Welcome to the Yieldy issue of M&A Daily
AT&T (NYSE:T) is buying Time Warner (NYSE:TWX) in an $85 billion cash and stock deal. TWX holders get 53.75 in cash and $53.75 in T shares. The stock portion is subject to a collar. The $18.54 arb spread offers an 18% IRR if the deal closes by 2018.
Key points to consider:
- Time Warner is not the same as Time Warner Cable (nee TWC).
- AT&T's board and management have had mixed antitrust judgment.
- The fate of this deal is in the hands of a new activist administration.
AT&T pays a substantial dividend, which is attractive to many investors. Want it at a discount? If you buy Time Warner instead and the deal is able to close as the companies predict, you could get AT&T at a substantial discount. As a percentage of your cost basis, the dividend yield would be over 7%.
Rockwell Collins (NYSE:COL) is buying B/E (BEAV) in a $6.3 billion cash and stock deal. BEAV holders get $34.10 per share in cash and $27.90 in COL, subject to a 7.5% collar. The $3.81 arb spread offers an 11% IRR if the deal closes by June.
China Oceanwide (OTC:HHRBF) is buying Genworth (NYSE:GNW) in a $2.7 billion cash deal. GNW holders get $5.43 per share. The $0.63 arb spread offers a 19% IRR if the deal closes by the middle of next year. The target is working with Goldman (NYSE:GS) and Lazard (NYSE:LAZ); the buyer is working with Citi (NYSE:C).
The definitive proxy has been filed for the Tessera (TSRA) acquisition of DTS (NASDAQ:DTSI). DTS shareholders vote December 1.
The third S-4 amendment was filed for the FMC (NYSE:FTI) merger with Technip (TKPPY). FMC shareholders vote December 5.
ChemChina did not offer concessions to the EU regarding its acquisition of Syngenta (NYSE:SYT). The ACCC delayed their decision date of October 27 at the request of the filers. The $13.85 arb spread offers an 88% IRR if the deal closes by year-end, leaving plenty of return even if it delayed well into 2017. More to come in future editions of M&A Daily…
Elsewhere on Seeking Alpha
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- Buffett, Brands And Boats
- An (Almost) Free Business (GEC, FULL)
- AT&T: Beware Of Another Deal (T, TWX)
- Share Your Best Catalyst-Driven Investment Idea
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- Hedge Funds Search for Their Real Killers
- Trump's apocalyptic view of America
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Disclosure: I am/we are long TWX, MBRG, WR, RAI, SYT.
I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.
Additional disclosure: Chris DeMuth Jr and Andrew Walker are portfolio managers at Rangeley Capital. We invest with a margin of safety by buying securities at discounts to their intrinsic value and unlocking that value through corporate events. To maximize returns for our investors, we reserve the right to make investment decisions regarding any security without notification except where notification is required by law. This post may contain affiliate links, consistent with the disclosure in such links. We manage diversified portfolios with a multi-year time horizon. Positions disclosed in articles may vary in sizing, hedges, and place within the capital structure. Disclosed ideas are related to a specific price, value, and time. If any of these attributes change, then the position might change (and probably will).
Editor's Note: This article covers one or more stocks trading at less than $1 per share and/or with less than a $100 million market cap. Please be aware of the risks associated with these stocks.