on December 6, 2022.
  5. On December 21, 2022, Opiant Pharmaceuticals (OPNT) and Indivior PLC filed a voluntary CFIUS Notice seeking approval of their merger.

Approvals

  1. Professional Holding (PFHD) – received shareholders approval.
  2.  Atlas Corp. (ATCO) announced that the waiting period under the HSR Act expired on December 19, 2022.
  3. Imago BioSciences (IMGO) announced that the waiting period under the HSR Act expired on December 20, 2022.
  4. On December 19, 2022, Abiomed (ABMD) announced that the waiting period under the Austrian Cartel Act expired on December 16, 2022. Johnson & Johnson (JNJ) obtained all regulatory approvals required under the Merger Agreement, and accordingly the Antitrust Clearance Condition has been satisfied. The transaction is expected to be completed on December 22, 2022.
  5. On December 20, 2022, Ritchie Bros. Auctioneers Incorporated (RBA) and IAA, Inc. (IAA) announced expiration of the waiting period under the HSR Act and receipt of a no-action letter from the Canadian Commissioner of Competition. The parties have received all necessary regulatory clearance. The transaction is expected to close in the first half of 2023.
  6. On December 21, 2022,  MoneyGram International (MGI) announced that it has obtained all but one approval from international money transmission regulators. The transaction is expected to be completed early in the first quarter of 2023.
  7. On December 22, 2022, OpenText (OTEX) announced jointly with Micro Focus International (MFGP) that all regulatory conditions pertaining to the all-cash offer by OpenText to acquire Micro Focus have now been satisfied. The acquisition is expected to close on January 31, 2023.
  8. Benefitfocus  and Voya Financial (VOYA) filed certain required information with the Texas Department of Insurance on November 14, 2022, and November 18, 2022. The Texas Department of Insurance has completed its review of those submissions and has issued no objection determinations, thereby satisfying the requirements.

Hurdles

  1. On December 19, 2022, Bloomberg reported that, Luxor Capital Group, a top Ritchie Bros. Auctioneers (RBA) shareholder, which owns about 3.6% of Ritchie Bros. shares is opposing a takeover of IAA Inc. (IAA), a business it calls “distinctly inferior.” Luxor also said that an 18% drop in the company’s share price since the deal was announced Nov. 7 indicates investors’ “clear distaste” for the transaction.
  2. On December 19, 2022, F-star Therapeutics (FSTX) and invoX Pharma extended the tender offer to December 23, 2022, unless further extended. The expiration date is being extended in order to facilitate ongoing CFIUS review of the proposed transaction.
  3. December 20, 2022: According to Reuters, EU antitrust regulators have asked game developers and distributors if they think Microsoft (MSFT) will block their access to Activision Blizzard’s (ATVI) games once it has bought the company.
  4. December 20, 2022, According to Reuters, European antitrust regulators have opened an in-depth investigation into Broadcom’s (AVGO) proposed bid for VMware (VMW). “The Commission is particularly concerned that the transaction would allow Broadcom to restrict competition in the market for certain hardware components which interoperate with VMware’s software,” the European Commission said in a statement.
  5. On December 21, 2022, Albertsons Companies (ACI) announced that on December 19, 2022, the State of Washington Supreme Court set February 9, 2023 as the date for the review of the temporary restraining order (“TRO”) against the company’s previously announced $6.85 per common share Special Dividend.
  6. On December 21, 2022, Congresswoman Maxine Waters (D-CA) urged the Federal Trade Commission to conduct a robust review of Intercontinental Exchange’s (ICE) planned purchase of Black Knight (BKI).
  7. On December 21, 2022, F-star Therapeutics (FSTX) and invoX Pharma extended the tender offer to December 28, 2022, unless further extended. The expiration date is being extended in order to facilitate ongoing CFIUS review of the proposed transaction.
  8. December 22, 2022: According to Reuters, Canada’s competition tribunal said that it had not arrived at a decision regarding the merger between Rogers Communications (RCI) and Shaw Communications (SJR).
  9. On December 22, 2022, ForgeRock (FORG) and Thoma Bravo each received a request for additional information (the “Second Request”) from the Department of Justice in connection with the DOJ’s review of the merger.
  10. December 22, 2022: According to The Wall Street Journal, Microsoft (MSFTfiled a rebuttal to a Federal Trade Commission lawsuit aimed at blocking the software giant’s purchase of Activision Blizzard (ATVI) saying the deal will not hurt competition in the videogaming industry.
  11. December 23, 2022: According to Bloomberg, regulators have asked for additional comments on Standard General’s proposed purchase of Tegna (TGNA) after the hedge fund agreed to make concessions to get the deal done. The Federal Communications Commission said in a notice Friday that it wants comments by January 13 on recent letters Standard General sent the regulator.

Shareholders Meeting Schedule

  1. Benefitfocus (BNFT) – January 20, 2023
  2. KnowBe4 (KNBE) – January 31, 2023
  3. Lakeland Bancorp (LBAI) and Provident Financial Services (PFS) – February 1, 2023
  4. Maverix Metals (MMX) – January 12, 2023. If the Maverix shareholders approve the arrangement with Triple Flag Precious Metals (TFPM) at the meeting, it is currently anticipated that the Arrangement will be completed on or about January 19, 2023.

Closed Deals:

  1. The acquisition of RealNetworks (RNWK) by CEO Rob Glaser on December 21, 2022. It took 146 days for this deal to be completed.
  2. The acquisition of Abiomed (ABMD) by Johnson & Johnson (JNJ) on December 22, 2022. It took 51 days for this deal to be completed.

Weekly Spread Changes:

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

SymbolQuoteAcquiring
Company
Acquiring
Company Quote
Current
Spread
Last Week
Spread
Spread Change
Weekly
Deal
Type
PCSB18.94Brookline Bancorp, Inc. (BRKL)13.92-2.37%-11.44%9.07%All Stock
AYLA0.41Advaxis, Inc. (ADXS)1.22-44.24%-52.42%8.18%All Stock
GRIN19.27Taylor Maritime Investments Limited and Good Falkirk Limited (N/A)8.98%1.79%7.19%Special Conditions
SIMO62.39MaxLinear, Inc. (MXL)33.9471.03%65.38%5.65%Cash Plus Stock
ELSE4.51Mobile X Global, Inc. (N/A)7.10%1.68%5.42%All Cash
ACI21.13The Kroger Co. (KR)45.8928.96%31.90%-2.94%Special Conditions
FCRD4.27Crescent Capital BDC, Inc. (CCAP)13.1212.18%15.28%-3.10%Special Conditions
FSTX5.43invoX Pharma (N/A)31.12%34.85%-3.73%All Cash
TGNA20.71Standard General L.P. (N/A)15.89%21.09%-5.20%Special Conditions
SPNE7.45Orthofix (OFIX)19.348.07%18.63%-10.56%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)$106.71$62.3906/30/202371.03%139.40%
SAVE07/28/2022JetBlue Airways Corporation (JBLU)$31.00$19.6306/30/202457.92%38.30%
BKI05/04/2022Intercontinental Exchange, Inc. (ICE)$85.00$59.3505/04/202343.22%122.28%
FSTX06/23/2022invoX Pharma (N/A)$7.12$5.4312/31/202231.12%2272.01%
ACI10/14/2022The Kroger Co. (KR)$27.25$21.1303/31/202428.96%22.93%
IRBT08/05/2022Amazon (AMZN)$61.00$47.9912/31/202227.11%1979.02%
ATVI01/18/2022Microsoft Corporation (MSFT)$95.00$75.9506/30/202325.08%49.22%
TSEM02/15/2022Intel Corporation (INTC)$53.00$43.9202/15/202320.67%147.96%
VMW05/26/2022Broadcom Inc. (AVGO)$142.50$121.4204/30/202317.36%50.69%
TGNA02/22/2022Standard General L.P. (N/A)$24.00$20.7112/31/202215.89%1159.68%

Deals In The Works

One new potential deal was added to the ‘Deals In The Works‘ section last week.

  1. On December 20, 2022, iClick Interactive Asia (ICLK) received a preliminary non-binding bid from a consortium of company insiders to acquire all ordinary shares and American depositary shares for $4.0672 per ADS in cash, or $0.81344 per ordinary share.

Updates

  1. On December 22, 2022, Kingstone Companies (KINS) announced they are no longer considering takeover proposals from Griffin Highline.
  2. On December 23, 2022, Hewlett Packard Enterprise (HPE) said it wasn’t in discussions with the cloud computing company Nutanix (NTNX) about a potential acquisition.
  3. On December 23, 2022, Fanhua (FANH), announced that Yinan Hu, founder, chairman, and Chief Executive Officer of Fanhua, stated that he has determined to withdraw the preliminary non-binding going private proposal dated December 16, 2021, effective immediately.

SPAC Arbitrage

SPAC IPO

  1. AlphaVest Acquisition Corp. priced its $60 million IPO and its units are expected to begin trading on the Nasdaq under the symbol “ATMVU” Tuesday, December 20, 2022.
  2. Horizon Space Acquisition I Corp. priced its $60 million IPO and its units are expected to begin trading on the Nasdaq under the symbol “HSPOU” Thursday, December 22, 2022.

SPAC Business Combination

  1. On December 19, 2022, Unique Logistics International, Inc. signed a definitive agreement and plan of merger with Edify Acquisition Corp. (EAC).
  2. On December 21, 2022, Sparks Energy and 10X Capital Venture Acquisition Corp. III (VCXBentered into a merger agreement for a business combination.
  3. On December 22, 2022, Rain Enhancement Technologies and dMY Technology Group, Inc. VI (DMYSentered into a business combination agreement.
  4. On December 22, 2022, Caspi Oil Gas and Liberty Resources Acquisition Corp. (LIBYentered into a business combination to form a new entity, Liberty Onshore Energy B.V., which is expected to continue listing on the Nasdaq under the symbol LIBY.
  5. On December 23, 2022, Ace Global Business Acquisition Limited (ACBAentered into a definitive merger agreement with LE Worldwide Limited for a proposed business combination that, if consummated, will result in LE becoming a publicly listed company.

Completed

  1. On December 19, 2022, MariaDB (MRDBannounced the completion of its previously announced business combination with Angel Pond Holdings Corporation.
  2. On December 20, 2022, ECARX Holdings (ECX) and COVA Acquisition Corp., announced the completion of their previously announced business combination.

Terminated

  1. On December 22, 2022, Far Peak Acquisition Corporation (FPAC) and Bullish mutually agreed to terminate their proposed business combination.

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.