UBS Acquires Credit Suisse In A Fire Sale – Merger Arbitrage Mondays

UBS Group AG (UBS) confirmed on Sunday evening that it is acquiring Credit Suisse for a total of 3 billion Swiss francs or about $3.24 billion in an all-stock deal. The deal was facilitated by the Swiss government and international regulators to ensure the stability of the Swiss banking system. The offer is a fraction of Credit Suisse’s market cap of almost $8 billion last Friday. The stock, which had dropped from $8 a year ago to just above $2 is likely to drop sharply into penny stock territory when the market opens on Monday.

The deal was announced a week after the collapse of two large U.S. banks. We have been covering the turmoil in the last two editions of our weekly Friday Wrap articles: FDIC Takes Control of Silicon Valley Bank and Rescuing First Republic Bank.

Swiss President Alain Berset said the deal is “one of great breadth for the stability of international finance“. “An uncontrolled collapse of Credit Suisse would lead to incalculable consequences for the country and the international financial system.” The deal has been welcomed by The Federal Reserve and the Treasury Department in the United States.

Credit Suisse’s shares dropped more than 24% last week, in the midst of a series of scandals that led to a decline in client and investor confidence. Having struggled with multiple scandals, the company’s ADSs have dropped 89% in the past five years.

According to Bloomberg: UBS Group AG’s government-brokered deal to buy Credit Suisse Group AG is historic, complex and unique.

The first merger of two banks both deemed systemically important since the financial crisis almost 15 years ago was put together in a matter of days.

Under the terms of the all-share transaction, Credit Suisse shareholders will receive 1 UBS share for every 22.48 Credit Suisse shares held, equivalent to CHF 0.76/share for a total consideration of CHF 3 billion. UBS benefits from CHF 25 billion of downside protection from the transaction to support marks, purchase price adjustments and restructuring costs, and additional 50% downside protection on non-core assets.

UBS anticipates that the transaction is EPS accretive by 2027 and the bank remains capitalized well above its common equity tier 1 capital ratio target of 13%.

UBS has obtained pre-agreement from FINMA, Swiss National Bank, Swiss Federal Department of Finance and other core regulators on the timely approval of the transaction. The deal does not require shareholders approval and is expected to be completed in the second quarter of 2023.

Merger Arbitrage activity increased significantly last week with six new deals announced, and one deal closing. Four of the six new deals announced last week were potential deals in the works. Pfizer’s (PFE) acquisition of Seagen (SGEN) for $43 billion was the largest deal announced last week.

Additionally, there were seven new potential deals in the works announced last week.

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 Provention Bio (PRVB) by Sanofi (SNY) for $1.64 billion or $25 per share in cash.
2. The acquisition of Seagen (SGEN) by Pfizer (PFE) for $43 billion or $229 per share in cash. We added SGEN as a potential deal to the Deals in the Works section on February 26, 2023, and the price after the news of the potential deal came out was $178.16.
3. The acquisition of Momentive Global (MNTV) by a consortium led by Symphony Technology Group for $1.5 billion or $9.46 per share in cash. We added MNTV as a potential deal to the Deals in the Works section on October 19, 2022, and the price after the news of the potential deal came out was $7.54.
4. The acquisition of Univar Solutions (UNVR) by Apollo (APO) for $8.1 billion or $36.15 per share in cash. We added UNVR as a potential deal to the Deals in the Works section on November 25, 2022, and the price after the news of the potential deal came out was $32.39.
5. The acquisition of Cvent Holding (CVT) by Blackstone for $4.6 billion or $8.50 per share in cash. We added CVT as a potential deal to the Deals in the Works section on January 31, 2023, and the price after the news of the potential deal came out was $8.07.
6. The acquisition of Credit Suisse Group AG (CS) by UBS Group AG (UBS) for $3 billion in an all stock deal. Under the terms of the agreement, Credit Suisse shareholders will receive 1 UBS share for every 22.48 Credit Suisse shares held.

Deal Updates:

1. On March 13, 2023, Cardiovascular Systems (CSII) and Abbott (ABT) filed notification and report forms under the HSR Act with the Department of Justice Antitrust Division and the Federal Trade Commission.
2. On March 15, 2023, Biosynex SA announced that it has extended its tender offer for Chembio Diagnostics (CEMI) from March 14, 2023 to March 28, 2023.
3. On March 17, 2023, JetBlue (JBLU) has set March 27, 2023, as the record date for the March 2023 prepayment to Spirit (SAVE) stockholders, with payment of the March 2023 additional prepayment to occur on March 31, 2023.

Approvals:

1. On March 10, 2023, Volta (VLTA) and Shell (SHEL) received the final regulatory approval required under article L.151-3 of the French Code Monétaire et Financier (the “French FDI law”) for Shell to complete its acquisition of Volta.
2. On March 14, 2023, IAA, Inc. (IAA) received approval from its stockholders for the stock and cash acquisition of the company by Ritchie Bros. Auctioneers Incorporated (RBA).
3. On March 14, 2023, Atlas Air Worldwide Holdings (AAWW) announced that all regulatory conditions to closing set forth in the Merger Agreement with Apollo (APO) were satisfied.
4. On March 16, 2023, shareholders of IsoPlexis Corporation (ISO) approved the company’s merger with Berkeley Lights (BLI) at a special meeting of shareholders.
5. On March 16, 2023, Aerojet Rocketdyne Holdings (AJRD) announced that its stockholders voted to approve the company’s proposed acquisition by L3Harris Technologies (LHX).

Hurdles:

1. March 13, 2023, David E. Ritchie, Co-Founder, Former Chairman and Director; and Russell C. Cmolik, Former President and Director of Ritchie Bros. Auctioneers Incorporated (RBA), released a letter to shareholders of Ritchie Bros speaking out against the merger with IAA, Inc. (IAA). Ritchie Bros responded stating that shareholders should look to the future, not the past.
2. On March 15, 2023, pursuant to the HSR Act, Aerojet Rocketdyne Holdings (AJRD) and L3Harris (LHX) each received a request for additional information and documentary material, “Second Request,” from the FTC.
3. March 16, 2023: According to Reuters, Microsoft (MSFT) has offered remedies in an attempt to gain EU antitrust approval for its acquisition of Activision (ATVI).

Shareholders Meeting Schedule:

1. Maxar Technologies (MAXR) – April 19, 2023

Closed Deals:

1. The acquisition of Atlas Air Worldwide Holdings (AAWW) by Apollo (APO) on March 17, 2023. It took 225 days for this deal to be completed.

Weekly Spread Changes:

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

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

1. On March 13, 2023, Synchronoss Technologies (SNCR) confirmed that on March 10, 2023, it received a non-binding proposal from B. Riley Financial to acquire all outstanding shares of the company’s common stock for a price of $1.15 per share, payable in cash.
2. On March 14, 2023, Reuters reported that Infinera Corp (INFN) is exploring options that include a sale of the company.
3. On March 14, 2023, The Board of Directors of Jounce Therapeutics (JNCE) confirmed that Concentra Biosciences, of which Tang Capital Partners is the controlling shareholder, has made an unsolicited and non-binding proposal to acquire 100% of the equity of Jounce.
4. On March 15, 2023, Bloomberg reported that First Republic Bank (FRC) is exploring strategic options including a sale, and on March 16, 2023, The Wall Street Journal reported that several banks including JPMorgan Chase & Co (JPM) and Morgan Stanley (MS) are in talks with First Republic Bank (FRC) for a potential deal.
5. On March 16, 2023, the Financial Times reported that Richard Branson’s Virgin Orbit (VORB) is in discussions with two financial investors about a potential buyout or fundraising.
6. On March 16, 2023, Lifecore Biomedical (LFCR), announced that the Board of Directors of the company intend to initiate a process to evaluate the company’s potential strategic alternatives to maximize value for stockholders.
7. On March 17, 2023, Pear Therapeutics (PEAR) announced that it is engaged in a process to explore strategic alternatives to maximize shareholder value.

SPAC Arbitrage

Potential SPAC IPO

1. AI Transportation Acquisition Corp. filed its S-1 on March 15, 2023, and disclosed the terms for its SPAC IPO: 5.0 million units at $10.00 each to raise $50.0 million.

SPAC IPO

1. Four Leaf Acquisition Corp. priced its downsized $52 million IPO and its units are expected to begin trading on the Nasdaq under the symbol “FORL” Friday, March 17, 2023.

SPAC Business Combination

1. On March 13, 2023, Mobiv Acquisition Corp (MOBV) entered into a definitive merger agreement whereby Mobiv will combine with SRIVARU Holding Ltd.
2. On March 13, 2023,  Aark Singapore Pte Ltd, and Worldwide Webb Acquisition Corp. (WWAC) entered into a definitive merger agreement.
3. On March 14, 2023, Murano PV, S.A. DE C.V. announced its plan to go public via a business combination with HCM Acquisition Corp (HCMA).

Completed

1. On March 14, 2023, KINS Technology Group Inc (KINZ) announced the successful completion of its previously announced business combination with CXApp Holding Corp.
2. On March 16, 2023, YS Biopharma Co., Ltd. (YS) completed the business combination with Summit Healthcare Acquisition Corp. (SMIH).
3. On March 17, 2023, NioCorp Developments (NB) completed the business combination with GX Acquisition Corp. II (GXII).

Terminated

1. On March 14, 2023,  Globalink Investment (GLLI) announced that the previously announced agreement and plan of merger with Tomorrow Crypto Group was terminated on March 8, 2023. As a result, Globalink will seek an alternative business combination.

List of all pending Merger Arbitrage deals:

Disclaimer: I have long positions in Oak Street Health (OSH), Activision Blizzard (ATVI), Spirit Airlines (SAVE),  First Horizon (FHN), Tower Semiconductor (TSEM), TEGNA (TGNA) 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.