Merger Arbitrage Mondays - Ebix Acquires Yatra Online

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Includes: AMID, BRSS, CHFC, CPE, CRZO, ECOL, ELAN, EXTR, HIVE, ILMN, IMI, NRCG, PACB, PETX, TCF
by: Asif Suria
Summary

Merger activity increased last week.

The acquisition of Carrizo Oil & Gas by Callon Petroleum Company.

Illumina and Pacific Biosciences of California are down on merger concerns, in response to a final report from the UK Competition & Markets Authority.

Merger activity increased last week with four new deals announced and one pending deal closing.

Deal Statistics:

Total Number of Deals Closed in 2019 103
Total Number of Deals Not Completed in 2019 7
Total Number of Pending Deals
Cash Deals 43
Stock Deals 19
Stock & Cash Deals 14
Special Conditions 3
Total Number of Pending Deals 79
Total Deal Size $1.1 trillion

New Deals:

  1. The acquisition of Carrizo Oil & Gas (CRZO) by Callon Petroleum Company (CPE) for $3.2 billion in an all stock deal. Under the terms of the agreement, Carrizo shareholders will receive a fixed exchange ratio of 2.05 Callon shares for each share of Carrizo common stock they own.
  2. The acquisition of Carolina Trust BancShares (CART) by Carolina Financial Corporation (CARO) for $100.1 million in a cash or stock deal. Under the terms of the merger agreement, Carolina Trust shareholders will receive 0.3000 shares of Carolina Financial common stock, or $10.57 in cash for each share of Carolina Trust's common stock outstanding, subject to election and proration such that the aggregate consideration will consist of 90 percent Carolina Financial stock and 10 percent cash. We are treating this as an all stock deal.
  3. The acquisition of United Financial Bancorp (UBNK) by People's United Financial (PBCT) for $759 million in an all stock deal. Under the terms of the agreement, United Financial Bancorp shareholders will receive 0.875 shares of People's United Financial stock for each United Financial Bancorp share.
  4. The acquisition of Yatra Online (YTRA) by Ebix (EBIX) for $239 million in an all stock deal. Under the terms of the agreement, each ordinary share of Yatra will be entitled to receive 0.005 shares of a new class of preferred stock of Ebix. Each share of Ebix Convertible Preferred Stock received for each Yatra Ordinary Share will, in turn, be convertible into 20 shares of common stock of Ebix. We are using 0.1 as the conversion ratio.

Yatra, an Indian online travel company, went public more than two years ago through a merger into a blank check company or a special purpose acquisition company (SPAC). Blank check companies or SPACs are acquisition vehicles that have raised capital and are looking for an operating business to acquire. When Yatra went public, I polled a bunch of folks in India about their preference for online travel sites and most folks responded that they use either MakeMyTrip.com (MMYT) or sites like Expedia.com (EXPE). Yatra went on to lose more than half its value since going public and was trading close to an all time low just a few days before this acquisition was announced. A day after the acquisition was announced, the deal was trading at a 3.67% spread and it has now narrowed to a marginally negative spread.

Deal Updates:

  1. On July 15, 2019, American Midstream Partners (AMID) announced that it has notified the New York Stock Exchange of the anticipated closing date of the previously-announced merger transactions. The Partnership anticipates that the merger will close on July 23, 2019.
  2. On July 16, 2019, Aratana Therapeutics (PETX) stockholders voted in favor of its acquisition by Elanco Animal Health (ELAN).
  3. On July 16, 2019, Chemical Financial Corporation (CHFC) and TCF Financial Corporation (TCF) announced the receipt of regulatory approval from the Board of Governors of the Federal Reserve System to complete the proposed merger of equals.
  4. On July 16, 2019, The U.S. Federal Trade Commission granted early termination of the final waiting period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, with respect to the pending merger transaction between Aerohive Networks (HIVE) and NRC Extreme Networks (EXTR).
  5. On July 17, 2019, Intermolecular (IMI) announced that the stockholders of Intermolecular have approved the previously announced proposed acquisition of all outstanding shares of common stock of Intermolecular by Merck KGaA, Darmstadt, Germany.
  6. On July 17, 2019, The U.S. Federal Trade Commission granted early termination of the final waiting period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, with respect to the pending merger transaction involving US Ecology (ECOL) and NRC Group Holdings (NRCG).
  7. On July 19, 2019: Illumina (ILMN) and Pacific Biosciences of California (PACB) are down on merger concerns, in response to a final report from the UK Competition & Markets Authority that concluded that their planned tie-up will lessen competition and has referred the matter for phase 2 assessment.

Closed Deals:

  1. The acquisition of Global Brass and Copper Holdings (BRSS) by Wieland-Werke AG on July 13, 2019. It took 94 days for this deal to be completed.
  2. The acquisition of Aratana Therapeutics (PETX) by Elanco Animal Health Incorporated (ELAN) on July 18, 2019. It took 83 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
PACB 11/01/2018 Illumina, Inc. (ILMN) $8.00 $5.33 12/31/2019 50.09% 112.87%
GNW 10/23/2016 China Oceanwide Holdings Group Co., Ltd. (N/A) $5.43 $3.76 11/30/2019 44.41% 123.75%
LKSD 10/31/2018 Quad/Graphics, Inc. (QUAD) $4.71 $3.43 06/30/2019 37.39% -620.35%
STC 03/19/2018 Fidelity National Financial, Inc. (FNF) $52.44 $38.33 09/30/2019 36.81% 191.96%
ONCE 02/25/2019 Roche Holding AG (RHHBY) $114.50 $96.85 04/30/2020 18.22% 23.50%
AVP 05/22/2019 Natura Cosméticos S.A. (NATU3.SA) $4.55 $3.97 01/31/2020 14.51% 27.45%
S 04/29/2018 T-Mobile US, Inc. (TMUS) $7.94 $6.95 07/29/2019 14.26% 743.67%
MLNX 03/11/2019 NVIDIA Corporation (NVDA) $125.00 $111.55 12/31/2019 12.06% 27.17%
AGN 06/25/2019 AbbVie Inc. (ABBV) $179.66 $163.16 03/31/2020 10.11% 14.59%
ACIA 07/08/2019 Cisco Systems, Inc. (CSCO) $70.00 $64.75 07/31/2020 8.11% 7.89%

Disclosure: I am/we are long MLNX, PACB, 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.

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