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T-Mobile/Sprint Updates + A Few Interesting Deals

Includes: AST, ECA, LCTX, NFX, S, TMUS
by: Special Situation Investor

T-mobile/Sprint deal is slowly moving forward, but not without opposition.

BioTime is acquiring one of its subsidiaries.

Kangaroo Resources is being taken private by its largest shareholder.

After more than two months, FCC has announced that it will resume “the clock” for T-Mobile (TMUS)/Sprint (S) merger on the 4th of December. The commission has previously stopped its 180-day review period to review updated modelings of the deal and, now, will continue on the 55th day. It has also asked the companies to comment on some parts before the clock is restarted. Furthermore, T-Mobile has recently received the shareholder approval. However, it still has to secure many green lights from the state's regulators, DOJ, FCC and others. In August, DOJ said that they want three 5G carriers to ensure competition, so as T-Mobile/Sprint claims to be unable to compete without merging, that comment seemed to be in favor of the deal. In regards to acquiring approvals, in the recent Q3 results call, TMUS has commented that it already has more than half all required states consents, is working with the regulators to receive other approvals, and still expects the deal to close in H1 2019. On the other hand, this deal is also facing a serious opposition. The Communication Workers of America (CWA) association has even launched a website where it puts all the arguments against this deal, with its biggest concern being over 30,000 layoffs. Furthermore, New York regulators have concerns about possibly raising prices and have asked FCC to give them the materials of this deal, which they are going to share with other regulators. To remind, this is an all-stock deal with merger consideration of 0.10256 T-Mobile shares for each Sprint share. Despite all the good news, spread is currently at 14%, up from 10% where it has stayed most of the time my first coverage on this deal.

BioTime (BTX) - Asterias Biotherapeutics (AST) Merger

Spread: 5%. Closing: Q1 2019

A combination of two biotechnology companies, which are both dedicated to developing therapies. However, BioTime is more focused on degenerative diseases, while Asterias on neurology and oncology. Asterias is one of BioTime’s subsidiaries, and BTX owns about 40% of AST shares. In 2016, it owned 57% and, with time, has decreased its holdings, but now, as Asterias’ stock price is at its lowest in more than 3 years' time, it seems like a good time for them to fully acquire it. The deal has been approved by both companies’ boards and is conditioned upon both companies' shareholder approvals. Go-shop period is set until the 3rd of December, meaning that until that date AST is free to consider and choose other possible offers. So far, this looks straightforward. Merger consideration: 0.71 BTX.

Encana (ECA) - Newfield Corporation (NFX) All-Stock Merger

Spread: 5%. Closing: Q1 2019

A deal between North American energy companies. Approved by both boards, the acquisition still has to receive two-thirds of Newfield and a majority of Encana shareholder approvals as well as customary and regulatory approvals. Encana looks cheap, and given the recent energy industry downfall, it is understandable why its management has been aggressively acquiring its own shares this month. Besides that, considering the pricing, the deal also looks like a bargain for Encana, not to mention that Newfield’s market cap is half the worth of ECA’s, but they will own only 36% of the combined company. I would not be surprised if NFX shareholders would be hesitant to vote for the acquisition. Despite that, this deal looks worth looking into. Just make sure to do your own due diligence.

Kangaroo Resources (KRL) Going Private

Spread: 15%. Closing: December 2018

Australian mining and exploration firm Kangaroo Resources has received an offer to take the company private from its largest shareholder PT Bayan (owns 56%). Price is set at A$0.15, and the offer is subject to 75% rate of approval from the minority shareholders. Meeting is scheduled at the 26th of November and is expected to be implemented in the first half of December. The premium is large so shareholder approval should not be a problem. However, downside to the unaffected price is 80%+.

Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. 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.