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Silicon Motion – MaxLinear Deal Witnesses Major Spread Changes – Merger Arbitrage Mondays

  • July 31, 2023

Key Highlights

  • Silicon Motion expresses its intention to ensure the enforcement of the deal agreement with MaxLinear.
  • Reata Pharmaceuticals (RETA) to be acquired by Biogen (BIIB) for $7.3 billion.
  • Amazon (AMZN) and iRobot (IRBT) amend the existing terms of their merger agreement.

Silicon Motion (SIMO)

Silicon Motion and MaxLinear (MXL) announced their merger agreement over a year ago on May 5, 2022. Since announcement, the deal has often found itself in the top 10 list on our Merger Arbitrage Tool, primarily on account of the fact that the deal is a cross-border semiconductor deal that needed approval from China.

The spread on the deal saw significant changes last week, after the Chinese regulator approved the merger but on the same day MaxLinear attempt to walk away from the deal.

SIMO Spread History

We wrote the following about this in our Event Driven Monitor on Thursday, July 27, 2023:

We experienced a highly unusual event in the risk arbitrage world today. The acquisition of Silicon Motion Technology (SIMO) by Maxlinear (MXL) was trading at a massive spread as most semiconductor deals that require approval by China’s State Administration for Market Regulation (SAMR) agency, tend to do. The spread on the cash plus stock deal was 104.3% on Tuesday.

The spread narrowed significantly on Wednesday morning as SAMR suddenly granted conditional approval for the deal. The price of SIMO shot up from $52.20 at the close on Tuesday to $94.20 at the open on Wednesday. Unfortunately, later the same day, MaxLinear indicated that they were going to terminate the merger for various reasons outlined in this SEC filing. The stock promptly dropped back down to $65.35 and the spread on the deal is back up to 60.72%.

We are not marking the deal as failed because the parties are very likely to end up in court.

As expected, Silicon Motion Technolog decided to fight Maxlinear to make them perform and complete the deal. The deal will likely end up in court with an out of court settlement at a lower price.

Reata Pharmaceuticals (RETA)

On Friday, July 28, 2023, Biogen (BIIB) and Reata Pharmaceuticals (RETA) entered into a definitive agreement under which Biogen will acquire Reata for $172.50 per share in cash, reflecting an enterprise value of approximately $7.3 billion.

Through this acquisition, Biogen will gain access to Skyclarys, the first treatment for the rare, inherited neurologic disorder Friedreich’s ataxia. This treatment was approved by the FDA in February earlier this year, and has the potential to achieve sales of $1.5 billion by the year 2030, according to analysts.

Christopher Viehbacher, Biogen’s President and Chief Executive Officer, stated the following regarding the deal:

“With extensive expertise in rare disease product development and global commercialization, as demonstrated by SPINRAZA and the recent launch of QALSODY, we believe Biogen has the foundation in place to accelerate the delivery of SKYCLARYS to patients around the world. This is a unique opportunity for Biogen to bolster our near-term growth trajectory, and SKYCLARYS is an excellent complement to our global portfolio of treatments for neuromuscular and rare disease.”

The deal is expected to be completed in the fourth quarter of 2023. The current spread on the deal is 3.29%.


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

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 2023101
Total Number of Deals Not Completed in 20237
Total Number of Pending Deals
Cash Deals38
Stock Deals18
Stock & Cash Deals4
Special Conditions7
Total Number of Pending Deals67
Aggregate Deal Consideration$723.04 billion

New Merger Arbitrage Deals:

  1. The acquisition of Sculptor Capital Management (SCU) by Rithm Capital Corp. for $639 million or $11.15 per share in cash. We added SCU as a potential deal to the Deals in the Works section on November 18, 2022, and the price after the news of the potential deal came out was $9.95.
  2. The acquisition of American National Bankshares (AMNB) by Atlantic Union Bankshares Corporation (AUB) for $416.8 million in an all stock deal. Under the terms of the merger agreement, each outstanding share of American National common stock will be converted into the right to receive 1.35 shares of Atlantic Union common stock.
  3. The merger of PacWest Bancorp (PACW) and Banc of California (BANC) for a closing value of $1.55 billion in an all stock deal. Under the terms of the agreement, PacWest stockholders will receive 0.6569 of a share of Banc of California common stock for each share of PacWest common stock.
  4. The acquisition of Reata Pharmaceuticals (RETA) by Biogen (BIIB) for $7.3 billion or $172.50 per share in cash.

Deal Updates:

  1. On July 24, 2023, Mr. Cooper Group (COOPextended the expiration date of its offer to acquire Home Point Capital (HMPT) from July 21, 2023 to July 31, 2023.
  2. On July 25, 2023, Amazon (AMZN) and iRobot (IRBT) announced that they have agreed to amend the existing terms of their merger agreement to reflect a change to the price per share. Under the amended terms, Amazon will pay $51.75 per share revised from $61.00 per share.
  3. On July 25, 2023, Eli Lilly and Company (LLY) announced the extension of the expiration of the tender offer to acquire DICE Therapeutics (DICE) from July 28, 2023 to August 8, 2023.
  4. On July 26, 2023, L3Harris Technologies (LHXreported in its earnings release that it has been advised that the FTC will not block its acquisition of Aerojet Rocketdyne Holdings (AJRD). The companies expect to close the transaction by July 28, 2023.
  5. On July 26, 2023, Partners Bancorp’s (PTRS) board of directors declared a cash dividend of $0.04 per share, payable on August 17, 2023, to holders of record of its common stock as of the close of business on August 10, 2023.
  6. On July 27, 2023, 3D Systems Corporation (DDDannounced a target date of August 4, 2023 for the completion of due diligence and merger agreement discussions with Stratasys (SSYS).
  7. On July 27, 2023, the board of directors of Magellan Midstream Partners (MMPdeclared a quarterly cash distribution of $1.0475 per unit for the period April 1 through June 30, 2023. The distribution, which equates to $4.19 per unit on an annualized basis, will be paid on August 14 to unitholders of record at the close of business on August 7.
  8. On July 27, 2023, Home Point Financial Corporation, a wholly-owned subsidiary of Home Point Capital (HMPT), completed the sale of certain mortgage servicing rights held by HPF to Nationstar Mortgage LLC, a wholly owned subsidiary of Mr. Cooper Group (COOP) for the Bulk Purchase and Sale of Mortgage Servicing Rights, dated as of May 10, 2023.
  9. On July 28, 2023, Nano Dimension (NNDMannounced the cessation of its efforts to deliver the best present alternative for value creation for Stratasys (SSYS) shareholders through its $25 per share all-cash special tender offer and efforts to replace Stratasys’ entrenched board of directors.

Approvals:

  1. On July 21, 2023, Paratek Pharmaceuticals (PRTK), Gurnet Point Capital and Novo Holdings A/S announced the expiration of the waiting period under the HSR Act.
  2. On July 25, 2023, Arconic Corporation (ARNC) announced that its shareholders voted to approve the company’s pending acquisition by funds managed by affiliates of Apollo (APO). The transaction is expected to close in the third quarter of 2023.
  3. On July 26, 2023, China’s State Administration for Market Regulation granted conditional approval to Silicon Motion Technology’s (SIMO) acquisition by Maxlinear (MXL).
  4. On July 26, 2023, Midwest Holding (MDWT) announced that its shareholders approved the previously announced merger agreement with Antarctica Capital.
  5. On July 27, 2023, shareholders of Spectrum Pharmaceutical (SPPI) and Assertio Holdings (ASRTapproved the proposed definitive agreement pursuant to which Assertio will acquire Spectrum in an all-stock and contingent value rights (CVR) transaction.
  6. On July 28, 2023, NexTier Oilfield Solutions (NEX) and Patterson-UTI Energy (PTEN) announced the expiration of the waiting period under the HSR Act, in connection with the previously announced all-stock merger of equals transaction.

Hurdles:

  1. On July 26, 2023, MaxLinear (MXL) announced that it has exercised its contractual rights to terminate its merger agreement with Silicon Motion (SIMO).
  2. On July 27, 2023, Silicon Motion (SIMO) issued the following statement in response to a notice of purported termination of the Merger from MaxLinear (MXL):“MaxLinear’s eleventh-hour purported termination of its merger agreement with Silicon Motion is invalid and reflects a repudiation of MaxLinear’s obligations rather than any failure of Silicon Motion’s conditions to closing. In the 15 months since the signing of the merger agreement between the parties, Silicon Motion worked cooperatively with MaxLinear to obtain regulatory approvals for the merger, Silicon Motion complied with its obligations under the agreement and Silicon Motion has not suffered a material adverse effect. Silicon Motion expects MaxLinear to abide by its obligation under the merger agreement and intends to vigorously enforce its rights under the merger agreement.

Shareholders Meeting Schedule:

  1. Surface Oncology (SURF) – September 7, 2023.

Closed Deals:

  1. The acquisition of GreenLight Biosciences Holdings (GRNA) by Fall Line Capital, LLC on July 24, 2023. It took 55 days for this deal to be completed.
  2. The acquisition of Absolute Software Corporation (ABST) by Crosspoint Capital Partners, L.P. on July 27, 2023.  It took 77 days for this deal to be completed.
  3. The acquisition of Aerojet Rocketdyne Holdings (AJRD) by L3Harris Technologies (LHX) on July 28, 2023. It took 222 days for this deal to be completed.

Weekly Spread Changes:

The table below shows weekly spread changes between July 21, 2023, and July 28, 2023.

SymbolQuoteAcquiring
Company
Acquiring
Company Quote
Current
Spread
Last Week
Spread
Spread Change
Weekly
Deal
Type
DHC2.08Office Properties Income Trust (OPI)7.495-47.03%-54.18%7.15%All Stock
SAVE18.17JetBlue Airways Corporation (JBLU)7.8470.61%63.93%6.68%All Cash
SPPI1.025Assertio Holdings, Inc. (ASRT)5.68-1.20%-4.89%3.69%All Stock
IRBT39.51Amazon (AMZN)132.1830.98%28.58%2.40%All Cash
PNM44.9Avangrid, Inc. (AGR)37.4612.03%9.83%2.20%All Cash
SURF0.9701Coherus BioSciences, Inc. (CHRS)4.77513.39%15.29%-1.90%Special Conditions
TSEM37.225Intel Corporation (INTC)36.81542.38%45.80%-3.42%All Cash
NATI58.825Emerson Electric Co. (EMR)90.972.00%7.32%-5.32%All Cash
DM1.78Stratasys Ltd. (SSYS)18.6228.67%37.12%-8.45%All Stock
SIMO59.53MaxLinear, Inc. (MXL)24.8873.35%98.18%-24.83%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
SIMO05/05/2022MaxLinear, Inc. (MXL)$103.19$59.5308/07/202373.35%3,346.45%
SAVE07/28/2022JetBlue Airways Corporation (JBLU)$31.00$18.1706/30/202470.61%76.71%
TSEM02/15/2022Intel Corporation (INTC)$53.00$37.22508/15/202342.38%966.74%
IRBT08/05/2022Amazon (AMZN)$51.75$39.5102/05/202430.98%59.51%
DM05/25/2023Stratasys Ltd. (SSYS)$2.29$1.7812/31/202328.67%67.94%
ACI10/14/2022The Kroger Co. (KR)$27.25$21.6603/31/202425.81%38.45%
SGEN03/13/2023Pfizer Inc. (PFE)$229.00$192.1501/31/202419.18%37.84%
HZNP12/12/2022Amgen Inc. (AMGN)$116.50$99.91512/15/202316.60%43.90%
SURF06/16/2023Coherus BioSciences, Inc. (CHRS)$1.10$0.970109/30/202313.39%78.83%
FORG10/11/2022Thoma Bravo (N/A)$23.25$20.6609/30/202312.54%73.80%

SPAC Arbitrage

Potential SPAC IPO

  1. On July 26, 2023, GRD Biotechnolog(CGRD) submitted its S-1 filing for a $40 million IPO.

SPAC IPO

  1. On July 24, 2023, Keen Vision Acquisition Corporation (KVACU) announced the pricing of $130 million Initial Public Offering.
  2. On July 25, 2023, Haymaker Acquisition Corp. 4 (HYACannounced the pricing of its initial public offering of $200 million.

SPAC Business Combination

  1. On July 24, 2023, BlueRiver Acquisition Corp. (BLUA) and Spinal Stabilization Technologies entered into a definitive business combination agreement.

Terminated

  1. On July 26, 2023, NaturalShrimp (SHMP) announced that it has terminated its business combination with Yotta Acquisition Corp. (YOTA).

List of all pending Merger Arbitrage deals:

Disclaimer: I have long positions in Activision Blizzard (ATVI), Spirit Airlines (SAVE) and Tower Semiconductor (TSEM). 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.