Merger Arbitrage Mondays: May 17, 2010

by: Asif Suria

With the turmoil in the market, merger activity slowed just a little with four new deals announced last week and one deal closing. The deal that closed was the acquisition of Brink’s Home Security Holdings (CFL) by Tyco International on May 14, 2010.

Two out of the four new deals are all cash deals while the other two are a combination of cash and stock. The all cash deals include the acquisition of Sybase (SY) by SAP (NYSE:SAP) where SAP is offering $65 for each outstanding share of Sybase’s common stock and the acquisition of BioSphere Medical (BSMD) by Merit Medical Systems (NASDAQ:MMSI) where BioSphere Medical shareholders will receive $4.38 per share in cash. Given that Sybase closed below $65 on Friday, the market is not anticipating a competing offer from other tech heavyweights like Oracle (NASDAQ:ORCL).

The cash plus stock deals include the acquisition of CPI International (CPII) by Comtech Telecommunications and the acquisition of Atlantic BancGroup (ATBC) by Jacksonville Bancorp (NASDAQ:JAXB). If the merger is completed, CPI International shareholders will receive a combination of $9.00 in cash plus a fraction of Comtech common stock equal to $8.10 divided by the average closing price of Comtech common stock over a specified period of time prior to closing. The fraction shall not be greater than 0.2382 nor less than 0.2132. On the completion of the merger, Atlantic BancGroup shareholders will receive 0.2 shares of Jacksonville Bancorp common stock for each share of Atlantic BancGroup common stock held, plus up to approximately $0.65 per share in cash, subject to the qualifying sale of certain Atlantic BancGroup assets.

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