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Merger Arbitrage Mondays - Regulatory Issues Sink The Fidelity National Financial And Stewart Information Services Deal

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Includes: ABBV, ABDC, ACIA, AGN, ASV, AVP, CBLK, CHSP, CMI, CPE, CRZO, CSCO, DRYS, EXAS, FCSC, FDEF, FNF, GHDX, GNW, HYGS, ILMN, MLNX, MSL, NANO, NVDA, OHAI, ONCE, PACB, PK, PSDO, PTMN, RHHBY, RTEC, S, STC, TMUS, UCFC, VMW, VSI
by: Asif Suria
Summary

Merger activity increased last week.

The acquisition of United Community Financial by First Defiance Financial.

The acquisition of Fibrocell Science by Castle Creek Pharmaceutical Holdings.

Merger activity increased last week with two new deals announced and two deals closing.

Deal Statistics:

Total Number of Deals Closed in 2019 126
Total Number of Deals Not Completed in 2019 9
Total Number of Pending Deals
Cash Deals 50
Stock Deals 18
Stock & Cash Deals 12
Special Conditions 5
Total Number of Pending Deals 85
Aggregate Deal Consideration $1.13 trillion

New Deals:

  1. The acquisition of United Community Financial (NASDAQ:UCFC) by First Defiance Financial (NASDAQ:FDEF) for $473 million in an all-stock deal. Under the terms of the merger agreement, shareholders of United Community will receive 0.3715 shares of First Defiance common stock for each share of United Community common stock.
  2. The acquisition of Fibrocell Science (NASDAQ:FCSC) by Castle Creek Pharmaceutical Holdings for $63.3 million or $3.00 per share in cash.

Deal Updates:

  1. On September 9, 2019, DryShips (NASDAQ:DRYS) announced that it has called a special meeting of the Company’s shareholders to be held on October 9, 2019.
  2. On September 9, 2019, Paulson & Co., as manager of funds holding 21.6 million shares, or 9.5% of those outstanding, of Callon Petroleum Company (NYSE:CPE), sent a letter to the board of Callon. The letter informs Callon that Paulson plans to vote its shares against the proposed acquisition of Carrizo Oil & Gas (NASDAQ:CRZO) and urges the board and management to pursue a sale of the Company.
  3. On September 9, 2019, Vitamin Shoppe (NYSE:VSI) announced that the "go-shop" period provided for under the terms of the previously announced merger agreement expired on September 6, 2019.
  4. On September 9, 2019, the applicable waiting period under the Hart-Scott-Rodino Act related to the acquisition of Genomic Health (NASDAQ:GHDX) by Exact Sciences (NASDAQ:EXAS) expired.
  5. On September 10, 2019, shareholders of Chesapeake Lodging Trust (NYSE:CHSP) approved the company’s merger with Park Hotels & Resorts (NYSE:PK) at a special meeting of shareholders. The merger is expected to close on or about September 18, 2019, subject to the satisfaction or waiver of all closing conditions related to the transaction.
  6. On September 10, 2019, VMware (NYSE:VMW) and Carbon Black (NASDAQ:CBLK) announced that the required waiting period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended applicable to VMware’s cash tender offer for Carbon Black has been terminated.
  7. On September 10, 2019, Allergan (NYSE:AGN) announced that following a hearing before the Irish High Court it has scheduled shareholder meetings for Monday, October 14, 2019, in connection with the proposed acquisition of Allergan by AbbVie (NYSE:ABBV).
  8. On September 10, 2019, the Federal Trade Commission (FTC) granted early termination of the required waiting period under Hart-Scott-Rodino in connection with BC Partners' acquisition of Presidio (NASDAQ:PSDO).
  9. On September 10, 2019, Rudolph Technologies (NYSE:RTEC) and Nanometrics (NASDAQ:NANO) set October 24, 2019 as the date of their respective special meetings for their shareholders to vote on their merger of equals.
  10. On September 10, 2019, The Federal Trade Commission (FTC) has granted early termination of the required waiting period under the Hart-Scott-Rodino Act with respect to the acquisition of Alcentra Capital Corporation (NASDAQ:ABDC) by Crescent Capital.
  11. September 13, 2019: According to Reuters, about a dozen advocacy groups and unions, including Public Citizen and the American Federation of Teachers, wrote to the Federal Trade Commission urging it to consider blocking drugmaker AbbVie's planned purchase of Allergan.
  12. On September 13, 2019, Hancock Whitney Corporation received regulatory approval from the Board of Governors of the Federal Reserve System, the Federal Deposit Insurance Corporation and the Mississippi Department of Banking and Consumer Finance to complete its previously announced proposed acquisition of MidSouth Bancorp (NYSE:MSL). The proposed acquisition was announced on April 30, 2019, and is expected to close on or about September 20, 2019.

Failed Deals:

  1. On September 10, 2019, Stewart Information Services Corporation (NYSE:STC) announced the mutual termination of its merger agreement with Fidelity National Financial (NYSE:FNF) after not obtaining the necessary approval by the U.S. Federal Trade Commission.

Closed Deals:

  1. The acquisition of Hydrogenics Corporation (NASDAQ:HYGS) by Cummins (NYSE:CMI) on September 9, 2019. It took 73 days for this deal to be completed.
  2. The acquisition of ASV Holdings (NASDAQ:ASV) by an affiliate of Yanmar Holdings on September 11, 2019. It took 76 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. (NASDAQ:ILMN) $8.00 $5.56 12/31/2019 43.88% 149.70%
ABDC 08/13/2019 Crescent Capital BDC, Inc. (N/A) $11.02 $8.83 12/31/2019 24.80% 84.60%
GNW 10/23/2016 China Oceanwide Holdings Group Co., Ltd. (N/A) $5.43 $4.42 12/31/2019 22.85% 77.95%
S 04/29/2018 T-Mobile US, Inc. (NASDAQ:TMUS) $8.14 $6.83 01/31/2020 19.23% 50.86%
MLNX 03/11/2019 NVIDIA Corporation (NASDAQ:NVDA) $125.00 $111.44 12/31/2019 12.17% 41.51%
AVP 05/22/2019 Natura Cosméticos S.A. (NATU3.SA) $5.09 $4.58 01/31/2020 11.08% 29.32%
ONCE 02/25/2019 Roche Holding AG (OTCQX:RHHBY) $114.50 $104.77 04/30/2020 9.29% 14.87%
AGN 06/25/2019 AbbVie Inc. (ABBV) $181.36 $166.14 03/31/2020 9.16% 16.89%
OHAI 08/01/2019 Portman Ridge Finance Corporation (NASDAQ:PTMN) $1.46 $1.34 12/31/2019 8.96% 30.55%
ACIA 07/08/2019 Cisco Systems, Inc. (NASDAQ:CSCO) $70.00 $64.29 07/31/2020 8.88% 10.13%

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.

Additional disclosure: I hold long positions in Mellanox Technologies, Pacific Biosciences of California, 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.