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Stratasys To Engage In Discussions With 3D Systems – Merger Arbitrage Mondays

  • July 24, 2023

Key Highlights

  • Microsoft (MSFT) overcomes the FTC’s opposition to its acquisition of Activision Blizzard (ATVI).
  • Intercontinental Exchange (ICE) and Black Knight (BKI) decided to sell Black Knight’s Optimal Blue business to a subsidiary of Constellation Software.
  • The UK gives provisional approval to Broadcom’s (AVGO) acquisition of VMware (VMW).
  • Stratasys (SSYS) declines Nano Dimension’s (NNDM) acquisition offer and decides to engage in discussions with 3D Systems (DDD).

Activision Blizzard (ATVI) and Microsoft (MSFT)

Microsoft’s acquisition of Activision Blizzard saw significant developments last week. The Competition Appeal Tribunal in Britain “conditionally” suspended its challenge against the proposed ban on the deal, which was previously imposed by the UK’s Competition and Markets Authority (CMA). According to Bloomberg, the companies involved have no intention of abandoning the deal and will persist in pursuing the necessary final regulatory approvals for its completion.

Meanwhile, twenty-two Republican lawmakers urged the FTC to drop its opposition to the deal. Both companies are actively working to resolve remaining regulatory issues as the merger deadline approaches.

The companies entered into an agreement with amended terms, waiving certain rights to terminate the merger and increasing the termination fee payable to Activision Blizzard under specific conditions.The companies agreed that if the merger isn’t completed before October 18, 2023, they won’t be able to cancel the deal easily.

If the merger is canceled after August 29, 2023, Activision Blizzard will get $3.5 billion from Microsoft as a penalty. And if the cancellation happens after September 15, 2023, the penalty will be even higher, at $4.5 billion.

The agreement also allows Activision to pay its shareholders a cash dividend of up to $0.99 per share for the year 2023, prior to and not contingent on the closing of the transaction.

On July 20, 2023, the U.S. FTC withdrew its case against Microsoft and Activision Blizzard. However, on July 21, 2023, the deal went back under scrutiny by Britain’s antitrust regulator, following an appeals court’s adjournment and publication of grounds for reconsideration.

According to Bloomberg, Microsoft ’s success fighting the FTC’s challenge to its $69 billion Activision Blizzard acquisition could ease the path to more deals at a time when Wall Street has been confronting a severe merger drought.

Black Knight (BKI) and Intercontinental Exchange (ICE)

Intercontinental Exchange and Black Knight agreed to sell Optimal Blue to meet regulatory requirements for ICE’s planned acquisition of Black Knight. A subsidiary of Constellation Software, based in Toronto, will purchase Optimal Blue for $700 million. The deal includes an upfront payment of $200 million, with a $500 million promissory note issued to Black Knight upon the completion of the ICE transaction. The sale is contingent on the successful completion of both the merger between ICE and Black Knight and Constellation’s earlier agreement to buy Black Knight’s Empower loan origination system business. Optimal Blue provides data and technology for mortgage pricing and trades.

In March, the FTC expressed concerns about the potential pricing power ICE could gain in the mortgage data market through this deal, which might lead to higher consumer costs. Following the news of the sale of Optimal Blue, shares of Black Knight surged more than 15%. The spread on the deal is now just 7.99% compared to over 30% earlier this month.

Desktop Metal (DM) and Stratasys (SSYS)

Stratasys recently engaged in six weeks of back-and-forth with 3D Systems (DDD) over the latter’s revised buyout offer. Stratasys acknowledged that the latest offer could potentially qualify as a “Superior Proposal” under its existing all-stock $1.8 billion merger agreement with Desktop Metal (DM), which was signed in May.

The new 3D Systems offer outlines that each Stratasys share would be converted into $7.50 in cash and 1.5444 shares of the combined company, giving Stratasys shareholders approximately 44% ownership.

On the same day, Stratasys firmly rejected Nano Dimension’s (NNDM) latest partial tender offer, where Nano Dimension offered $24 per share in cash. Stratasys, in a letter to shareholders, expressed that the hostile offer was misleading, coercive, and substantially undervalued the company as a whole, not serving the best interests of all Stratasys shareholders. The company urged shareholders not to tender their shares, to withdraw any shares that had already been tendered, and to file a Notice of Objection.

Following these developments, Stratasys shares experienced a 4.6% decline to $20.27 during the week, while 3D Systems slid 8.8%. Desktop Metal’s value decreased by 1.1%, while Nano Dimension gained 5% over the past five sessions.


Merger Arbitrage activity increased last week with four new deals announced, four deals closing, and one deal terminated.

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 2023 98
Total Number of Deals Not Completed in 2023 7
Total Number of Pending Deals
Cash Deals 39
Stock Deals 16
Stock & Cash Deals 4
Special Conditions 7
Total Number of Pending Deals 66
Aggregate Deal Consideration $712.22 billion

New Merger Arbitrage Deals:

  1. The acquisition of PolyMet Mining Corp. (PLM) by Glencore AG for $499.71 million or $2.11 per share in cash. We added PLM as a potential deal to the Deals in the Works section on July 3, 2023, and the price after the news of the potential deal came out was $2.00.
  2. The acquisition of Pardes Biosciences, Inc. (PRDS) by MediPacific. Under the terms of the agreement, MediPacific will acquire Pardes for a price per share of not less than $2.02 in cash and an additional cash amount of not more than $0.17 per share, with the final price per share being based on the amount of the Company’s net cash at closing, plus a non-tradeable contingent value right (the CVR) associated with any future monetization of its COVID-19 antiviral portfolio and related intellectual property. We added PRDS as a potential deal to the Deals in the Works section on April 21, 2023, and the price after the news of the potential deal came out was $1.73.
  3. The acquisition of Heritage-Crystal Clean (HCCI) by J.F. Lehman & Company for $1.2 billion or $45.50 per share in cash.
  4. The acquisition of Chase Corporation (CCF) by an affiliate of investment funds managed by KKR for $1.3 billion or $127.50 per share in cash. We added CCF as a potential deal to the Deals in the Works section on June 9, 2023, and the price after the news of the potential deal came out was $123.08.

Deal Updates:

  1. On July 17, 2023, Intercontinental Exchange (ICE) and Black Knight (BKI) announced that, in connection with their previously announced merger agreement for ICE’s acquisition of Black Knight, they have agreed to sell Black Knight’s Optimal Blue business to a subsidiary of Constellation Software.
  2. On July 18, 2023, Nano Dimension (NNDMincreased its proposed price to $25.00 per share in cash in its special tender offer price for Stratasys (SSYS) shares.
  3. On July 18, 2023, Midwest Holding (MDWT) announced that leading independent proxy advisory firms Institutional Shareholder Services, and Glass, Lewis & Co. recommended that Midwest shareholders vote “FOR” the proposed acquisition of Midwest by Antarctica Capital.
  4. On July 18, 2023, Activision Blizzard (ATVI) and Microsoft (MSFTentered into an agreement waiving certain rights to terminate the merger agreement if the merger has not been consummated prior to October 18, 2023. The terms of the agreement include an increase in the termination fee payable to Activision Blizzard from $3.0 billion to $3.5 billion if the transaction is terminated after August 29, 2023, and to $4.5 billion if the transaction is terminated after September 15, 2023. The agreement also includes amendments to Activision Blizzard’s commercial Xbox arrangements with Microsoft, valued at up to $250 million for each of fiscal years 2023 and 2024. The agreement further enables Activision Blizzard to declare and pay one regular cash dividend for fiscal year 2023 of up to $0.99 per share, prior to and not contingent on the closing of the transaction.
  5. On July 19, 2023, Stratasys (SSYS) announced that its Board of Directors determined that the revised partial tender offer announced by Nano Dimension (NNDM) to acquire Stratasys for $25.00 per share in cash is misleading, illusory, continues to significantly undervalue the company as a whole and is NOT in the best interests of all Stratasys shareholders.
  6. On July 20, 2023, The U.S. Federal Trade Commission (FTC) withdrew its case against Microsoft (MSFT) and Activision Blizzard (ATVI).
  7. On July 20, 2023, eMagin Corporation (EMAN) announced that the waiting period under the HSR Act expired on July 3, 2023. The CFIUS Notice was accepted for review on July 18, 2023, and the 45 day review period that started on July 18, 2023, is expected to end on August 31, 2023. The company also reported that the ITAR Notice (International Traffic in Arms Regulations) was submitted to the DDTC (Directorate of Defense Trade Controls, U.S. Department of State) on June 15, 2023. The notification to the NSIA Authority (National Security and Investment Act 2021) was submitted on June 30, 2023, and the 30 working-day waiting period commenced on July 7, 2023.
  8. On July 20, 2023, GreenLight Biosciences Holdings (GRNA) announced that it is initiating the final steps in closing its previously announced merger with SW MergerCo and SW ParentCo. Following the completion of the merger, shares of GreenLight common stock are expected to cease trading on the NASDAQ Global Market after market close on July 20, 2023.

Approvals:

  1. On July 14, 2023, Reunion Neuroscience (REUN) announced that the Ontario Superior Court of Justice granted a final order approving the proposed arrangement under Section 192 of the Canada Business Corporations Act, with affiliates of MPM BioImpact.
  2. July 17, 2023: According to Bloomberg, Britain’s Competition Appeal Tribunal “conditionally” paused a fight against a proposed ban on the Microsoft Corporation (MSFT) Activision (ATVI) deal handed down earlier this year by the Competition and Markets Authority (CMA), the UK’s competition regulator. Bloomberg also reported that the companies don’t plan to walk away from the deal and will continue seeking the final regulatory approvals needed for closing.
  3. On July 17, 2023, Embark Technology (EMBK) announced that its shareholders approved the deal with Applied Intuition.
  4. On July 18, 2023, Berkshire Grey (BGRY) announced that its shareholders approved the merger with SoftBank.
  5. On July 18, 2023, NeoGames (NGMS) announced that its shareholders have approved the adoption of the previously announced business combination agreement with Aristocrat Leisure Limited.
  6. On July 18, 2023, Life Storage (LSI) and Extra Space Storage (EXR) announced that their stockholders voted, separately, to approve the proposed merger at their respective special meetings.
  7. July 19, 2023: According to Bloomberg, Broadcom’s (AVGO) proposed takeover of VMware (VMW) was provisionally waved through by the UK’s antitrust watchdog.
  8. On July 20, 2023, CIRCOR International (CIRannounced the expiration of the waiting period under the HSR Act, in connection with with the company’s acquisition by investment funds managed by KKR & Co. Inc. (KKR).

Hurdles:

  1. On July 17, 2023, Stratasys (SSYS) announced that its Board of Directors, after consultation with its financial advisor and outside legal counsel, has unanimously determined that the July 13, 2023 revised unsolicited proposal by 3D Systems Corporation (DDD) to acquire Stratasys for $7.50 in cash and 1.5444 newly issued shares of 3D Systems common stock per ordinary share of Stratasys would reasonably be expected to result in a “Superior Proposal” as defined in Stratasys’ merger agreement with Desktop Metal (DM).
  2. July 18, 2023: According to Reuters, twenty-two Republican lawmakers urged the FTC to drop its fight against Microsoft’s (MSFT) deal to buy video game maker Activision Blizzard (ATVI), calling it “an example of the FTC’s rejection of sound antitrust policy.”
  3. July 18, 2023: According to The Wall Street Journal, Microsoft (MSFT) and Activision Blizzard (ATVIplan to continue work to resolve lingering regulatory issues as the deadline to close the merger approaches.
  4. On July 19, 2023, the European Commission pushed back the deadline for its decision on Amazon’s (AMZN) planned purchase of iRobot (IRBT) by 20 working days to December 13, 2023, according to a filing on the regulator’s website.
  5. On July 19, 2023, Flat Footed LLC issued a statement disclosing a 9.8% stake in Diversified Healthcare Trust (DHC), urging DHC shareholders to vote against the proposed merger.
  6. July 21, 2023: According to Reuters, Microsoft’s (MSFT) Activision Blizzard (ATVI) deal is back in the hands of Britain’s antitrust regulator after an appeals court granted an adjournment, and the grounds for why the UK should reconsider its block on the U.S. software giant’s takeover were published.

Shareholders Meeting Schedule:

  1. CIRCOR International (CIR) – August 24, 2023
  2. Diversified Healthcare Trust (DHC) – August 30, 2023
  3. eMagin Corporation (EMAN) – August 31, 2023

Closed Deals:

  1. The acquisition of Malvern Bancorp (MLVF) by First Bank (FRBA) on July 17, 2023. It took 215 days for this deal to be completed.
  2. The acquisition of TESSCO Technologies Incorporated (TESS) by Lee Equity Partners and Twin Point Capital on July 17, 2023. It took 96 days for this deal to be completed.
  3. The acquisition of Life Storage (LSI) by Extra Space Storage (EXR) on July 20, 2023. It took 108 days for this deal to be completed.
  4. The acquisition of Berkshire Grey (BGRY) by SoftBank on July 20, 2023. It took 118 days for this deal to be completed.

Terminated Deal:

  1. On July 23, 2023: MEI Pharma (MEIP) announced that it did not obtain the necessary stockholder votes to approve the merger agreement with Infinity Pharmaceuticals (INFI). Accordingly, MEI has sent Infinity a notice terminating the merger agreement.

Weekly Spread Changes:

The table below shows weekly spread changes between July 14, 2023, and July 21, 2023.

Symbol Quote Acquiring
Company
Acquiring
Company Quote
Current
Spread
Last Week
Spread
Spread Change
Weekly
Deal
Type
SIMO 53.85 MaxLinear, Inc. (MXL) 33.97 98.18% 67.70% 30.48% Cash Plus Stock
TSEM 36.35 Intel Corporation (INTC) 34.01 45.80% 41.33% 4.47% All Cash
HZNP 101.16 Amgen Inc. (AMGN) 234.76 15.16% 12.08% 3.08% All Cash
APGN 0.4351 Pyxis Oncology, Inc. (PYXS) 2.575 2.09% -0.41% 2.50% All Stock
SGEN 194.59 Pfizer Inc. (PFE) 37.4 17.68% 15.66% 2.02% All Cash
PTRS 6.93 LINKBANCORP, Inc. (LNKB) 6.405 6.29% 8.52% -2.23% All Stock
VMW 160.38 Broadcom Inc. (AVGO) 896.8 -11.15% -8.79% -2.36% Special Conditions
SPPI 0.9992 Assertio Holdings, Inc. (ASRT) 5.33 -4.89% -2.00% -2.89% All Stock
SURF 0.9541 Coherus BioSciences, Inc. (CHRS) 4.3 15.29% 20.68% -5.39% Special Conditions
BKI 70.31 Intercontinental Exchange, Inc. (ICE) 116.22 7.99% 24.08% -16.09% 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.

Symbol Announced
Date
Acquiring
Company
Closing
Price
Last
Price
Closing
Date
Profit Annualized
Profit
SIMO 05/05/2022 MaxLinear, Inc. (MXL) $106.72 $53.85 08/07/2023 98.18% 2559.71%
SAVE 07/28/2022 JetBlue Airways Corporation (JBLU) $31.00 $18.91 06/30/2024 63.93% 68.23%
TSEM 02/15/2022 Intel Corporation (INTC) $53.00 $36.35 08/15/2023 45.80% 759.94%
DM 05/25/2023 Stratasys Ltd. (SSYS) $2.50 $1.82 12/31/2023 37.12% 84.69%
IRBT 08/05/2022 Amazon (AMZN) $61.00 $47.44 02/05/2024 28.58% 53.23%
ACI 10/14/2022 The Kroger Co. (KR) $27.25 $22.01 03/31/2024 23.81% 34.62%
SGEN 03/13/2023 Pfizer Inc. (PFE) $229.00 $194.59 01/31/2024 17.68% 33.79%
SURF 06/16/2023 Coherus BioSciences, Inc. (CHRS) $1.10 $0.9541 09/30/2023 15.29% 82.08%
HZNP 12/12/2022 Amgen Inc. (AMGN) $116.50 $101.16 12/15/2023 15.16% 38.44%
FORG 10/11/2022 Thoma Bravo (N/A) $23.25 $20.4 09/30/2023 13.97% 74.99%

Deals In The Works

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

  1. On July 20, 2023, Eliem Therapeutics (ELYM) announced plans to conduct a comprehensive exploration of strategic alternatives focused on maximizing shareholder value.
  2. On July 21, 2023, Reuters reported that Thorne HealthTech (THRN), a provider of at-home health tests and nutritional supplements, is exploring a sale.

Updates

  1. The Donerail Group, a large shareholder of Stratasys announced that it had sent a letter to Stratasys (SSYS) stating that it expects Stratasys Board to deem 3D Systems Offer (DDD) superior to Desktop Metal transaction.
  2. Nano Dimension (NNDM) increased its proposed price to $25.00 per share in cash in its special tender offer price for Stratasys shares.
  3. Symetryx Corporation announced a non-binding proposal to acquire Check-Cap (CHEK) for $4.35 per share in cash.
  4. Stratasys Board of Directors unanimously rejected Nano Dimension’s (NNDM)  $25.00 revised partial tender offer.

SPAC Arbitrage

SPAC Business Combination

  1. On July 18, 2023, Set Jet, Inc. and Revelstone Capital Acquisition Corp. (RCACentered into a definitive agreement and plan of merger.
  2. On July 18, 2023, Filament Health Corp. and Jupiter Acquisition Corporation (JAQCentered into a definitive agreement for a proposed business combination.
  3. On July 21, 2023, Chenghe Acquisition Co. (CHEAentered into a business combination agreement with optical and 3D sensing technology company Taiwan Color Optics, Inc.

Completed

  1. On July 18, 2023, Freedom Acquisition I Corp. (FACTcompleted its business combination with Complete Solaria, Inc. (CSLR).
  2. On July 19, 2023, Colombier Acquisition Corp. (CLBR) and PSQ Holdings (PSQHannounced the completion of their previously announced business combination.
  3. On July 21, 2023, Priveterra Acquisition Corp. (PMGM) announced the successful completion of its business combination with AEON Biopharma (AEON).

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.