Merger Arbitrage Mondays – Emerson Announces Proposal to Acquire National Instruments

Merger Arbitrage activity decreased last week with three new deals announced and four deals closing.

In our previous Merger Arbitrage Mondays post, we wrote about three healthcare sector deals that were announced at JP Morgan’s Healthcare Conference. In continuation with that trend, two of the three new deals announced last week were also healthcare sector deals involving contingency payments.

National Instruments Corp. (NATI) – A Potential Deal In The Works

We added National Instruments as a potential deal in the works on January 13, 2023, when the company’s Board of Directors initiated a review and evaluation of strategic options, to maximize shareholder value. The company also went on the defensive by adopting a poison pill provision, making a potential hostile bid difficult if not impossible. Examples of companies adopting a poison pill that were unable to fend off an acquirer include Peoplesoft in 2004 and Twitter last year.

National Instruments Corporation, also known as NI, produces automated test equipment and virtual instrumentation software. The company’s common applications include data acquisition, instrument control and machine vision.

Emerson Electric (EMR), a multinational company that manufactures products and provides engineering services for industrial, commercial, and consumer markets, went public with its desire to acquire NI on January 17, 2023.

Emerson’s $53 per share bid values NI at around $7.4 billion. It had initially made an unsolicited $48 per share bid in May of 2022 but had no success in trying to engage the board in M&A discussions. The proposed deal, is not subject to any financing conditions, and represents a 32% premium over NI’s January 12 closing price and a 38% premium over the volume-weighted average price for the last 30 trading days ending January 12.

Emerson has targeted ‘Test and Measurement’ as a high-priority area of focus, as it fits well with the company’s strategy of focusing on automation and industrial software. NI’s automotive, semiconductors and aerospace/defense markets services could be complementary to Emerson’s product portfolio.

According to Emerson’s statement, the proposal represents:

• Immediate and certain cash value for all NI shareholders;
• A 32% premium to NI’s closing share price as of January 12, 2023, the day prior to NI’s public announcement of a strategic review on January 13, 2023;
• A 45% premium to NI’s closing share price as of November 3, 2022, the day Emerson submitted its latest proposal to acquire NI;
• A 38% premium to the volume weighted average price for the last 30 trading days ending January 12, 2023; and
• A 23% premium to NI’s 52-week high intra-day share price of $43.12, as of January 12, 2023.

“Although Emerson would have preferred to reach an agreement privately, given NI’s announcement that it is undertaking a strategic review, and after refusing to work with us toward a premium cash transaction over the past eight months, we are making our interest public for the benefit of all NI shareholders,” said Lal Karsanbhai, President and Chief Executive Officer of Emerson.

According to a report, besides Emerson (EMR), Fortive (FTV), Keysight (KEYS) and Honeywell (HON) are also interested in National Instruments (NATI).

The potential sale of National Instruments is now up for further discussion and it will be interesting to see if Emerson’s offer of $53 is just an opening bid and if we can expect to see higher bids for NI.

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 Merger Arbitrage Deals:

1. The acquisition of Neovasc (NVCN) by ShockWave Medical (SWAV) for $100 million. Under the terms of the agreement, Neovasc shareholders will receive US$27.25 per share in cash, plus deferred payments of up to approximately US$47 million on the achievement of future regulatory milestones in the form of a contingent value rights.
2. The acquisition of Volta (VLTA) by Shell plc (SHEL) for $273.79 million or $0.86 per share in cash.
3. The acquisition of Concert Pharmaceuticals (CNCE) by Sun Pharmaceutical Industries Limited for $254.4 million. Under the terms of the agreement, an upfront payment of $8.00 per share of common stock in cash plus a non-tradeable CVR, which entitles Concert stockholders to receive up to an additional $3.50 per share of common stock in cash, payable upon deuruxolitinib achieving certain net sales milestones within specified periods.

Deal Updates:

1. On January 17, 2023, Albertsons Companies (ACI) announced that the temporary restraining order preventing the payment of the Special Divided has been lifted after the State of Washington’s Supreme Court denied a motion by the Attorney General of the State of Washington. Albertsons will immediately begin the process of paying the Special Dividend and amounts will be distributed as soon as practicable to stockholders of record as of the close of business on October 24, 2022.
2. January 17, 2023: According to Reuters, Rogers Communications (RCI) said in a fling that the acquisition of Shaw Communications (SJR) has been delayed long enough and must be allowed to proceed despite the competition bureau’s opposition.
3. On January 17, 2023, Weber (WEBR) filed its preliminary information statements, in which it stated that following the execution of the Merger Agreement, the company and BDT Capital Partners entered into the HSR Waiver Letter, dated January 10, 2023, whereby each party confirmed the waiver of certain closing conditions.
4. On January 18, 2023, F-star Therapeutics (FSTX) and invoX Pharma extended the tender offer to January 31, 2023, unless further extended.
5. On January 19, 2023, Trean Insurance Group (TIG) and Altaris Capital Partners filed their preliminary proxy statement, in which they stated that they had made the filings required under the HSR Act on December 23, 2022.
6. On January 19, 2023, Albertsons Companies (ACI) announced that the payment date for its previously announced $6.85 per common share Special Dividend, originally scheduled to be paid November 7, 2022, is now going to be paid on January 20, 2023 to stockholders of record as of the close of business on October 24, 2022.

Approvals

1. On January 17, 2023, Maverix Metals (MMX) announced that the Ontario Superior Court of Justice has granted a final order approving the previously announced acquisition of Maverix by Triple Flag Precious Metals (TFPM). The transaction is expected to be completed on January 19, 2023.
2. On January 17, 2023, shareholders of Altra Industrial Motion (AIMC) approved the company’s merger with Regal Rexnord Corporation (RRX) at a special meeting of shareholders.
3. On January 17, 2023, AVEO Oncology (AVEO) and LG Chem received clearance from CFIUS.
4. Vivint Smart Home (VVNT) announced that the applicable waiting period under the HSR Act expired on January 19, 2023.
5. On January 20, 2023, Benefitfocus (BNFT) announced that its stockholders approved the merger agreement with Voya Financial (VOYA). The transaction is expected to close on January 24, 2023.
6. On January 20, 2023, the Austrian Federal Competition Authority approved Thoma Bravo’s proposed acquisition of Coupa Software Incorporated (COUP).

Hurdles:

1. January 16, 2023: According to Reuters, Microsoft (MSFT) is likely to receive an EU antitrust warning about its $69 billion bid for Activision Blizzard (ATVI), that could pose another challenge to completing the deal.
2. On January 18, 2023, Ritchie Bros. (RBA) holder Luxor Capital formally filed a preliminary proxy in opposition to the company’s planned acquisition of IAA Inc. (IAA).
3. On January 20, 2023, Altra Industrial Motion (AIMC) disclosed that the company’s planned sale to Regal Rexnord (RRX) was filed under a simplified procedure with China’s antitrust regulator.

Shareholders Meeting Schedule:

1. IAA, Inc. (IAA) – March 14, 2023
2. Elevate Credit (ELVT) – February 15, 2023
3. Atlas Corp. (ATCO) – February 24, 2023

Closed Deals:

1. The acquisition of The Valens Company (VLNS) by SNDL Inc. (SNDL) on January 17, 2023. It took 148 days for this deal to be completed.
2. The acquisition of AVEO Oncology (AVEO) by LG Chem on January 19, 2023. It took 93 days for this deal to be completed.
3. The acquisition of Maverix Metals (MMX) by Triple Flag Precious Metals Corp. (TFPM) on January 19, 2023. It took 70 days for this deal to be completed.
4. The acquisition of Ayala Pharmaceuticals (AYLA) by Advaxis (ADXS) on January 19, 2023. It took 92 days for this deal to be completed.

Weekly Spread Changes:

The table below shows weekly spread changes between January 13, 2023, and January 20, 2023.

Top 10 Merger Arbitrage 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

Two new potential Merger Arbitrage deals was added to the ‘Deals In The Works‘ section last week.

1. On January 13, 2023, National Instruments (NATI) announced that its Board of Directors has initiated a review and evaluation of strategic options, to maximize shareholder value. On January 17, 2023, Emerson (EMR) announced that it submitted a proposal to acquire Instruments for $53 per share in cash at an implied enterprise value of $7.6 billion.
2. On January 20, 2023, Venator Materials (VNTR) announced the appointment of Moelis & Company and Kirkland & Ellis, in addition to business and operational advisor Alvarez & Marsal to assist with strategic review and engagement with stakeholders.

Updates

1. Jim Ratcliffe’s company INEOS formally entered the bidding process to buy Premier League soccer club Manchester United (MANU).
2. J. Hale Hoak of Hoak & Co requested that Natural Gas Services Group (NGS) call off its permanent CEO search, consider adding directors to its Board, explore a sale or merger of the company and use debt to fund growth opportunities.
3. Kushner Companies informed Veris Residential (VRE) that it is not currently interested in moving forward with a transaction with the REIT.

SPAC Arbitrage

SPAC Business Combination

1. On January 10, 2023, Wejo Group Limited (WEJO) entered into a definitive business combination agreement to combine with TKB Critical Technologies 1 (USCT).
2. On January 17, 2023, Spectaire announced entry into a definitive agreement to go public via a business combination with Perception Capital Corp. II (PCCT).
3. On January 18, 2023, APRINOIA Therapeutics Inc. and Ross Acquisition Corp II (ROSS) entered into a definitive agreement for a business combination.
4. On January 19, 2023, Openmarkets Group Pty Ltd and Broad Capital Acquisition Corp. (BRAC) entered into a definitive Agreement and Plan of Merger and Business Combination Agreement.

Terminated

1. On January 12, 203, Clover Inc. and FoxWayne Enterprises Acquisition Corp. (FOXW) by mutual agreement, entered into a letter agreement to terminate the Merger Agreement.

List of all pending Merger Arbitrage deals:

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.