Publicly Traded Merger Arbitrage Funds' Top 10 Holdings Q4 2016

by: Special Situations and Arbs


Harman International, Valspar and Endurance Specialty in three of the four funds' top 10.

Alere, Genworth Financial and Cabela's not in any of the four funds' top 10.

All four funds have different top picks.

It is not a bad idea to see what the public merger arbitrage funds are doing each quarter. What they aren't buying can be just as important as what they are. The four funds I track are The Arbitrage Fund, The Gabelli ABC Fund, The Merger Fund and Gabelli Enterprise Mergers & Acquisitions Fund. Here are the top 10 holdings as of December 31, 2016 for each of the funds.

The Arbitrage Fund

1. St. Jude Medical, Inc. (NYSE:STJ) (deal closed)

2. CST Brands (NYSE:CST)

3. Endurance Specialty Holdings (NYSE:ENH)

4. Spectra Energy Corp. (NYSE:SE)

5. Linear Technology Corporation (NASDAQ:LLTC)

6. WhiteWave Foods (NYSE:WWAV)

7. Team Heath (deal closed)

8. The Valspar Corp. (NYSE:VAL)

9. Chemtura (NYSE:CHMT)

10. ExamWorks (NYSE:EXAM) (deal closed)

Gabelli ABC Fund

1. Harman International (NYSE:HAR)

2. St. Jude Medical, Inc. (deal closed)

3. The Valspar Corp.

4. Westar Energy, Inc. (NYSE:WR)

5. Columbia Pipeline Partners (NYSE:CPPL)

6. WhiteWave Foods Co.

7. Empire District Electric (NYSE:EDE)

8. Clarcor (NYSE:CLC)

9. CST Brands

10. Endurance Specialty Holdings

The Merger Fund

1. Yahoo (NASDAQ:YHOO)

2. Jarden (NYSE:JAH) (deal closed)

3. St. Jude (deal closed)

4. Harman International

5. American Capital (deal closed)

6. Syngenta (NYSE:SYT)

7. NXP Semiconductors (NASDAQ:NXPI)


9. Endurance Specialty Holdings

10. Linear Technology Corporation

Gabelli Enterprise Mergers & Acquisitions Fund

1. Westar Energy, Inc.

2. Harman International

3. The Valspar Corp.

4. WhiteWave Foods Co

5. Telenet Group Holding (OTCPK:TLGHY)

6. Myers Industries, Inc. (NYSE:MYE)

7. Endurance Specialty holdings

8. Columbia Pipeline Partners

9. US Cellular Corp. (NYSE:USM)

10. Rite Aid (NYSE:RAD)

Valspar is in three of the four funds and top three in two of them. Valspar is in the process of being acquired by Sherwin-Williams (NYSE:SHW) for $113 per share in cash. Under the terms of the merger agreement, if divestitures are required of businesses totaling more than $650 million of Valspar's 2015 revenues, the transaction price would be adjusted to $105 per Valspar share.

On January 26, Sherwin-Williams issued this press release:

We now expect a divestiture will be required to gain approval from the FTC to complete the acquisition of Valspar. We are moving forward on a divestiture that we believe will allow us to gain approval from the FTC. The expected divestiture has revenues below the $650 million threshold, and we expect to negotiate the divestiture and complete the Valspar transaction at $113 per share within 90 days.

Three of the four funds have Harman as one of their top four stocks. Harman is in the process of being acquired by Samsung (OTC:SSNLF) for $112 in cash. The transaction is expected to close mid-year.

What about three companies that have definitive deals and huge spreads - Alere (NYSE:ALR), Genworth Financial (NYSE:GNW) and Cabela's (NYSE:CAB)? None of the three show up on any of the four funds' top 10. All three may have the distinction of joining Rite Aid in what may be a 2017 trend: the year of the price cut.

Alere has long been rumored to wind up taking a significant price cut from Abbott Labs (NYSE:ABT) if their deal can be salvaged. Genworth's $5.43 cash deal with China Oceanwide (OTC:HHRBF) could be cut to $3.43 according to a Wells Fargo analyst, due to weakening fundamentals. And Cabela's, while nothing has been said publicly about a price cut, the stock sure is trading like it.

Disclosure: I am/we are long VAL, GNW, ALR, NXPI, WR, CAB, RAD, HAR, SYT, WWAV.

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.

Editor's Note: This article discusses one or more securities that do not trade on a major U.S. exchange. Please be aware of the risks associated with these stocks.