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TravelCenters of America Acquired By BP – Merger Arbitrage Mondays

  • February 20, 2023

British energy company BP p.l.c. (BP) announced the acquisition of TravelCenters of America (TA) last week, at a premium of almost 74% to TA’s closing price on February 15, 2023.

Representative TA Travel CenterHeadquartered in Westlake, Ohio, TravelCenters of America is a full-service travel center operator and franchisor of the TA, Petro Stopping Centers and TA Express travel center brands. TA has travel centers in over 281 locations in 44 states. The travel centers, that average around 25 acres, offer a wide range of services and products, including diesel and gasoline fuel, truck maintenance and repair, full-service and quick-service restaurants, travel stores, car and truck parking and other services.

Around 70% of the company’s total gross margin is generated by its convenience services business.

TA’s shares were up 70% on February 16, 2023, following the announcement of BP’s acquisition of the company. According to BP, ‘Convenience’ is one of its five strategic transition growth engines in which it aims to significantly grow investment through this decade.  The deal was announced a day after the Biden administration set new standards to invest $7.5 billion, in EV charging, $10 billion in clean transportation, and over $7 billion in EV battery components, critical minerals, and materials along routes that TravelCenters of America operates in. TravelCenters of America and Electrify America also announced that they will offer electric vehicle charging at select Travel Centers of America and Petro locations, with a goal of installing approximately 1,000 EV chargers at 200 locations along major highways over the next five years.

Under the terms of the agreement, BP Products North America Inc., a wholly-owned indirect subsidiary of BP p.l.c. will acquire TravelCenters of America for $86 per share in cash, representing a premium of 84%  to TA’s 30 day average trading price ended February 15, 2023 of $46.68.

Bernard Looney, CEO of BP, said: “This is BP’s strategy in action. We are doing exactly what we said we would, leaning into our transition growth engines. This deal will grow our convenience and mobility footprint across the US and grow earnings with attractive returns. Over time, it will allow us to advance four of our five strategic transition growth engines. By enabling growth in EV charging, biofuels and RNG and later hydrogen, we can help our customers decarbonize their fleets. It’s a compelling combination.

As part of the transaction, TA entered into amended lease agreements with Service Properties Trust. According to the press release, “Following the closing, BP will become SVC’s largest tenant, accounting for 29% of SVC’s gross assets as of December 31, 2022, with five leases for 178 travel centers. Under the amended leases, aggregate annual minimum rent will be $254.0 million, with annual 2% increases throughout the initial 10-year terms and any renewal terms. SVC also currently owns certain tradenames and trademarks associated with TA’s business and has agreed to sell those tradenames and trademarks to BP at their current book value of $89.4 million.”

The current spread on the deal is 2.11%, with an annualized return of 5.89% if the deal closes by mid-year 2023.


Merger Arbitrage activity decreased last week with one new deal announced, and one deal closing. SPAC activity increased last week, with three new SPAC IPOs filed and seven SPAC business combinations announced.

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 202320
Total Number of Deals Not Completed in 20232
Total Number of Pending Deals
Cash Deals43
Stock Deals10
Stock & Cash Deals3
Special Conditions16
Total Number of Pending Deals72
Aggregate Deal Consideration$488.29 billion

New Merger Arbitrage Deals:

  1. The acquisition of TravelCenters of America (TA) by BP p.l.c. (BP) for $4.4 billion or $86 per share in cash.

Deal Updates:

  1. On February 13, 2023, L3Harris Technologies (LHX), in consulation with Aerojet Rocketdyne Holdings (AJRD), withdrew and resubmitted its notification with the HSR on February 13, 2023. The applicable waiting period will expire on March 15, 2023.
  2. On February 13, 2023, Atlas Technical Consultants (ATCXmade the necessary filings under the HSR Act with the U.S. FTC and the Antitrust Division of the U.S. DOJ. The applicable waiting period under the HSR Act is expected to expire on March 15, 2023.
  3. On February 14, 2023, In a regulatory filing Warren Buffett’s Berkshire Hathaway (BRK.Adisclosed that it reduced its investment in Activision Blizzard (ATVI) in late 2022.
  4. On February 14, 2023, Maxar Technologies (MAXRannounced the expiration of the 60-day “go-shop” period.
  5. On February 16, 2023, LHC Group (LHCGreceived a delisting notice from Nasdaq, that identified Wednesday as the last trading day for the company as UnitedHealth (UNH) completes its acquisition. The merger is tentatively scheduled to close prior to the market open on February 23, 2023; subject to pending regulatory approvals.
  6. Duck Creek Technologies (DCTmade the filings required under the HSR Act, on January 18, 2023. The waiting period under the HSR Act is scheduled to expire on February 17, 2023.
  7. On February 17, 2023, Rogers Communications (RCI), Shaw Communications (SJR), extended the outside date of the proposed merger to March 31, 2023.

Approvals:

  1. On February 13, 2023, AgroFresh Solutions (AGFS) and Paine Schwartz Partners announced that the waiting period under the HSR Act expired on January 5, 2023.
  2. On February 15, 2023, Amgen (AMGN) announced that the Austria Federal Competition Authority approved its proposed acquisition of Horizon Therapeutics (HZNP).
  3. On February 15, 2023, shareholders of Elevate Credit (ELVTapproved the company’s merger with Park Cities Asset Management at a special meeting of shareholders.

Hurdles:

  1. On February 14, 2023, According to Reuters, Microsoft (MSFT) will make a last-ditch effort to defend its bid for Activision Blizzard (ATVI) in front of EU and national antitrust officials at a closed hearing on February 21, 2023.
  2. On February 14, 2023, Bloomberg reported that Foxglove wrote to the European Union’s antitrust arm  to voice “grave concerns” over Amazon’s (AMZN) purchase of iRobot Corporation (IRBT).
  3. On February 15, 2023, Eminence Capital, a shareholder in Ritchie Bros. Auctioneers (RBA) has come out against the company’s acquisition of IAA Inc (IAA), opposing a deal that has received support from activists Starboard Value LP and Ancora Group Holdings.
  4. On February 16, 2023, Arizona’s Attorney General Kris Mayes announced that her office has launched an anti-trust investigation of the proposed merger between The Kroger (KR) and Albertsons (ACI).
  5. On February 17, 2023, VMware (VMW) and Broadcom (AVGOextended the Outside Date of their merger agreement to May 26, 2023.

Shareholders Meeting Schedule:

  1. IsoPlexis Corporation (ISO) and Berkeley Lights (BLI) – March 16, 2023
  2. Aerojet Rocketdyne Holdings (AJRD) – March 16, 2023
  3. Amryt Pharma (AMYT) – March 22, 2023

Closed Deals:

  1. The acquisition of Velodyne Lidar (VLDR) by Ouster (OUST) on February 13, 2023. It took 98 days for this deal to be completed.

Weekly Spread Changes:

The table below shows weekly spread changes between February 10, 2023, and February 17, 2023.

SymbolQuoteAcquiring
Company
Acquiring
Company Quote
Current
Spread
Last Week
Spread
Spread Change
Weekly
Deal
Type
GSMG0.85Cheers Inc (N/A)82.35%63.18%19.17%All Cash
GRIN14.33Taylor Maritime Investments Limited and Good Falkirk Limited (N/A)46.55%27.43%19.12%Special Conditions
IAA41.46Ritchie Bros. Auctioneers Incorporated (RBA)62.5912.77%9.37%3.40%Cash Plus Stock
TSEM40.85Intel Corporation (INTC)27.6129.74%27.47%2.27%All Cash
BKI63.94Intercontinental Exchange, Inc. (ICE)107.1132.94%31.52%1.42%Special Conditions
HVBC32.148Citizens Financial Services, Inc. (CZFS)85.876.84%10.55%-3.71%All Stock
FSTX4.98invoX Pharma (N/A)42.97%47.72%-4.75%All Cash
OIIM4.87FNOF Precious Honour Limited and Rim Peak Technology Limited (N/A)2.67%9.41%-6.74%All Cash
ONEM16.01Amazon (AMZN)97.212.43%19.36%-6.93%All Cash
SIMO69.63MaxLinear, Inc. (MXL)36.7454.81%64.10%-9.29%Cash Plus Stock

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.

SymbolAnnounced
Date
Acquiring
Company
Closing
Price
Last
Price
Closing
Date
ProfitAnnualized
Profit
GSMG07/11/2022Cheers Inc (N/A)$1.55$0.8504/11/202382.35%589.39%
SAVE07/28/2022JetBlue Airways Corporation (JBLU)$31.00$19.1906/30/202461.54%45.20%
SIMO05/05/2022MaxLinear, Inc. (MXL)$107.80$69.6306/30/202354.81%152.72%
IRBT08/05/2022Amazon (AMZN)$61.00$41.1908/05/202348.09%105.12%
GRIN10/12/2022Taylor Maritime Investments Limited and Good Falkirk Limited (N/A)$21.00$14.3303/31/202346.55%424.73%
FSTX06/23/2022invoX Pharma (N/A)$7.12$4.9801/31/202342.97%-825.51%
BKI05/04/2022Intercontinental Exchange, Inc. (ICE)$85.00$63.9405/04/202332.94%162.46%
TSEM02/15/2022Intel Corporation (INTC)$53.00$40.8502/15/202329.74%-2714.05%
ACI10/14/2022The Kroger Co. (KR)$27.25$21.2203/31/202428.42%25.55%
VMW05/26/2022Broadcom Inc. (AVGO)$142.50$116.1505/26/202322.69%86.25%

Deals In The Works

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

  1. On February 10, 2023, Berkshire Grey (BGRY), confirmed that it had received a non-binding indication of interest from SoftBank Group Corp. to acquire all of the outstanding capital stock of the company for $1.30 per share in cash.
  2. On February 17, 2023, Bloomberg reported that Tesla (TSLA) has been weighing a takeover of battery-metals miner Sigma Lithium Corp., (SGML) amid rampant demand for the metal used in electric vehicle batteries.

Update

  1. Purple Innovation (PRPL) responds to Coliseum Capital’s campaign to replace a majority of the board. It believes coliseum’s effort to take control of the company without paying a suitable premium is not in the best interests of all Purple shareholders.
  2. According to Bloomberg, Qatari investors are readying a roughly £5 billion ($6 billion) opening bid for Manchester United (MANU).
  3. The Special Committee of F45 Training Holdings (FXLV) paused its review and evaluation as the Board focuses on securing this financing to address F45’s liquidity needs.
  4. The Board of Directors of Life Storage (LSI) unanimously rejected an unsolicited proposal from Public Storage stating Public Storage (PSA) significantly undervalues Life Storage and its prospects for future growth and value creation.

SPAC Arbitrage

Potential SPAC IPO

  1. On February 10, 2023, SilverBox Corp. III filed for a $100 million IPO to sell 10 million units for a prospective business combination with one or more businesses with an aggregate enterprise value over $750 million.

SPAC IPO

  1. On February 10, 2023, Bellevue Life Sciences Acquisition Corp. priced its $60 million IPO and its units are expected to begin trading on the Nasdaq under the symbol (BLACU).
  2. On February 13, 2023,  Mars Acquisition Corp. (MARXU) announced the pricing of its $60 million initial public offering.
  3. On February 15, 2023, Distoken Acquisition Corporation (DISTU) announced the pricing of a $60 million initial public offering.

SPAC Business Combination

  1. On February 13, 2023, SVES Inc. and Relativity Acquisition Corp. (RACY) entered into a definitive business combination agreement.
  2. On February 13, 2023, Financial Strategies Acquisition Corp. (FXCOannounced the execution of a definitive business combination agreement with Austin Biosciences Corp.
  3. On February 13, 2023, Roadzen, Inc. and Vahanna Tech Edge Acquisition I Corp. (VHNAentered into a definitive merger agreement.
  4. On February 14, 2023, Drilling Tools International Holdings, Inc. ROC Energy Acquisition Corp. (ROC) announced a definitive agreement for a business combination that will result in DTI becoming a U.S. publicly listed company.
  5. On February 14, 2023, Vast Solar Pty Ltd, and Nabors Energy Transition Corp. (NETCannounced a definitive agreement for a business combination.
  6. On February 16, 2023, Honeycomb Battery Company and Nubia Brand International Corp. (NUBIannounced the signing of a definitive agreement, for a proposed merger of the two companies.
  7. On February 16, 2023, NewGenIvf Limited and A SPAC I Acquisition Corp. (ASCA) announced that they have entered into a definitive merger agreement for a business combination.

Completed

  1. On February 13, 2023, Intuitive Machines, LLC, (LUNRannounced the completion of its business combination with Inflection Point Acquisition Corp. (IPAX).
  2. On February 15, 2023, Ocean Biomedical (OCEAannounced the completion of its business combination with Aesther Healthcare Acquisition Corp. (AEHA).
  3. On February 15, 2023, Southland Holdings, LLC (SLND), and Legato Merger Corp. II (LGTOcompleted their previously announced business combination.
  4. On February 16, 2023, Verde Clean Fuels announced the completion of the previously announced business combination with CENAQ Energy Corp. (CENQ).
  5. On February 17, 2023, Mountain Crest Acquisition Corp. III (MCAE) announced the completion of its business combination with ETAO International Group. The securities of ETAO International Co. will commence trading its shares on Nasdaq under the ticker symbol (ETAO) on February 21, 2023.

Terminated

  1. On February 16, 2023, Good Works II (GWII) announced that it is mutually terminating its combination with drug developer Direct Biologics.

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), TEGNA (TGNA), 1Life Healthcare (ONEM) and CVS Health (CVS). 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.