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Merger Arbitrage activity declined last week with one new deal announced and one deal closing.
Evoqua Water Technologies (AQUA)
Xylem (XYL), a global water technology company entered into an agreement last week to acquire Evoqua Water Technologies (AQUA), a mission critical water and wastewater treatment solutions for $7.5 billion in an all stock deal.
Headquartered in Pittsburgh, Pennsylvania, Evoqua operates through two segments, Integrated Solutions and Services, and Applied Product Technologies. The Integrated Solutions and Services segment provides outsourced water service contracts, capital systems and related recurring aftermarket services, and the Applied Product Technologies segment provides advanced filtration and separation products.
Evoqua Products and Services
Evoqua started trading as a public company in 2017 and Xylem had approached the company for a potential acquisition before its IPO. According to Reuters, Evoqua also received acquisition interest from other potential buyers before agreeing to a deal with Xylem.
“Solving the world’s water challenges has never been more urgent. Our acquisition of Evoqua creates a transformative global platform to address water scarcity, affordability and resilience at even greater scale,” said Patrick Decker, President and CEO of Xylem. “The combined company delivers an unparalleled portfolio of advanced technologies, integrated services and application expertise across the water cycle.”
Under the terms of the agreement, Xylem will acquire Evoqua in an all-stock transaction at a 0.480 exchange ratio, representing a value of $52.89 per share or a 29% premium based on Xylem and Evoqua closing prices as of January 20, 2023. Upon closing, Xylem shareholders will own approximately 75% and Evoqua shareholders will own approximately 25% of the combined company.
Xylem’s shares dropped after the deal was announced. With Xylem currently at $102.42, the deal values Evoqua at $49.16 per share. With Evoqua currently trading at $47.78, the spread is 2.89% or 6.94% annualized if the deal closes by mid-2023.
You can find all the active deals listed below in our Merger Arbitrage Tool (MAT) which automatically updates itself during market hours.
| Total Number of Deals Closed in 2023 | 11 |
| Total Number of Deals Not Completed in 2023 | 1 |
| Total Number of Pending Deals | |
| Cash Deals | 42 |
| Stock Deals | 11 |
| Stock & Cash Deals | 3 |
| Special Conditions | 16 |
| Total Number of Pending Deals | 72 |
| Aggregate Deal Consideration | $464.55 billion |
New Merger Arbitrage Deals:
Deal Updates:
Approvals
Hurdles:
Shareholders Meeting Schedule:
Closed Deals:
Weekly Spread Changes:
The table below shows weekly spread changes between January 20, 2023, and January 27, 2023.
| Symbol | Quote | Acquiring Company | Acquiring Company Quote | Current Spread | Last Week Spread | Spread Change Weekly | Deal Type |
|---|---|---|---|---|---|---|---|
| FSTX | 4.21 | invoX Pharma (N/A) | 69.12% | 17.49% | 51.63% | All Cash | |
| GSMG | 1.19 | Cheers Inc (N/A) | 30.25% | 22.05% | 8.20% | All Cash | |
| LHCG | 156.74 | Optum (N/A) | 8.46% | 3.28% | 5.18% | All Cash | |
| IAA | 41.22 | Ritchie Bros. Auctioneers Incorporated (RBA) | 58.9 | 13.99% | 10.51% | 3.48% | Cash Plus Stock |
| VLTA | 0.855 | Shell plc (SHEL) | 58.51 | 0.58% | -2.21% | 2.79% | All Cash |
| OIIM | 4.635 | FNOF Precious Honour Limited and Rim Peak Technology Limited (N/A) | 7.87% | 11.11% | -3.24% | All Cash | |
| SJR | 29.78 | Rogers Communications Inc. (RCI) | 48.56 | 2.15% | 5.40% | -3.25% | Special Conditions |
| FCRD | 4.65 | Crescent Capital BDC, Inc. (CCAP) | 15 | 3.01% | 6.92% | -3.91% | Special Conditions |
| ATVI | 76.61 | Microsoft Corporation (MSFT) | 248.16 | 24.00% | 28.66% | -4.66% | All Cash |
| ELSE | 4.869 | Mobile X Global, Inc. (N/A) | -0.80% | 6.15% | -6.95% | All Cash |
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.
| Symbol | Announced Date | Acquiring Company | Closing Price | Last Price | Closing Date | Profit | Annualized Profit |
|---|---|---|---|---|---|---|---|
| FSTX | 06/23/2022 | invoX Pharma (N/A) | $7.12 | $4.21 | 01/31/2023 | 69.12% | 12614.61% |
| SIMO | 05/05/2022 | MaxLinear, Inc. (MXL) | $109.56 | $67.01 | 06/30/2023 | 63.50% | 152.49% |
| SAVE | 07/28/2022 | JetBlue Airways Corporation (JBLU) | $31.00 | $19.76 | 06/30/2024 | 56.88% | 40.08% |
| GRIN | 10/12/2022 | Taylor Maritime Investments Limited and Good Falkirk Limited (N/A) | $21.00 | $14.26 | 03/31/2023 | 47.27% | 282.82% |
| BKI | 05/04/2022 | Intercontinental Exchange, Inc. (ICE) | $85.00 | $60.89 | 05/04/2023 | 39.60% | 152.13% |
| IRBT | 08/05/2022 | Amazon (AMZN) | $61.00 | $45.36 | 08/05/2023 | 34.48% | 66.94% |
| GSMG | 07/11/2022 | Cheers Inc (N/A) | $1.55 | $1.19 | 04/11/2023 | 30.25% | 153.36% |
| ACI | 10/14/2022 | The Kroger Co. (KR) | $27.25 | $21.19 | 03/31/2024 | 28.60% | 24.45% |
| ATVI | 01/18/2022 | Microsoft Corporation (MSFT) | $95.00 | $76.61 | 06/30/2023 | 24.00% | 57.64% |
| TSEM | 02/15/2022 | Intel Corporation (INTC) | $53.00 | $42.78 | 02/15/2023 | 23.89% | 512.93% |
Two new potential Merger Arbitrage deals was added to the ‘Deals In The Works‘ section last week.
Updates
SPAC Business Combination
Completed
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.