Merger activity decreased last week with three new deals announced and one deal closing. Even though the activity with respect to new deals announced and existing deals closing was low last week, we saw an uptick in potential deals and a number of updates related to the active deals in our list.
We continue to see consolidation in the midstream section of the energy industry with yet another merger announced where EQM Midstream Partners (EQM) is merging with Equitrans Midstream Corporation (ETRN) in a $10.03 billion all stock deal. The resulting entity would be a C-Corporation and EQM will as a result abandon its Master Limited Partnership (MLP) structure.
Kinder Morgan was one of the first companies in the energy industry to favor the Master Limited Partnership (MLP) structure that allowed companies to pay no corporate taxes and pass all its profits to investors as distributions. More than five years ago, it was also one of the first to abandon the structure by merging its four pipeline companies into a single one and adopting a traditional C corporate structure. With changes in the tax structure in 2018 pushing the corporate tax rate well below the top individual tax rate, the MLP structure was no longer as tax efficient as it once was and we have seen a number of MLP companies converting to C corporations in 2018.
Headquartered in Beijing, China, Jumei International Holding Limited (JMEI) is an online retailer of beauty products. Earlier this year, on January 12, 2020, the company announced that its board of directors had received a preliminary non-binding proposal letter from Mr. Leo Ou Chen, chairman of the Board, chief executive officer and acting chief financial officer of the Company, to acquire all of the outstanding ordinary shares of the Company. Jumei agreed to a ‘going private transaction’ last week at a 14.7% premium. These ‘going private’ deals are often viewed with skepticism and we have some of them fail in the past. In that context, the 2.99% spread on this deal is lower than what we would have expected.
Founded in 1999, Gain Capital Holdings (GCAP) is one of the early developers of online forex trading and owns the site FOREX.com. On February 27, 2020, the company entered into a definitive agreement to be acquired by INTL FCStone (INTL) at a 70% premium. The stock appreciated from $3.53 to $5.86 after the deal was announced.
The updates announced for active deals last week included Craft Brew Alliance (BREW), InterXion Holding (INXN) and Central European Media Enterprises (CETV) receiving approval from their shareholders for their respective deals. The Federal Trade Commission (FTC) granted early termination of the required waiting period under the Hart-Scott-Rodino Act for the acquisitions of Forescout Technologies (FSCT) and Pope Resources (POPE). Zayo Group Holdings (ZAYO) received regulatory approval and Eldorado Resorts (ERI) received state approval for their deals.
Weekly Spread Changes
The weakness we saw in the market last week related to the spread of the COVID-19 virus was also reflected in active deals with the spread on several mergers and acquisitions increasing last week. The table below shows weekly spread changes between February 21, 2020 and February 28, 2020.
Symbol | Quote | Acquiring Company | Acquiring Company Quote | Current Spread | Last Week Spread | Spread Change Weekly | Deal Type |
---|---|---|---|---|---|---|---|
NTGN | 1.5 | BioNTech SE (BNTX) | 35.1 | 47.42% | 33.21% | 14.21% | All Stock |
FOMX | 3.6 | Menlo Therapeutics Inc. (MNLO) | 2.95 | -19.17% | -33.26% | 14.09% | Special Conditions |
GNW | 3.9 | China Oceanwide Holdings Group Co., Ltd. (N/A) | 39.23% | 25.40% | 13.83% | All Cash | |
CBB | 13.05 | Brookfield Infrastructure Partners L.P. (BIP) | 50.54 | -4.21% | -16.80% | 12.59% | All Cash |
SORL | 4.15 | Ruili International Inc. (N/A) | 0.00 | 13.73% | 4.42% | 9.31% | All Cash |
CYOU | 10.76 | Sohu.com Limited (SOHU) | 9.53 | 0.37% | 0.84% | -0.47% | All Cash |
FSBC | 17.22 | Evans Bancorp, Inc. (EVBN) | 39.27 | 3.37% | 4.22% | -0.85% | All Cash |
INXN | 84.89 | Digital Realty Trust, Inc. (DLR) | 120.11 | -0.01% | 1.02% | -1.03% | All Stock |
DLPH | 14.12 | BorgWarner Inc. (BWA) | 31.6 | 1.47% | 2.71% | -1.24% | All Stock |
YTRA | 2.84 | Ebix, Inc. (EBIX) | 26.44 | -6.90% | -4.23% | -2.67% | All Stock |
Cincinnati Bell (CBB) amended its deal with Brookfield Infrastructure. The consideration payable to holders of outstanding shares of Cincinnati Bell common stock has been increased to $12.50 per share in cash from $10.50 per share in cash. This is the third amended deal in the month of February.
There were five new deals announced in the Deals in the Works section. On December 19, 2019, Xperi Corporation (XPER) and TiVo Corporation (TIVO) entered into a definitive agreement to combine in an all-stock transaction. According to Bloomberg, Xperi received an unsolicited takeover proposal on February 24, 2020, from a consortium led by its former chief executive officer, posing a potential challenge to its merger with TiVo.
Boingo Wireless (WIFI) and Iovance Biotherapeutics (IOVA) are exploring potential sales. Gilead Sciences (GILD) approached cancer therapy company Forty Seven (FTSV) with a takeover offer. According to Reuters, Apollo Global Management (APO) has approached Tutor Perini Corp (TPC), with a close to $1 billion acquisition offer.
You can find all the active deals listed below in our Merger Arbitrage Tool (MAT) that automatically updates itself during market hours.
Deal Statistics:
Total Number of Deals Closed in 2020 | 27 |
Total Number of Deals Not Completed in 2020 | 2 |
Total Number of Pending Deals | |
Cash Deals | 40 |
Stock Deals | 24 |
Stock & Cash Deals | 6 |
Special Conditions | 4 |
Total Number of Pending Deals | 74 |
Aggregate Deal Consideration | $473.61 billion |
New Deals:
Deal Updates:
Closed Deals:
Top 10 deals with largest spreads:
Symbol | Announced Date | Acquiring Company | Closing Price | Last Price | Closing Date | Profit | Annualized Profit |
---|---|---|---|---|---|---|---|
NTGN | 01/16/2020 | BioNTech SE (BNTX) | $2.21 | $1.5 | 06/30/2020 | 47.42% | 143.04% |
GNW | 10/23/2016 | China Oceanwide Holdings Group Co., Ltd. (N/A) | $5.43 | $3.9 | 03/31/2020 | 39.23% | 477.31% |
FIT | 11/01/2019 | Google LLC (GOOG) | $7.35 | $6.39 | 06/30/2020 | 15.02% | 45.32% |
SORL | 11/29/2019 | Ruili International Inc. (N/A) | $4.72 | $4.15 | 06/30/2020 | 13.73% | 41.43% |
CDOR | 07/22/2019 | NexPoint Hospitality Trust (N/A) | $11.10 | $9.98 | 03/16/2020 | 11.22% | 273.08% |
LACQ | 12/30/2019 | GTWY Holdings Limited (N/A) | $11.50 | $10.42 | 06/30/2020 | 10.36% | 31.27% |
FG | 02/07/2020 | Fidelity National Financial, Inc. (FNF) | $12.50 | $11.44 | 09/30/2020 | 9.27% | 15.88% |
QUMU | 02/11/2020 | Synacor, Inc. (SYNC) | $1.79 | $1.69 | 06/30/2020 | 5.75% | 17.33% |
TSG | 10/02/2019 | Flutter Entertainment PLC (PDYPF) | $24.12 | $22.95 | 09/30/2020 | 5.12% | 8.77% |
MLNX | 03/11/2019 | NVIDIA Corporation (NVDA) | $125.00 | $119.42 | 03/31/2020 | 4.67% | 56.85% |
List of all pending deals:
The number of active deals in our Merger Arbitrage Tool increased last week to 74 with an aggregate deal consideration of $473.61 billion, an increase from last week’s $462.56 billion. Neon Therapeutics (NTGN), Genworth Financial (GNW) and Fitbit (FIT) still hold the top 3 positions in our table. Condor Hospitality Trust (CDOR) and Mellanox Technologies (MLNX) moved into the ‘Top 10 deals with largest spreads” table, replacing FSB Bancorp (FSBC) and KEMET Corporation (KEM).
Disclaimer: I hold a long position in Mellanox Technologies (MLNX). 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.
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