M&A Updates And New Deals: RC Capital/Owens Realty Mortgage Merger

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Includes: AFSI, CFG, COL, EFSC, ORM, PDS, RC, TDGCF, TRIN, UTX
by: Special Situation Investor
Summary

AmTrust deal brought 5% in a week.

8% spread between two real estate financing firms RC/ORM.

EFSI - TRIN deal looks straightforward, but the stock is illiquid.

A bit more than a week ago I covered AmTrust (AFSI) going private deal, which already had the approval from Carl Icahn and other shareholders. It was supposed to close by the end of 2018, however AFSI got their final regulatory blessing much faster and should close on the 29th of November. Congratulations on 5%.

As expected (see previous post on this deal), after almost two months since DOJ approval, China gave their blessing for the biggest merger in aerospace history between United Technology(UTX)/Rockwell Collins (COL). That was the final required approval so the deal is already done. Congratulations on 6%+ in a month.

After all, Trinidad Drilling’s (OTCPK:TDGCF) shareholders decided to choose (see previous coverage) a safer offer from Ensign Energy priced at C$1.68/share. I think it was a good decision as Precision Drilling (PDS) shares are showing no signs of recovery and their competing bid of 0.445 PDS/share would be currently valued at C$1.47. 56% of Trinidad’s shareholders have tendered their shares making PDS terminate their own offer and seek $20m termination fee.

Ready Capital (RC) - Owens Realty Mortgage (ORM) All-Stock Merger

Spread: 8%. Closing: end of Q1 2019.

A merger between two real estate financing firms after which Ready Capital (formerly Sutherland Asset Management) is expected to own 72% and Owens Realty 28% of the company. The deal is approved by both boards and is subject to majority approvals of both companies’ shareholders as well as other customary conditions. Merger consideration: 1.441 RC based on a fixed ratio, which is subject to changes if either company’s book value declines more than 3%. Earlier this year ORM had a proxy fight with their shareholders (collectively named “Hovde group”), who wanted to put 2 of their people on ORM’s board, arguing that the company is underperforming and the board is not interested in strengthening the company. 2 out of 5 Owen’s board members were from their external management company (CFG), which over the past 10 years has collected about $50m in fees from ORM, while shareholders earned only about $6m. In the end Hovde group got to put just one of the proposed directors. Maybe RC will do a better job at managing their assets and won’t hurt shareholders that much, so that should make ORM shareholders willing to vote for this deal. Offer is priced at 8% premium to ORM BV, which looks decent for a company that has been trading at 23% discount prior to the announcement.

Enterprise Financial Services (EFSC) - Trinity Capital (OTCQX:TRIN) Merger

Spread: 3%. Closing: early 2019

One more consolidation deal in banking industry in which Enterprise Financial Services is acquiring Trinity Capital for 0.1972 shares of EFSC common stock and $1.84 in cash per each TRIN share. Enterprise Financial Services has 28 locations in central U.S. and this acquisition allows them to expand into a nearby state of New Mexico, where Trinity’s subsidiary Los Alamos Bank has 6 locations. Approved by both boards, this transaction is still subject to TRIN shareholder as well as regulatory and customary approvals. Some shareholders including Trinity’s management (I was unable to find out how much they own) and Castle Creek Capital Partners (owns 10%) have already agreed to vote in favor of the acquisition. I could find only one previous acquisition made by EFSC - in early 2017 they closed on the Jefferson County Bancshares with Eagle Bank that had 13 branches. The deal was worth $130m and it took 4 months to close it. So far, the deal looks good and straightforward and I expect it to close as planned, however it is worth mentioning that TRIN stock is quite illiquid.

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.

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