Merger Arbitrage Mondays: May 03, 2010

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 |  Includes: ATSI, CRL, MDT, PALM, PONE, WX
by: Asif Suria

We saw twice as many Merger and Acquisition announcements last week when compared to the prior week with six new deals announced. One deal closed and CKE scrapped the THL deal to accept Apollo’s takeover bid for $12.55 per share. The deal that closed was the acquisition of Techwell (TWLL) by Intersil Corporation on April 28.

Amongst the newly announced deals, the acquisition of Thomas Weisel Partners Group (TWPG) by Stifel Financial for $7.82 per share was at a very large premium of almost 80% over the previous day’s closing price. The deal for this San Francisco based investment bank is a stock-for-stock merger using a fixed exchange ratio of 0.1364 shares of Stifel common stock for each share of Thomas Weisel Partners common stock.

Another high profile deal was the acquisition of Dollar Thrifty Automotive Group (NYSE:DTG) by Hertz for $41 per share, a 5.5 percent premium over Friday’s closing price of $38.85, the offer consists of 80% cash and 20% Hertz stock. I am still getting over the sticker shock of having rented a car at the Portland, Oregon airport for nearly $100/day a few weeks ago and this consolidation is probably going to push prices even higher.

It had become abundantly clear that smartphone maker PALM would not survive as an independent company following lackluster sales of the Palm Pre line of phones and rumors of an acquisition finally came to fruit last week when Hewlett-Packard announced the acquisition of Palm (PALM) for $5.7 per share in an all cash deal.

The acquisition of ATS Medical (ATSI) by Medtronic (NYSE:MDT) for $4.00 per share in a cash deal, the acquisition of Protection One (PONE) by GTCR for $15.5 per share in a cash deal and the acquisition of WuXi Pharmatech (NYSE:WX) by Charles River Laboratories (NYSE:CRL) in a cash and stock transaction round out the six new deals. WuXi PharmaTech ADS holders will receive $11.25 in cash and $10.00 of Charles River common stock determined by an exchange ratio. This exchange ratio will be determined by dividing $10.00 by the weighted average Charles River common st ock closing price as reported on the New York Stock Exchange for the 20-day trading period ending on the second business day prior to closing (Charles River Average Price).

However, if the Charles River Average Price is equal to or greater than $43.1726, then the exchange ratio will be fixed at 0.2316, and if the Charles River Average Price is equal to or less than $37.1486, then the exchange ratio will be fixed at 0.2692.

Isn’t it great that you can leave these calculations to us and use the following table to figure out the spreads between the announced closing price and the current price?

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