Merger Arbitrage Mondays - June 18, 2018

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Includes: ABLX, AKRX, AVA, BPR, BPY, CTWS, EURN, EVHC, FNF, GNRT, GNW, GVA, HAWK, LAYN, LYB, MCHP, MRVL, MTGE, NLY, NXPI, QCOM, RAD, S, SCG, SHLM, SHPG, SJW, SNY, T, TKPYY, TMUS, TWX, USG
by: Asif Suria

Summary

Merger Activity increased last week with two new deals announced and five pending deals closing.

The NXP Semiconductor acquisition saga continues.

Total U.S. deal volume approached $1 trillion.

Merger activity increased last week with two new deals announced and five pending deals closing. Several deals with large spreads on account of regulatory hurdles including Bayer's acquisition of Monsanto, AT&T's (NYSE:T) acquisition of Time Warner and China Oceanwide's acquisition of Genworth (NYSE:GNW) recently managed to get past those hurdles.

For a while last week it looked like Qualcomm's (NASDAQ:QCOM) acquisition of NXP Semiconductors (NASDAQ:NXPI) would get past its last hurdle of approval by Chinese regulators but then it turned out that celebrations were premature. There were three semiconductor deals with large spreads a few weeks ago including the acquisition of Microsemi Corporation by Microchip Technology Incorporated (NASDAQ:MCHP), the acquisition of Cavium (CAVM) by Marvell Technology Group (NASDAQ:MRVL) and the acquisition of NXP Semiconductors by Qualcomm. The Microsemi acquisition closed on May 29th and the spreads on the other semiconductor deals narrowed considerably in May. Whether the NXPI deal gets the final nod from Chinese regulators will partly depend on ZTE's fate and the growing trade war between the U.S. and China, which has now moved past the sable rattling phase.

Deal Statistics:

Total Number of Deals Closed in 2018 69
Total Number of Deals Not Completed in 2018 6
Total Number of Pending Deals
Cash Deals 37
Stock Deals 13
Stock & Cash Deals 18
Special Conditions 9
Total Number of Pending Deals 77
Total Deal Size $987.77 billion

New Deals:

  1. The acquisition of Envision Healthcare Corporation (NYSE:EVHC) by KKR for $9.9 billion or $46.00 per share in cash. We added EVHC as a potential deal to the Deals in the Works section on November 14, 2017 and the price after the news of the potential deal came out was $28.52.
  2. The acquisition of USG Corporation (NYSE:USG) by Knauf for $7 billion or $44.00 per share in cash. We added USG as a potential deal to the Deals in the Works section on May 1, 2018 and the price after the news of the potential deal came out was $42.00.

Deal Updates:

  1. June 11, 2018: According to Reuters, California's utilities regulator has told SJW Group (NYSE:SJW) it must seek approval for its proposed merger with Connecticut Water Service (NASDAQ:CTWS).
  2. On June 12, 2018, AT&T won court approval to buy Time Warner (NYSE:TWX), rebuffing an attempt by U.S. President Donald Trump's administration to block the deal and likely setting off a wave of corporate mergers.
  3. On June 12, 2018, Hydro One Limited and Avista Corporation (NYSE:AVA) announced that the Montana Public Service Commission has voted to approve the proposed merger, with conditions.
  4. On June 13, 2018, Granite (NYSE:GVA) announced that Layne (NASDAQ:LAYN) shareholders voted to approve the adoption of the merger agreement with Granite at a special meeting of Layne’s shareholders.
  5. On June 14, 2018, A. Schulman (NASDAQ:SHLM) announced that during a special stockholder meeting, A. Schulman stockholders approved the merger agreement under which LyondellBasell Industries (NYSE:LYB) will acquire all of the outstanding shares of A. Schulman common stock.
  6. On June 15, 2018, Qualcomm Incorporated announced that Qualcomm River Holdings, has extended the offering period of its previously announced cash tender offer to purchase all of the outstanding common shares of NXP Semiconductors. The tender offer is now scheduled to expire on June 22, 2018, unless extended or earlier terminated.
  7. On June 15, 2018, Annaly Capital Management (NYSE:NLY) announced that it has extended its previously announced exchange offer to purchase all of the outstanding shares of common stock of MTGE Investment Corp. (NASDAQ:MTGE). The Offer will now expire on July 18, 2018, unless further extended.
  8. June 15, 2018: According to Reuters, Sprint (NYSE:S) and T-Mobile (NASDAQ:TMUS) have informed the Federal Communications Commission that they will formally file an application asking for approval to merge on Monday, June 18, 2018.

Closed Deals:

  1. The acquisition of Gener8 Maritime (NYSE:GNRT) by Euronav NV (NYSE:EURN) on June 12, 2018. It took 173 days for this deal to be completed.
  2. The acquisition of Ablynx NV (NASDAQ:ABLX) by Sanofi (NYSE:SNY) on June 12, 2018. It took 134 days for this deal to be completed.
  3. The acquisition of Layne Christensen Company by Granite Construction Incorporated on June 14, 2018. It took 120 days for this deal to be completed.
  4. The acquisition of Time Warner by AT&T on June 14, 2018. It took 600 days for this deal to be completed.
  5. The acquisition of Blackhawk Network Holdings (NASDAQ:HAWK) by Silver Lake and P2 Capital Partners on June 15, 2018. It took 150 days for this deal to be completed.

Top 10 deals with largest spreads:

Symbol AcquiringCompany ClosingPrice ClosingDate Profit IRR
AKRX Fresenius Kabi (N/A) $34.00 06/30/2018 120.49% 3664.99%
RAD Albertsons Companies, Inc. (N/A) $2.50 09/30/2018 40.45% 141.96%
SHPG Takeda Pharmaceutical Company Limited (OTCPK:TKPYY) $194.74 06/30/2019 20.40% 19.75%
SCG Dominion Energy, Inc. (NYSE:D) $44.36 12/31/2018 18.90% 35.20%
GNW China Oceanwide Holdings Group Co., Ltd. (N/A) $5.43 07/01/2018 16.77% 470.97%
CTWS SJW Group $75.80 12/31/2018 16.62% 30.95%
GGP Brookfield Property Partners (NYSE:BPY) $23.50 07/31/2018 13.75% 116.68%
STC Fidelity National Financial, Inc. (NYSE:FNF) $49.54 06/30/2019 13.44% 13.01%
NXPI QUALCOMM Incorporated (QCOM) $127.50 06/30/2018 12.67% 385.45%
S T-Mobile US, Inc. (TMUS) $6.15 06/30/2019 12.11% 11.72%

Disclaimer: I hold positions in SteadyMed (NASDAQ:STDY), WGL Holdings (NYSE:WGL), GGP Inc. (GGP), magicJack VocalTec (NASDAQ:CALL), Rite Aid (NYSE:RAD) and Southcross Energy Partners (NYSE:SXE). 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.

Disclosure: I am/we are long WGL, STDY, GGP, RAD, CALL, SXE.

I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it. I have no business relationship with any company whose stock is mentioned in this article.

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