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Merger Arbitrage Mondays – Massive Spike in M&A With 14 New Deals

  • August 14, 2023

Key Highlights

  • Big spike in M&A activity with 14 new deals announced last week
  • Capri Holdings Limited (CPRI) to be acquired by Tapestry (TPR) for $8.5 billion
  • After turning down the Cleveland-Cliffs offer, U.S. Steel (X) is now investigating potential strategic alternatives.

Out of the 14 new deals announced last week, seven were multi-billion dollar deals and five were potential deals in the works.

Merger Calendar

 

Capri Holdings Limited (CPRI)

Capri Holdings is a multinational luxury fashion holding company known for its portfolio of high-end brands. It was founded in 1981 by American fashion designer Michael Kors, who initially launched his own eponymous brand. The company’s name was changed to Capri Holdings in 2018 to reflect its broader scope after acquiring additional luxury fashion labels.

Capri Holdings is headquartered in London, England. The company’s primary focus is on designing, marketing, and distributing luxury apparel, accessories, and footwear. Capri Holdings owns three prominent luxury fashion brands:

  1. Michael Kors
  2. Versace: Acquired by Capri Holdings in 2018
  3. Jimmy Choo: Acquired in 2017, Jimmy Choo is a luxury footwear and accessories brand, with a specific focus on high-end women’s shoes.

These three brands collectively cover a range of fashion segments, catering to different styles and tastes within the luxury market.

On the night of Monday, August 7, 2023, Capri Holdings provided an update, indicating a postponement of its fiscal 2024 first-quarter results to Thursday. Generally, the postponement of an earnings report (a relatively rare occurrence) suggests one of two possibilities. Either there are concerns regarding irregularities in the financial statements, leading to internal disagreements about the content and wording of the report, or there exists a significant announcement that is not yet ready for public disclosure.

On August 10, 2023, Tapestry (TPR), the parent company of renowned lifestyle and accessory brands including Coach, Kate Spade, and Stuart Weitzman, and Capri Holdings, entered into a definitive agreement, under which Tapestry will acquire Capri Holdings for $57.00 per share in cash, resulting in an enterprise value of around $8.5 billion. The offer price signifies a significant premium of 64.7% compared to the trading price of Capri Holdings’ shares at $34.61 on the day preceding the announcement.

Combination of Tapestry and Capri

 

This deal will bring together six prominent fashion brands into a unified enterprise. The merged entity is anticipated to achieve approximately $12.1 billion in annual revenue, where Tapestry’s operations will contribute approximately 55.4% of this overall amount.

Both companies had been buying back their stock but figured they stood a better chance of rerating to a higher earnings multiple once they joined forces.

Makes me wish it was Tapestry (the parent of Coach and Kate Spade) that was buying back instead. $TPR has better margins, higher revenue growth, a less leveraged balance sheet and is cheaper than $CPRI

Capri secured the ownership of Versace and Jimmy Choo, combining them for a total enterprise value of $3.5 billion. Back in 2017, before these acquisitions, Capri’s market cap stood at roughly $5.5 billion, bringing the cumulative value to around $9 billion. Fast forward six years, the current sale of the company stands at $8.5 billion.

The deal is expected to be completed in calendar year 2024. The current spread on the deal is 7.26%.


Merger Arbitrage activity increased significantly last week with fourteen new deals announced and four 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 2023111
Total Number of Deals Not Completed in 20237
Total Number of Pending Deals
Cash Deals43
Stock Deals18
Stock & Cash Deals4
Special Conditions7
Total Number of Pending Deals72
Aggregate Deal Consideration$753.66 billion

New Merger Arbitrage Deals:

  1. The acquisition of Sovos Brands (SOVO) by Campbell Soup Company (CPB) for $2.7 billion or $23 per share in cash.
  2. The acquisition of Veritiv Corporation (VRTV) by Clayton, Dubilier & Rice, LLC for $2.48 billion or $170 per share in cash.
  3. The acquisition of Tabula Rasa HealthCare (TRHC) by ExactCare Pharmacy, a portfolio company of Nautic, for $570 million or $10.50 per share in cash.
  4. The acquisition of Fiesta Restaurant Group (FRGI) by Authentic Restaurant Brands, a portfolio company of Garnett Station Partners, LLC, for $368.72 million or $8.50 per share in cash.
  5. The acquisition of Sequans Communications S.A. (SQNS) by Renesas Electronics Corporation for $249 million. Under the terms of the MoU, Renesas will initiate a cash tender offer of $3.03 per Sequans ADS.
  6. The combination of EchoStar Corporation (SATS) and DISH Network Corporation (DISH) for $1.89 billion in an all stock deal. Under the terms of the agreement, EchoStar Corporation stockholders will receive 2.85 shares of DISH Network common stock for each share of EchoStar Corporation common stock.
  7. The acquisition of SciPlay Corporation (SCPL) by Light & Wonder, Inc. (LNW) for $709.34 million or $22.95 per share in cash. We added SCPL as a potential deal to the Deals in the Works section on May 18, 2023, and the price after the news of the potential deal came out was $19.66.
  8. The acquisition of Western Asset Mortgage Capital Corporation (WMC) by AG Mortgage Investment Trust (MITT) for $61.53 million in an all stock deal. Under the terms of the agreement, each share of WMC common stock will be converted at closing into the right to receive 1.5 shares of MITT common stock. We added WMC as a potential deal to the Deals in the Works section on July 13, 2023, and the price after the news of the potential deal came out was $9.05.
  9. The acquisition of Computer Task Group, Incorporated (CTG) by Cegeka Groep nv for $162.39 million or $10.50 per share in cash.
  10. The acquisition of Decibel Therapeutics (DBTX) by Regeneron Pharmaceuticals (REGN) for $109 million. Under the terms of the agreement, shareholders of Decibel Therapeutics will receive $4.00 per share, with an additional non-tradeable contingent value right (CVR) to receive up to $3.50 per share in cash upon achievement of certain clinical development and regulatory milestones for Decibel’s lead investigational candidate, DB-OTO, within specified time periods.
  11. The acquisition of Avid Technology (AVID) by an affiliate of STG for $1.4 billion or $27.05 per share in cash. We added AVID as a potential deal to the Deals in the Works section on May 24, 2023, and the price after the news of the potential deal came out was $25.16.
  12. The acquisition of Capri Holdings Limited (CPRI) by Tapestry (TPR) for $8.5 billion or $57 per share in cash.
  13. The acquisition of Arco Platform Limited (ARCE) by Achieve Holdings for $1.5 billion or $14 per share in cash. We added ARCE as a potential deal to the Deals in the Works section on November 30, 2022, and the price after the news of the potential deal came out was $9.04.
  14. The acquisition of Chindata Group Holdings Limited (CD) by BCPE Chivalry Bidco Limited for $4.17 billion. Under the terms of the agreement, shareholders of Chindata Group Holdings Limited receive US$8.60 in cash without interest and net of any applicable withholding taxes and certain fees to the ADS depositary. We added CD as a potential deal to the Deals in the Works section on June 7, 2023, and the price after the news of the potential deal came out was $6.94.

Deal Updates:

  1. On August 7, 2023, Silicon Motion Technology Corporation (SIMOissued a written notice to MaxLinear (MXL) categorically rejecting MaxLinear’s purported termination of the Merger Agreement, and the assertions made by MaxLinear, in its letter of July 26, 2023.
  2. Heritage-Crystal Clean (HCCI) and J.F. Lehman & Company filed their notifications under the HSR Act on August 2, 2023.
  3. On August 11, 2023, Reata Pharmaceuticals (RETA) and Biogen (BIIBfiled their respective HSR Act notifications.
  4. On August 11, 2023, Thoma Bravo extended its timing agreement for its planned acquisition of ForgeRock (FORG) to give the US Justice Department an additional week to decide whether to challenge the deal in court.

Approvals:

  1. On August 7, 2023, New Zealand’s Commerce Commission gave its official approval for Microsoft’s (MSFT) proposed acquisition of Activision Blizzard (ATVI).
  2. On August 9, 2023, Radius Global Infrastructure (RADI) announced that it has obtained all antitrust and direct foreign investment approvals required in connection with the Merger except for one foreign direct investment approval that remains outstanding. The parties still expect the Merger to close in the third quarter of 2023.

Hurdles:

  1. On August 7, 2023, Intercontinental Exchange (ICE) and Black Knight (BKI) announced that, amid progress toward a potential resolution, they have jointly stipulated, along with the FTC, to dismiss the preliminary injunction proceeding in the United States District Court seeking to block the close of ICE’s previously announced acquisition of Black Knight. In connection with the stipulation, ICE and Black Knight have entered into a Timing Agreement to refrain from closing ICE’s acquisition of Black Knight before the tenth calendar day after the parties sign an Agreement Containing Consent Order (ACCO) for submission to the FTC. The Timing Agreement provides certain deadlines and milestones for a mutually acceptable ACCO by August 25, 2023.
  2. August 10, 2023: Amedisys (AMED) and UnitedHealth Group (UNHreceived a request for additional information (a “second request”) under the HSR Act from the U.S. Department of Justice relating to the Merger on August 4, 2023, extending the HSR Act waiting period until the parties have substantially complied with the second request. The special meeting of stockholders will be on September 8, 2023.

Shareholders Meeting Schedule:

  1. Amedisys (AMED) – September 8, 2023

Closed Deals:

  1. The acquisition of PDC Energy (PDCE) by Chevron Corporation (CVX) on August 7, 2023. It took 77 days for this deal to be completed.
  2. The acquisition of DICE Therapeutics (DICE) by Eli Lilly and Company (LLY) on August 9, 2023. It took 50 days for this deal to be completed.
  3. The acquisition of Sigilon Therapeutics (SGTX) by Eli Lilly and Company (LLY) on August 11, 2023. It took 43 days for this deal to be completed.
  4. The acquisition of Chinook Therapeutics (KDNY) by Novartis AG (NVS) on August 11, 2023. It took 61 days for this deal to be completed.

Weekly Spread Changes:

The table below shows weekly spread changes between August 4, 2023, and August 11, 2023.

SymbolQuoteAcquiring
Company
Acquiring
Company Quote
Current
Spread
Last Week
Spread
Spread Change
Weekly
Deal
Type
SIMO58.17MaxLinear, Inc. (MXL)22.4575.78%64.04%11.74%Cash Plus Stock
SURF0.9394Coherus BioSciences, Inc. (CHRS)4.67517.10%5.77%11.33%Special Conditions
TSEM34.34Intel Corporation (INTC)34.9154.34%44.37%9.97%All Cash
IRBT37.75Amazon (AMZN)138.4837.09%32.54%4.55%All Cash
APGN0.416Pyxis Oncology, Inc. (PYXS)2.566.15%1.88%4.27%All Stock
DM1.62Stratasys Ltd. (SSYS)14.9113.21%15.55%-2.34%All Stock
BKI74.6Intercontinental Exchange, Inc. (ICE)113.991.57%5.98%-4.41%Cash Plus Stock
HZNP104.25Amgen Inc. (AMGN)262.5611.75%16.34%-4.59%All Cash
WWE111.7Endeavor Group Holdings, Inc. (EDR)25.18-5.10%0.36%-5.46%Special Conditions
FORG21.76Thoma Bravo (N/A)6.85%12.59%-5.74%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.

SymbolAnnounced
Date
Acquiring
Company
Closing
Price
Last
Price
Closing
Date
ProfitAnnualized
Profit
SAVE07/28/2022JetBlue Airways Corporation (JBLU)$31.00$16.0906/30/202492.67%105.04%
SIMO05/05/2022MaxLinear, Inc. (MXL)$102.25$58.1708/31/202375.78%1536.63%
TSEM02/15/2022Intel Corporation (INTC)$53.00$34.3408/15/202354.34%9916.86%
IRBT08/05/2022Amazon (AMZN)$51.75$37.7502/05/202437.09%76.91%
ACI10/14/2022The Kroger Co. (KR)$27.25$21.6703/31/202425.75%40.69%
SGEN03/13/2023Pfizer Inc. (PFE)$229.00$194.7401/31/202417.59%37.55%
SURF06/16/2023Coherus BioSciences, Inc. (CHRS)$1.10$0.939409/30/202317.10%130.00%
PNM10/21/2020Avangrid, Inc. (AGR)$50.30$44.0812/31/202314.11%36.79%
DM05/25/2023Stratasys Ltd. (SSYS)$1.83$1.6212/31/202313.21%34.43%
HZNP12/12/2022Amgen Inc. (AMGN)$116.50$104.2512/15/202311.75%34.59%

Deals In The Works

One new potential Merger Arbitrage deal was added to the ‘Deals In The Works‘ section last week.

  1. On August 13, 2023, United States Steel Corporation (X) confirmed that it has invited Cleveland-Cliffs to participate in its previously announced strategic review process. The company had received an unsolicited cash and stock proposal from Cleveland-Cliffs to acquire all of U. S. Steel’s outstanding shares.

SPAC Arbitrage

SPAC Business Combinations

  1. On August 7, 2023, Artemis (ARTE) and Danam Health, Inc., a health services technology and pharmaceutical distribution company entered into a definitive agreement and plan of merger.
  2. On August 9, 2023, 10X Capital Venture Acquisition Corp. III (VCXB) and American Gene Technologies International Inc. entered into a merger agreement for a business combination that would result in the combined company being a publicly listed company (the public company following the business combination to be renamed “Addimmune”). The combined company is expected to trade under the ticker symbol “HIV”.
  3. On August 9, 2023, Maquia Capital Acquisition Corporation (MAQC) and Immersed Inc. entered into a definitive agreement for a business combination.
  4. On August 10, 2023, Blue World Acquisition Corporation (BWAQ) and Vietnam Sunergy Cell Company Limited (“TOYO Solar”), a solar solution company entered into a definitive business combination agreement.
  5. On August 11, 2023, Mountain & Co. I Acquisition Corp. (MCAA) and FC Barcelona, a professional football club, entered into a definitive agreement, to bring its content creation platform, Barça Media, to the U.S. and other global financial markets.
  6. On August 11, 2023, Swiftmerge Acquisition Corp. (IVCP) and HDL Therapeutics entered into a definitive agreement for a business combination.

Completed

  1. On August 10, 2023, MedTech Acquisition Corporation (MTAC) and TriSalus Life Sciences (TLSIannounced the completion of their previously announced merger.
  2. On August 10, 2023, Oxbridge Acquisition Corp. (OXAC) and Jet Token Inc. (JTAIannounced the completion of their business combination.

Terminated

  1. On August 8, 2023, Golden Falcon Acquisition Corp. (GFX) and MNG Airlines mutually terminated their business combination.
  2. On August 10, 2023, Moringa Acquisition Corp (MACA) and Holisto mutually terminated their business combination.
  3. On August 11, 2023, Insight Acquisition Corp. (INAQ) and Avila Energy Corporation mutually agreed to terminate their previously announced Business Combination Agreement.

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.