Merger Arbitrage Mondays - July 16, 2018

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Includes: AET, AKRX, AVA, AVGO, CA, CHCO, CMCSA, CPLA, CTWS, CVS, D, DIS, ES, FFKT, FOX, FOXA, GNW, HL, KLDX, LHO, LITE, NXPI, OCLR, PBSK, PEB, PERY, QCOM, RAD, S, SCG, SHPG, SJW, STC, STRA, T, TKPYY, TWX, WMB, WPZ, WSBC
by: Asif Suria

Summary

Merger activity decreased last week with two new deals announced.

Revised takeover offer from Eversource rejected by Connecticut Water Service.

DOJ's challenge to AT&T and Time Warner’s merger could affect the bidding war between Disney and Comcast for Twenty-First Century Fox.

Merger activity decreased last week with two new deals announced. You can find all the active deals listed below in our Merger Arbitrage Tool (MAT) that automatically updates itself during market hours.

There were three new deals announced in the Deals in the Works section.

Deal Statistics

Total Number of Deals Closed in 2018 81
Total Number of Deals Not Completed in 2018 6
Total Number of Pending Deals
Cash Deals 43
Stock Deals 15
Stock & Cash Deals 18
Special Conditions 9
Total Number of Pending Deals 85
Total Deal Size $1.04 trillion

New Deals:

  1. The acquisition of CA, Inc. (NASDAQ:CA) by Broadcom (NASDAQ:AVGO) for $18.4 billion or $44.50 per share in cash. We added CA as a potential deal to the Deals in the Works section on June 20, 2017, and the price after the news of the potential deal came out was $36.39.
  2. The acquisition of Poage Bankshares (NASDAQ:PBSK) by City Holding Company (NASDAQ:CHCO) for $93.5 million in an all stock deal. Under the terms of the Poage merger agreement, Poage shareholders will receive 0.335 shares of City common stock for each outstanding share of Poage common stock.

Deal Updates:

  1. On July 9, 2018, Capella Education Company (NASDAQ:CPLA) announced that the Higher Learning Commission has approved the change of ownership of Capella University in connection with the merger between Capella and Strayer Education (NASDAQ:STRA). Upon closing, Strayer Education will be renamed Strategic Education. The merger is expected to close on or before August 1.
  2. On July 10, 2018, Takeda Pharmaceutical (OTCPK:TKPYY) said it has received U.S. approval for its acquisition of London-listed Shire (NASDAQ:SHPG). The drugmaker expects the deal to close in the first half of 2019.
  3. On July 10, 2018, Pebblebrook Hotel Trust (NYSE:PEB) announced it has filed a preliminary proxy statement with the United States Securities and Exchange Commission to urge shareholders of LaSalle Hotel Properties (NYSE:LHO) to vote with Pebblebrook against LaSalle’s merger agreement with BRE Landmark.
  4. On July 10, 2018, Oclaro (NASDAQ:OCLR) announced that, based on the vote tally from Oclaro’s Special Meeting of Stockholders, Oclaro’s stockholders approved the merger agreement under which Lumentum Holdings (NASDAQ:LITE). The parties continue to expect the transaction to close in the second half of 2018.
  5. On July 10, 2018, Rite Aid Corporation (NYSE:RAD) announced that it has issued a letter to shareholders urging them to vote FOR the proposed merger with Albertsons Companies. Rite Aid will hold a Special Meeting of Stockholders on August 9, 2018, to vote on the proposed merger with Albertsons Companies.
  6. On July 11, 2018, Perry Ellis International (NASDAQ:PERY) announced that it had been granted early termination, effective as of July 10, 2018, of the 30-day waiting period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended in connection with the Feldenkreis transaction.
  7. On July 11, 2018, WesBanco (NASDAQ:WSBC) announced that it has received all necessary regulatory approvals for the merger between WesBanco and Farmers Capital Bank Corporation (NASDAQ:FFKT). WesBanco and Farmers anticipate that the closing of the merger will occur during the third quarter of 2018.
  8. On July 12, 2018, Klondex Mines (NYSEMKT:KLDX) announced that its shareholders and securityholders approved the proposed statutory plan of arrangement with Hecla Mining Company (NYSE:HL) at the Klondex annual and special meeting of securityholders. Subject to customary closing conditions in accordance with the Plan of Arrangement, the transaction is expected to close on or about July 20, 2018.
  9. On July 12, 2018, The Williams Companies (NYSE:WMB) and Williams Partners (NYSE:WPZ) announced that, in connection with the previously announced merger transaction between Williams and Williams Partners, the registration statement on Form S-4 has been declared “effective” by the U.S. Securities and Exchange Commission. Williams also announced that it has scheduled a special meeting of Williams stockholders to vote on the proposed merger. The special meeting of stockholders will be held on Aug. 9, 2018.
  10. July 12, 2018: According to Bloomberg, shares of CVS Health (NYSE:CVS) and Aetna (NYSE:AET) spiked Thursday after a report by Reorg Research that U.S. antitrust enforcers might not move to block the health-care companies’ deal.
  11. On July 13, 2018, Connecticut Water Service (NASDAQ:CTWS) announced that it recently received a revised acquisition proposal from Eversource Energy (NYSE:ES) to acquire all of the outstanding shares of Connecticut Water common stock for $64.00 per share in cash. The Connecticut Water Service Board of Directors concluded that it is not a superior proposal as compared to the terms, value and benefits of the SJW Group (NYSE:SJW) merger of equals. SJW Group also issued a statement to clarify the anticipated regulatory timeline to complete its merger with Connecticut Water Service.
  12. On July 13, 2018, the proposed merger of Dominion Energy (NYSE:D) and SCANA Corporation (NYSE:SCG) achieved another significant milestone with the approval of the Federal Energy Regulatory Commission (FERC).
  13. On July 13, 2018, Qualcomm Incorporated (NASDAQ:QCOM) 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 (NASDAQ:NXPI). The tender offer is now scheduled to expire on July 20, 2018, unless extended or earlier terminated.
  14. July 13, 2018: According to Bloomberg, a shuffle among the top brass of Hydro One poses a threat to the timely completion of its acquisition of U.S. power supplier Avista (NYSE:AVA).
  15. July 13, 2018: AT&T (NYSE:T) CEO Randall Stephenson told CNBC that the Department of Justice’s challenge to AT&T and Time Warner’s (NYSE:TWX) merger could affect the bidding war between Disney (NYSE:DIS) and Comcast (NASDAQ:CMCSA) for Twenty-First Century Fox (NASDAQ:FOX) (NASDAQ:FOXA).

Top 10 deals with largest spreads

Symbol Announced Date Acquiring Company Closing Price Last Price Closing Date Profit Annualized Profit
AKRX 04/24/2017 Fresenius Kabi (N/A) $34.00 $17.91 07/31/2018 89.84% 2186.06%
RAD 02/18/2018 Albertsons Companies, Inc. (N/A) $2.50 $1.65 09/30/2018 51.52% 247.41%
SCG 01/03/2018 Dominion Energy, Inc. $46.82 $39.06 12/31/2018 19.88% 43.18%
NXPI 10/27/2016 QUALCOMM Incorporated $127.50 $107.52 07/31/2018 18.58% 452.18%
GNW 10/23/2016 China Oceanwide Holdings Group Co., Ltd. (N/A) $5.43 $4.61 08/15/2018 17.79% 216.41%
CTWS 03/15/2018 SJW Group $75.33 $66.47 12/31/2018 13.32% 28.94%
SHPG 05/08/2018 Takeda Pharmaceutical Company Limited $194.74 $172.88 06/30/2019 12.64% 13.22%
STC 03/16/2018 Fidelity National Financial, Inc. (NYSE:FNF) $48.82 $43.4 06/30/2019 12.50% 13.07%
GGP 03/26/2018 Brookfield Property Partners (NYSE:BPY) $23.50 $20.9 07/31/2018 12.44% 302.71%
S 04/29/2018 T-Mobile US, Inc. (NASDAQ:TMUS) $6.33 $5.66 06/30/2019 11.77% 12.30%

Disclaimer: I hold positions in SteadyMed (NASDAQ:STDY), GGP Inc. (GGP), magicJack VocalTec (NASDAQ:CALL), Rite Aid (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 STDY, CALL, GGP, RAD, 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.

Editor's Note: This article covers one or more microcap stocks. Please be aware of the risks associated with these stocks.