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New Relic Set to Be Acquired by Francisco Partners and TPG – Merger Arbitrage Mondays

  • August 7, 2023

Key Highlights

  • New Relic (NEWR) to be acquired by Francisco Partners and TPG for $5.75 billion
  • Francisco Partners and Symphony Technology Group are among private equity firms competing to buy Avid Technology (AVID).
  • Bain Capital is nearing a potential deal to take Chindata Group Holdings Ltd. (CD) prviate.
  • Judge Vince Chhabria of the US District Court for the Northern District of California dismissed a consumer lawsuit against Kroger’s (KR) acquisition of rival grocery chain Albertson’s (ACI).

New Relic (NEWR)

Headquartered in San Francisco, New Relic functions as a web tracking and analytics firm, offering cloud-based software that enables websites and mobile apps to monitor user interactions and the operational performance of software and hardware used by service providers. While certain companies have names that clearly indicate their services, others may not reveal their purpose immediately.  “New Relic,” however, is an anagram of its founder Lew Cirne’s name.

New Relic’s platform gathers over 3.1 exabytes of data annually, handles more than 333 billion web requests daily, and processes over 4,000 queries per second. This system enables the consolidation, organization, visualization, and examination of data, aiming to deliver valuable analytics to its clientele.

The company has over 57,500 active customers, including 15,900 paid active accounts. New Relic’s Management anticipates continued growth, with projections indicating a substantial increase in the public cloud market, from approximately $600 billion this year to an estimated $2.5 trillion by 2032, representing a 17% annualized growth rate.

New Relic Customers (Investor Presentation)

We added New Relic as a potential deal in the works on May 17, 2023, when The Wall Street Journal reported that private-equity firms Francisco Partners and TPG (TPG were working together on a $5 billion-plus bid to acquire the company. In late May, Reuters reported that discussions with the PE firms concluded due to the inability to secure sufficient debt financing to meet the company’s valuation demands. Francisco Partners is a leading global investment firm that specializes in partnering with technology businesses, and TPG is a leading global alternative asset management firm.

After successfully obtaining adequate debt financing to align with the company’s desired valuation, the PE firms managed to revive a deal with New Relic. On July 31, 2023, New Relic finalized a definitive agreement for acquisition by Francisco Partners and TPG at a price of $87.00 per share in cash.

Prominent stakeholders, such as founder and Executive Chairman Lew Cirne and activist hedge fund Jana Partners, along with HMI Capital Management, L.P., which collectively hold around 20% of New Relic’s outstanding shares, have given their approval to the agreement.

According to the Merger Agreement, New Relic will have a 45-day window for a “go-shop” period, during which it can consider offers from other eligible potential buyers.

The deal is expected to be completed in late 2023 or early 2024, and the current spread on the deal is 3.09%.


Merger Arbitrage activity declined last week with one new deal announced and six 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 2023107
Total Number of Deals Not Completed in 20237
Total Number of Pending Deals
Cash Deals34
Stock Deals17
Stock & Cash Deals4
Special Conditions7
Total Number of Pending Deals62
Aggregate Deal Consideration$728.79 billion

New Merger Arbitrage Deals:

  1. The acquisition of New Relic (NEWR) by Francisco Partners and TPG for $5.75 billion or $87 per share in cash. We added NEWR as a potential deal to the Deals in the Works section on May 17, 2023, and the price after the news of the potential deal came out was $83.84.
  2. Revolution Medicines (RVMD) entered into a definitive agreement with EQRx, Inc. (EQRX) in an all-stock transaction. We are not adding this deal to the Merger Arbitrage Tool, since the exchange ratio for the transaction will be determined during the closing period of the deal.

Deal Updates:

  1. Amedisys (AMED) and UnitedHealth Group (UNHfiled their respective notification and report forms under HSR Act on July 5, 2023. Unless extended or earlier terminated, the 30-calendar-day waiting period under the HSR Act will expire on August 4, 2023.
  2. According to a Nasdaq delisting notice, The tender offer by Eli Lilly and Company (LLY) to acquire DICE Therapeutics (DICEis scheduled to expire on August 8, 2023. The waiting period under the HSR Act is also expected to expire on August 8. The merger is tentatively scheduled to close before the market opens on August 9, 2023.
  3. On August 4, 2023, Kaleyra (KLR) by Tata Communications Limited filed their respective notification and report forms under the HSR Act on July 13, 2023.

Approvals:

  1. On August 2, 2023, Syneos Health (SYNH) announced that the company’s stockholders approved the agreement to take the company private through an acquisition by a consortium of private investment firm affiliates composed of Elliott Investment Management, Patient Square Capital, and Veritas Capital.
  2. On August 2, 2023, Chinook Therapeutics (KDNY) announced that it has received shareholder approval to be acquired by Novartis AG (NVS).
  3. Quotient Technology (QUOT) reported that the initial 30-day waiting period under the HSR Act expired on July 31, 2023.
  4. Chinook Therapeutics (KDNY) announced that the waiting period under the HSR Act expired on July 31, 2023.
  5. On August 2, 2023, Wireless Telecom Group (WTT) announced that its shareholders voted to approve the previously announced merger agreement, pursuant to which WTT will be acquired by Maury Microwave. The merger is expected to close on August 4, 2023.
  6. On August 4, 2023, PDC Energy (PDCE) announced that its shareholders voted to approve the previously announced merger agreement with Chevron (CVX).

Hurdles:

  1. July 31, 2023: According to Reuters, Britain’s antitrust regulator called for public responses on whether Microsoft’s (MSFT) takeover of Activision Blizzard (ATVI), should be cleared ahead of a final decision by August 29.
  2. On August 2, 2023, Flat Footed LLC, a top shareholder of Diversified Healthcare Trust (DHCreleased a presentation detailing why shareholders should reject the proposed merger with Office Properties Income Trust (OPI).
  3. On August 3, 2023, Judge Vince Chhabria of the US District Court for the Northern District of California tossed out a lawsuit by a group of consumers who sued to block Kroger’s (KR) planned purchase of rival grocery chain Albertson’s (ACI).

Shareholders Meeting Schedule:

  1. NexTier Oilfield Solutions (NEX) – August 30, 2023
  2. Quotient Technology (QUOT) – September 1, 2023
  3. Paratek Pharmaceuticals (PRTK) – September 18, 2023

Closed Deals:

  1. The acquisition of Spectrum Pharmaceuticals (SPPI) by Assertio Holdings (ASRT) on July 31, 2023. It took 97 days for the deal to be completed.
  2. The acquisition of Univar Solutions (UNVR) by Apollo (APO) on August 1, 2023. It took 140 days for the deal to be completed.
  3. The acquisition of Home Point Capital (HMPT) by Mr. Cooper Group Inc. (COOP) on August 1, 2023. It took 82 days for the deal to be completed.
  4. The acquisition of Reunion Neuroscience (REUN) by MPM BioImpact on August 1, 2023. It took 61 days for the deal to be completed.
  5. The acquisition of Embark Technology (EMBK) by Applied Intuition on August 2, 2023. It took 69 days for the deal to be completed.
  6. The acquisition of Wireless Telecom Group (WTT) by Maury Microwave on August 4, 2023. It took 71 days for the deal to be completed.

Weekly Spread Changes:

The table below shows weekly spread changes between July 28, 2023, and August 4, 2023.

SymbolQuoteAcquiring
Company
Acquiring
Company Quote
Current
Spread
Last Week
Spread
Spread Change
Weekly
Deal
Type
SAVE16.19JetBlue Airways Corporation (JBLU)6.6991.48%70.61%20.87%All Cash
TSEM36.71Intel Corporation (INTC)35.1644.37%42.38%1.99%All Cash
IRBT39.045Amazon (AMZN)139.5932.54%30.98%1.56%All Cash
PNM44.33Avangrid, Inc. (AGR)34.913.47%12.03%1.44%All Cash
LBAI14.81Provident Financial Services, Inc. (PFS)18.322.91%1.64%1.27%All Stock
KDNY40.29Novartis AG (NVS)101.8-0.72%2.35%-3.07%All Cash
SURF1.04Coherus BioSciences, Inc. (CHRS)5.075.77%13.39%-7.62%Special Conditions
SIMO62.64MaxLinear, Inc. (MXL)23.7564.04%73.35%-9.31%Cash Plus Stock
DHC2.71Office Properties Income Trust (OPI)7.42-59.75%-47.03%-12.72%All Stock
DM1.75Stratasys Ltd. (SSYS)16.4415.55%28.67%-13.12%All 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
SAVE07/28/2022JetBlue Airways Corporation (JBLU)$31.00$16.1906/30/202491.48%101.80%
SIMO05/05/2022MaxLinear, Inc. (MXL)$102.76$62.6408/07/202364.04%0.00%
TSEM02/15/2022Intel Corporation (INTC)$53.00$36.7108/15/202344.37%2024.60%
IRBT08/05/2022Amazon (AMZN)$51.75$39.04502/05/202432.54%65.26%
ACI10/14/2022The Kroger Co. (KR)$27.25$21.7503/31/202425.29%38.94%
SGEN03/13/2023Pfizer Inc. (PFE)$229.00$193.48501/31/202418.36%37.85%
HZNP12/12/2022Amgen Inc. (AMGN)$116.50$100.1412/15/202316.34%45.87%
DM05/25/2023Stratasys Ltd. (SSYS)$2.02$1.7512/31/202315.55%38.87%
PNM10/21/2020Avangrid, Inc. (AGR)$50.30$44.3312/31/202313.47%33.67%
FORG10/11/2022Thoma Bravo (N/A)$23.25$20.6509/30/202312.59%85.10%

Deals In The Works

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

  1. August 1, 2023: According to Bloomberg, HomeStreet (HMST), a Seattle bank that’s lost about two-thirds of its market value this year, is exploring options including a potential sale.
  2. On August 4, 2023, the boards of directors of Telephone and Data Systems (TDS) and United States Cellular Corporation (USM) each decided to initiate a process to explore strategic alternatives for UScellular.
  3. August 6, 2023: According to The Wall Street Journal, Authentic Restaurant Brands plans to buy Pollo Tropical restaurant parent Fiesta Restaurant Group (FRGI) for $225 million.

Updates

  1. Nano Dimension (NNDM) withdrew its $25 per share special tender offer for Stratasys (SSYS).
  2. Symphony Technology Group and Francisco Partners are among the private equity firms competing to acquire media editing software maker Avid Technology (AVID).
  3. According to Bloomberg, Bain Capital is moving closer to a potential agreement to take Chindata Group Holdings Ltd. (CD) private.

SPAC Arbitrage

SPAC Business Combinations

  1. On July 31, 2023, Keyarch Acquisition Corporation (KYCH) and ZOOZ Power Ltd., a provider of flywheel-based power boosting solutions for the EV charging infrastructure market entered into a business combination agreement.
  2. On August 1, 2023, Churchill Capital Corp VII (CVII) and CorpAcq Holdings Limited entered into a definitive agreement for a business combination.
  3. On August 2, 2023, PROOF Acquisition Corp I (PACIentered into a definitive agreement for a business combination with Volato, an innovator in private aviation.
  4. On August 3, 2023, Catcha Investment Corp (CHAA) announced a definitive agreement for a business combination with Crown LNG Holdings AS, a leading provider of LNG liquefaction and regasification terminal technologies for harsh weather location.
  5. On August 3, 2023, HHG Capital Corporation (HHGC) and Perfect Hexagon Group Limited entered into a definitive merger agreement.

Completed

  1. On August 1, 2023, TLG Acquisition One Corp. (TLGA) and Electriq Power (ELIQannounced the completion of their previously announced merger.
  2. On August 1, 2023, Compute Health Acquisition Corp. (CPUHannounced the completion of its previously announced business combination with Allurion Technologies, Inc. (ALUR).

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.