Merger Arbitrage Mondays - The Ghost Of TheStreet Sells Itself

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Includes: AVP, CRM, CUZ, DATA, DXC, FNF, GNW, ILMN, INUV, JEC, KEYW, LABL, LKSD, LXFT, MDSO, MLNX, NETS, NVDA, ONCE, PACB, QUAD, RHHBY, S, SFLY, STC, TIER, TMUS, TST, UQM, UWN
by: Asif Suria
Summary

Merger activity decreased last week.

The acquisition of Tableau Software by salesforce.com.

The acquisition of TheStreet by TheMaven.

Merger activity decreased last week with four new deals announced and six pending deals closing.

Deal Statistics:

Total Number of Deals Closed in 2019 90
Total Number of Deals Not Completed in 2019 6
Total Number of Pending Deals
Cash Deals 35
Stock Deals 18
Stock & Cash Deals 11
Special Conditions 3
Total Number of Pending Deals 67
Total Deal Size $977.75 billion

New Deals:

  1. The acquisition of Tableau Software (NYSE:DATA) by salesforce.com (NYSE:CRM) for $15.7 billion in an all-stock deal. Under the terms, if the agreement, each share of Tableau Class A and Class B common stock will be exchanged for 1.103 shares of Salesforce common stock.
  2. The acquisition of Shutterfly (NASDAQ:SFLY) by funds managed by affiliates of Apollo Global Management for $2.7 billion or $51.00 per share in cash.
  3. The acquisition of Medidata Solutions (NASDAQ:MDSO) by Dassault Systèmes for $5.8 billion or $92.25 per share in cash.
  4. The acquisition of TheStreet (NASDAQ:TST) by TheMaven for roughly $33.75 million. Upon completion of the merger, stockholders of TheStreet are expected to receive total cash consideration, including payments under the CVR, of $6.19-$6.47 per share. About half the total consideration will be paid in cash and the rest as a special dividend and a Contingent Value Right (CVR). We added the deal in our Merger Arbitrage Tool as a "Special Conditions" deal to reflect the uncertain payout to shareholders.

I had the good fortune of meeting the ex-CEO of TheStreet, Dave Callaway, at the headquarters of MarketWatch in San Francisco more than a decade ago when he was the Editor-in-Chief of MarketWatch. He then went on to become the Editor-in-Chief of USA Today before joining TheStreet as its CEO in 2016. The stock that had been declining and languishing for years finally started going up after he cut costs and eventually sold their RateWatch business for $33.5 million. He then sold the institutional units of TheStreet that included TheDeal for $87.3 million and left the company in December 2018 after seeing the stock more than double since he joined the company.

The company distributed most of the cash generated from these sales as a special dividend of $17.70/share in April 2019 (adjusted for the 10 for 1 reverse split in the same month) before selling the rest of the company in this latest deal to TheMaven. Turning around a business in secular decline is very difficult and Dave Callaway did an admirable job of unlocking value for shareholders during his tenure as the CEO of TheStreet.

Deal Updates:

  1. On June 10, 2019, UQM Technologies (NYSEMKT:UQM) announced that the Committee on Foreign Investment in the United States (CFIUS) has notified the Company that it will extend its period of investigation regarding the previously announced merger with Danfoss Power Solutions. The extended period will be completed no later than July 25, 2019. Given the extended review period, management now believes that the closing with Danfoss should occur in the early part of the third quarter of 2019 following CFIUS approval.
  2. On June 11, 2019, Roche Holdings (OTCQX:RHHBY) announced another delay in its proposed takeover of Spark Therapeutics (NASDAQ:ONCE). The expiration date of Roche's offer has been extended from June 14 to July 31, which suggests Spark shareholders now have until July 31 to tender their shares.
  3. On June 12, 2019, The European Commission approved, under the EU Merger Regulation, the acquisition of sole control over Multi-Color Corporation (NASDAQ:LABL) by Platinum Equity Group.
  4. On June 13, 2019, Netshoes (NYSE:NETS) announced that it has entered into a second amendment to the Agreement and Plan of Merger to increase the Per Share Merger Consideration from US$3.00 to US$3.70.
  5. June 14, 2019: According to Reuters, the U.S. Justice Department is set to decide as early as next week whether to approve the merger of wireless carriers T-Mobile USA (NASDAQ:TMUS) and Sprint (NYSE:S).

Closed Deals:

  1. The acquisition of Bemis Company (BMS) by Amcor Limited (AMC.AX) on June 11, 2019. It took 309 days for this deal to be completed.
  2. The acquisition of The KeyW Holding Corporation (NASDAQ:KEYW) by Jacobs Engineering Group (NYSE:JEC) on June 12, 2019. It took 51 days for this deal to be completed.
  3. The acquisition of TIER REIT (NYSE:TIER) by Cousins Properties Incorporated (NYSE:CUZ) on June 14, 2019. It took 81 days for this deal to be completed.
  4. The acquisition of Nevada Gold & Casinos (NYSEMKT:UWN) by Maverick Casinos on June 14, 2019. It took 269 days for this deal to be completed.
  5. The acquisition of Luxoft Holding (NYSE:LXFT) by DXC Technology Company (NYSE:DXC) on June 14, 2019. It took 158 days for this deal to be completed.
  6. The acquisition of Netshoes (Cayman) Limited (NETS) by Magazine Luiza S.A. on June 15, 2019. It took 47 days for this deal to be completed.

Top 10 deals with largest spreads:

Symbol Announced Date Acquiring Company Closing Price Last Price Closing Date Profit Annualized Profit
INUV 11/05/2018 ConversionPoint Technologies, Inc. (N/A) $2.22 $0.708 08/05/2019 213.56% 1590.80%
GNW 10/23/2016 China Oceanwide Holdings Group Co., Ltd. (N/A) $5.43 $3.07 06/30/2019 76.87% 2158.36%
STC 03/19/2018 Fidelity National Financial, Inc. (NYSE:FNF) $50.61 $41.22 06/30/2019 22.78% 639.60%
PACB 11/01/2018 Illumina, Inc. (NASDAQ:ILMN) $8.00 $6.65 06/30/2019 20.30% 569.98%
ONCE 02/25/2019 Roche Holding AG (RHHBY) $114.50 $97.7 06/30/2019 17.20% 482.80%
AVP 05/22/2019 Natura Cosméticos S.A. (NATU3.SA) $4.40 $3.82 01/31/2020 15.19% 24.33%
MLNX 03/11/2019 NVIDIA Corporation (NASDAQ:NVDA) $125.00 $110.07 12/31/2019 13.56% 25.13%
LKSD 10/31/2018 Quad/Graphics, Inc. (NYSE:QUAD) $5.81 $5.22 06/30/2019 11.23% 315.33%
UQM 01/21/2019 Danfoss Power Solutions (US) Company (N/A) $1.71 $1.56 07/15/2019 9.62% 125.34%
S 04/29/2018 T-Mobile US, Inc. (TMUS) $7.68 $7.01 07/29/2019 9.58% 83.28%

Disclosure: I am/we are long RHT, CELG, BMY, PACB. 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.

Additional disclosure: I hold long positions in Red Hat (RHT), Celgene (CELG), Bristol-Myers Squibb (BMY) and Finisar (FNSR). 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.