Merger Arbitrage Mondays - Exact Sciences Corporation Acquires Genomic Health

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Includes: ABBV, AGN, ANDX, AVP, BBT, BMY, CELG, CHFC, CPE, CRM, CRZO, CTRL, DATA, ENFC, EPIX, EXAS, FCNCA, FDC, FIS, FISV, FNF, FNSR, GHDX, GNW, HFBC, HQY, ILMN, KPOC, MLNX, MPLX, NCI, NUACF, NVDA, OHAI, ONCE, PACB, PFE, PTMN, RHHBY, RLM, S, STC, STI, TCF, THFF, TMUS, UQM, WAGE, WP, ZAYO
by: Asif Suria
Summary

Merger activity decreased last week.

The acquisition of Navigant Consulting by Guidehouse.

The European Commission granted unconditional approval to Bristol-Myers Squibb’s pending acquisition of Celgene Corporation.

Merger activity decreased last week with three new deals announced and ten pending deals closing.

Deal Statistics:

Total Number of Deals Closed in 2019 116
Total Number of Deals Not Completed in 2019 8
Total Number of Pending Deals
Cash Deals 44
Stock Deals 14
Stock & Cash Deals 13
Special Conditions 3
Total Number of Pending Deals 74
Total Deal Size $1.11 trillion

New Deals:

  1. The acquisition of Genomic Health (GHDX) by Exact Sciences Corporation (EXAS) for $2.8 billion in a cash-plus-stock deal. Under the terms of the agreement, for each share of Genomic Health common stock they own, Genomic Health stockholders will receive $27.50 in cash and $44.50 in shares of Exact Sciences stock, subject to a 10% collar centered on Exact Sciences’ volume-weighted average price for the 45 trading days ended July 26, 2019. We added GHDX as a potential deal to the Deals in the Works section on July 28, 2019, and the price after the news of the potential deal came out was $68.66.
  2. The acquisition of OHA Investment Corporation (OHAI) by Portman Ridge Finance Corporation (PTMN) for $70.49 million. Under the terms of the proposed transaction, OHAI stockholders will receive value per share (based on the net asset value per share of PTMN stock and the aggregate value of cash consideration) of approximately 108% of OHAI’s net asset value per share at the time of the closing of the transaction from PTMN and Sierra Crest. As of March 31, 2019, OHAI’s net asset value was $37.1 million, or $1.84 per share. In connection with the transaction, OHAI stockholders will receive a combination of (i) a minimum of $8 million in cash (approximately $0.40 per share) from PTMN (as may be adjusted as described below); (ii) PTMN shares valued at 100% of PTMN’s net asset value per share at the time of closing of the transaction in an aggregate number equal to OHAI’s net asset value at closing minus the $8 million PTMN cash merger consideration (as may be adjusted as described below); and (iii) an additional cash payment from Sierra Crest, the external adviser to PTMN, of $3 million in the aggregate, or approximately $0.15 per share. Assuming a transaction based on respective March 31, 2019 net asset values for OHAI and PTMN, adjusted for expected transaction expenses, and PTMN’s 60-day volume weighted average price through July 30, 2019 of $2.57, the merger transaction (including the Sierra Crest additional cash payment) currently values OHAI shares at approximately $1.46 per share, which represents 83% of OHAI’s March 31, 2019, net asset value, and a 35% premium to OHAI’s closing price on July 30, 2019.
  3. The acquisition of Navigant Consulting (NCI) by Guidehouse for $1.1 billion, or $28.00 per share in cash.

Deal Updates:

  1. On July 29, 2019, Bristol-Myers Squibb Company (BMY) announced that the European Commission (EC) has granted unconditional approval of the company’s pending acquisition of Celgene Corporation (CELG.
  2. On July 29, 2019, HealthEquity (HQY and WageWorks (WAGE) announced that they have received notification of early termination of the waiting period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976 with respect to WageWorks’ pending acquisition by HealthEquity.
  3. On July 30, 2019, SunTrust Banks (STI) and BB&T Corporation (BBT) shareholders approved the agreement for the merger of equals between the two companies and Truist Financial Corporation as the new name of the combined company.
  4. On July 31, 2019, Roche and Spark Therapeutics (ONCE) announced that Roche has extended the offering period of its previously announced tender offer to purchase all of the outstanding shares of common stock of Spark. The offer has been extended until Tuesday, September 3, 2019, unless it is extended further under the circumstances set forth in the merger agreement.
  5. On August 1, 2019, Zayo Group Holdings (ZAYO) announced the early termination of the waiting period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, in connection with the previously announced acquisition by affiliates of Digital Colony Partners and the EQT Infrastructure IV fund.
  6. On August 1, 2019, Entegra Financial Corp. (ENFC) and First-Citizens Bank & Trust Company (FCNCA) announced that Entegra’s shareholders voted to approve First Citizens Bank’s previously announced proposal to acquire Entegra and its wholly owned subsidiary, Entegra Bank.

Closed Deals:

  1. The acquisition of First Data Corporation (FDC) by Fiserv (FISV) on July 29, 2019. It took 194 days for this deal to be completed.
  2. The acquisition of HopFed Bancorp (HFBC) by First Financial Corporation (THFF) on July 29, 2019. It took 203 days for this deal to be completed.
  3. The acquisition of Array BioPharma (ARRY) by Pfizer (PFE) on July 30, 2019. It took 43 days for this deal to be completed.
  4. The acquisition of Andeavor Logistics (ANDX) by MPLX LP (MPLX) on July 30, 2019. It took 83 days for this deal to be completed.
  5. The acquisition of Worldpay (WP) by Fidelity National Information Services (FIS) on July 31, 2019. It took 135 days for this deal to be completed.
  6. The acquisition of UQM Technologies (UQM) by Danfoss Power Solutions (US) Company on July 31, 2019. It took 191 days for this deal to be completed.
  7. The acquisition of Realm Therapeutics (RLM) by ESSA Pharma (EPIX) on July 31, 2019. It took 76 days for this deal to be completed.
  8. The acquisition of Tableau Software (DATA) by Salesforce.com (CRM) on August 1, 2019. It took 52 days for this deal to be completed.
  9. The acquisition of TCF Financial Corporation (TCF) by Chemical Financial Corporation (CHFC) on August 1, 2019. It took 185 days for this deal to be completed.
  10. The acquisition of Control4 Corporation (CTRL) by SnapAV on August 1, 2019. It took 84 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 $5.43 12/31/2019 47.33% 116.73%
STC 03/19/2018 Fidelity National Financial, Inc. (FNF) $52.56 $37.75 09/30/2019 39.24% 255.76%
GNW 10/23/2016 China Oceanwide Holdings Group Co., Ltd. (N/A) $5.43 $3.94 11/30/2019 37.82% 117.98%
S 04/29/2018 T-Mobile US, Inc. (TMUS) $7.97 $6.76 07/29/2019 17.93% -934.86%
AVP 05/22/2019 Natura Cosméticos S.A. (OTC:NUACF) $4.93 $4.34 01/31/2020 13.57% 27.67%
ONCE 02/25/2019 Roche Holding AG (OTCQX:RHHBY) $114.50 $101.53 04/30/2020 12.77% 17.33%
MLNX 03/11/2019 Nvidia Corporation (NVDA) $125.00 $111.38 12/31/2019 12.23% 30.16%
AGN 06/25/2019 AbbVie Inc. (ABBV) $176.89 $161.02 03/31/2020 9.86% 15.05%
OHAI 08/01/2019 Portman Ridge Finance Corporation (PTMN) $1.46 $1.33 12/31/2019 9.77% 24.11%
CRZO 07/15/2019 Callon Petroleum Company (CPE) $9.37 $8.72 12/31/2019 7.44% 18.34%

Disclaimer: I hold long positions in Mellanox Technologies, Pacific Biosciences of California, Celgene, Bristol-Myers Squibb, 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 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.