Merger Arbitrage Mondays - Sotheby's Catches A Bid

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Includes: APO, ARRY, AVP, BID, CJ, CY, FNF, FRAC, GNW, HHRBF, IDSY, IFNNY, ILMN, INUV, LHX, LKSD, LLL, LTXB, MKGAF, MLNX, MOGO, NUACF, NVDA, ON, ONCE, PACB, PB, PFE, PNTR, QTNA, QUAD, RHHBY, S, SFS, STC, TMUS, TNTHF, VSM
by: Asif Suria
Summary

Merger activity remained steady last week.

The acquisition of Array BioPharma by Pfizer.

Inuvo mutually agreed with ConversionPoint Technologies to terminate the previously announced agreement.

Merger activity remained steady last week with four new deals announced and four pending deals closing.

Deal Statistics

Total Number of Deals Closed in 2019 93
Total Number of Deals Not Completed in 2019 7
Total Number of Pending Deals
Cash Deals 35
Stock Deals 17
Stock & Cash Deals 13
Special Conditions 2
Total Number of Pending Deals 67
Total Deal Size $995.54 billion

New Deals

  1. The acquisition of LegacyTexas Financial Group (LTXB) by Prosperity Bancshares (PB) for $2.1 billion in a cash-plus-stock deal. Under the terms of the merger agreement, stockholders of LegacyTexas will receive 0.5280 shares of Prosperity common stock and $6.28 cash for each LegacyTexas share.
  2. The acquisition of Array BioPharma (ARRY) by Pfizer (PFE) for $11.4 billion, or $48.00 per share in cash.
  3. The acquisition of C&J Energy Services (CJ) by Keane Group (FRAC) for $666.6 million in an all-stock deal. Under the terms of the agreement, C&J shareholders will receive 1.6149 shares of Keane common stock for each share of C&J common stock owned. The merger agreement permits C&J to pay its shareholders a cash dividend of $1.00 per share prior to closing. This is an all-stock deal, but we are treating it as a cash-plus-stock deal because of the $1 per share pre-merger dividend.
  4. The acquisition of Sotheby's (BID) by BidFair USA for $3.7 billion, or $57.00 per share in cash.

Deal Updates

  1. On June 17, 2019, Versum Materials (VSM) announced that the stockholders of Versum have approved the merger with Merck KGaA (OTCPK:MKGAF), Darmstadt, Germany.
  2. On June 18, 2019, The Competition and Markets Authority of the United Kingdom announced the completion of its Phase 1 review of the Merger between Pacific Biosciences of California (PACB) Illumina (ILMN) and that it will refer the Merger for a Phase 2 review if the Company and Illumina are unable to address the CMA’s concerns. The companies now expect the merger to be completed in the fourth quarter of 2019 instead of the previously announced end of second-quarter 2019 date.
  3. On June 20, 2019, Harris Corp. (HRS) and L3 Technologies (LLL) won U.S. antitrust approval for their merger. On June 21, 2019, Harris Corp. won European Union approval for the acquisition of L3 Technologies on the condition that Harris sells its night vision global business and announced that they have received the necessary regulatory approvals for their all-stock merger and have set a closing date of June 29, 2019.
  4. On June 20, 2019, The U.S. Justice Department said that it had filed a lawsuit aimed at stopping Quad/Graphics (QUAD) from buying LSC Communications (LKSD).

Failed Deals

  1. On June 21, 2019, Inuvo (INUV) announced that it has mutually agreed with ConversionPoint Technologies to terminate the previously announced agreement under which ConversionPoint was to acquire Inuvo.

Closed Deals

  1. The acquisition of Quantenna Communications (QTNA) by ON Semiconductor Corporation (ON) on June 19, 2019. It took 84 days for this deal to be completed.
  2. The acquisition of Smart & Final Stores (SFS) by Apollo Global Management (APO) on June 20, 2019. It took 65 days for this deal to be completed.
  3. The acquisition of Mogo Finance Technology (MOGO) by Difference Capital Financial (OTC:TNTHF, DCF.TO) on June 21, 2019. It took 67 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
GNW 10/23/2016 China Oceanwide Holdings Group Co., Ltd. (OTC:HHRBF) $5.43 $3.67 06/30/2019 47.96% 2500.58%
PACB 11/01/2018 Illumina, Inc. (ILMN) $8.00 $6.23 12/31/2019 28.41% 54.29%
STC 03/19/2018 Fidelity National Financial, Inc. (NYSE:FNF) $51.19 $41.2 06/30/2019 24.24% 1264.12%
LKSD 10/31/2018 Quad/Graphics, Inc. (QUAD) $5.70 $4.7300 06/30/2019 20.51% 1069.31%
AVP 05/22/2019 Natura Cosméticos S.A. (OTC:NUACF) $4.65 $3.95 01/31/2020 17.60% 28.93%
S 04/29/2018 T-Mobile US, Inc. (TMUS) $7.76 $6.87 07/29/2019 13.01% 131.91%
MLNX 03/11/2019 Nvidia Corporation (NVDA $125.00 $111.49 12/31/2019 12.12% 23.16%
ONCE 02/25/2019 Roche Holding AG (OTCQX:RHHBY) $114.50 $105.07 06/30/2019 8.97% 467.98%
CY 06/02/2019 Infineon Technologies AG (OTCQX:IFNNY) $23.85 $22.17 01/31/2020 7.58% 12.46%
PNTR 03/15/2019 I.D. Systems, Inc. (IDSY) $15.90 $14.86 06/30/2019 7.02% 366.00%

Disclaimer: 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.

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