Merger Arbitrage Mondays - Multiple 'Deals In The Works' Get Confirmed
Summary
- Merger activity increased last week with four new deals announced.
- The acquisition of QIAGEN N.V. by Thermo Fisher Scientific for $11.5 billion.
- Genworth Financial and China Oceanwide Holdings Group expect to close the transaction by the end of the month.
Merger activity increased last week with four new deals announced and two deals closing. Out of the four deals announced, three were cash deals and one was an all-stock deal.
The acquisition of Forty Seven (FTSV) by Gilead Sciences (GILD) was the first deal announced last week. FTSV stock rocketed after the deal was announced. Gilead agreed to pay $95.50 for each Forty Seven share, a 64.7 premium to Friday's closing price of $58.00. This deal will help Gilead expand its cancer drug pipeline. Through the addition of Forty Seven’s investigational lead product candidate, magrolimab, the acquisition will strengthen Gilead’s immuno-oncology research and development portfolio. Many investors view Gilead as a biotech private equity firm that does not charge fees and uses its capital and cash flows to fuel acquisitions. This is the third-largest deal by Gilead after its $11 billion acquisition of Pharmasset in 2011, its acquisition of Kite Pharmaceuticals for nearly $12 billion in 2017 and now yet another multi-billion acquisition.
This is the first time since we started tracking potential deals in the "Deals in the Works" section of our website more than three years ago that all the confirmed deals that were announced last week had been "deals in the works".
Gilead Sciences had approached cancer therapy company Forty Seven with a takeover offer on February 27, 2020. On March 2, 2020, the deal was confirmed. Forty Seven stock appreciated from $48.79 on February 27 to $93.91 after the deal was announced on March 2. On September 11, 2019, according to Reuters, the Donerail Group, an investment firm led by former activist hedge fund Starboard Value LP executive William Wyatt, had built a stake in Mobile Mini (MINI) and was pushing the company to explore a sale. On March 2, 2020, Mobile Mini agreed to combine with WillScot Corporation (WSC) in an all-stock deal at a 20.33% premium to the closing price of MINI after we added it to our list of potential deals.
We added QIAGEN N.V. (QGEN) to our list of potential deals on November 13, 2019, when Thermo Fisher Scientific (TMO) announced that it was considering purchasing the company. This deal was confirmed on March 3, 2020, when TMO announced that it was acquiring QIAGEN at a premium of approximately 17% to the closing price of the stock after the potential deal was announced. The fourth successful "potential deal" last week was the acquisition of the Meet Group (MEET). On December 16, 2019, the NuCom Group had announced that it was exploring the acquisition of U.S. live streaming app developer Meet Group. This deal was confirmed on March 5, 2020, at a premium of over 16%.
In the deal updates section, we saw an intense bidding war between Brookfield Infrastructure Partners (BIP) and Macquarie Infrastructure and Real Assets for the acquisition of Cincinnati Bell (CBB). After entering into multiple amendments with Brookfield, Cincinnati Bell finally announced that it considered MIRA's proposal as a "Superior Proposal".
Weekly Spread Changes
The table below shows weekly spread changes between February 28, 2020, and March 6, 2020.
| Symbol | Quote | Acquiring Company | Acquiring Company Quote | Current Spread | Last Week Spread | Spread Change Weekly | Deal Type |
|---|---|---|---|---|---|---|---|
| CY | 16.37 | Infineon Technologies AG (OTCQX:IFNNY) | 19.21 | 45.69% | 3.29% | 42.40% | All Cash |
| FOMX | 2.99 | Menlo Therapeutics Inc. (MNLO) | 4.15 | -2.68% | -19.17% | 16.49% | Special Conditions |
| TGE | 20.61 | Blackstone Infrastructure Partners (N/A) | 8.93% | 1.72% | 7.21% | All Cash | |
| KEM | 24.43 | Yageo Corporation (N/A) | 11.34% | 4.29% | 7.05% | All Cash | |
| IOTS | 11.64 | Dialog Semiconductor Plc (OTCPK:DLGNF) | 33.01 | 7.82% | 2.37% | 5.45% | All Cash |
| NTGN | 1.67 | BioNTech SE (BNTX) | 38.09 | 43.69% | 47.42% | -3.73% | All Stock |
| CBB | 15.89 | Brookfield Infrastructure Partners L.P. (BIP) | 52.75 | -8.75% | -4.21% | -4.54% | All Cash |
| CDOR | 10.47 | NexPoint Hospitality Trust (N/A) | 6.02% | 11.22% | -5.20% | All Cash | |
| YTRA | 2.7 | Ebix, Inc. (EBIX) | 23.71 | -12.19% | -6.90% | -5.29% | All Stock |
| GNW | 4.41 | China Oceanwide Holdings Group Co., Ltd. (N/A) | 23.13% | 39.23% | -16.10% | All Cash |
The significant change in the spread for Cypress Semiconductor Corporation (CY) was triggered by U.S. national security officials recommending that President Donald Trump block Infineon Technologies AG’s proposed acquisition of Cypress Semiconductor. Genworth Financial (GNW) and China Oceanwide Holdings Group, the oldest deal in our list, reached an agreement with the New York State Department of Financial Services (NYDFS) that removed one of the final hurdles for the deal. The companies expect to close the transaction by the end of the month.
There was one new deal announced in the Deals in the Works section last week. On March 6, 2020, Gray Television Inc. (GTN) made an offer to acquire larger peer Tegna (TGNA) for approximately $8.5 billion. This is the second time we have added TGNA to our list of potential deals. On August 16, 2019, Apollo Global Management (APO) had approached the company about a deal.
You can find all the active deals listed below in our Merger Arbitrage Tool (MAT) that automatically updates itself during market hours.
Deal Statistics:
| Total Number of Deals Closed in 2020 | 29 |
| Total Number of Deals Not Completed in 2020 | 2 |
| Total Number of Pending Deals | |
| Cash Deals | 42 |
| Stock Deals | 25 |
| Stock & Cash Deals | 5 |
| Special Conditions | 4 |
| Total Number of Pending Deals | 76 |
| Aggregate Deal Consideration | $493.4 billion |
New Deals:
- The acquisition of Forty Seven by Gilead Sciences for $4.9 billion, or $95.50 per share in cash. We added FTSV as a potential deal to the Deals in the Works section on February 27, 2020, and the price after the news of the potential deal came out was $58.00.
- The merger of Mobile Mini with WillScot Corporation for $2.89 billion in an all stock deal. Under the terms of the agreement, Mobile Mini stockholders will receive 2.4050 shares of WillScot common stock for each share of Mobile Mini common stock. We added MINI as a potential deal to the Deals in the Works section on September 11, 2019, and the price after the news of the potential deal came out was $34.09.
- The acquisition of QIAGEN N.V. by Thermo Fisher Scientific for $11.5 billion, or 39 euros. We added QGEN as a potential deal to the Deals in the Works section on November 13, 2019, and the price after the news of the potential deal came out was $35.45.
- The acquisition of The Meet Group by NuCom Group for $500 million, or $6.30 per share in cash. We added MEET as a potential deal to the Deals in the Works section on December 16, 2019, and the price after the news of the potential deal came out was $5.33.
Deal Updates:
- On March 2, 2020, Genworth Financial and China Oceanwide Holdings Group announced that they have agreed in principle with the New York State Department of Financial Services (NYDFS) on conditions that are expected to facilitate a reapproval by the NYDFS of the proposed acquisition of control by Oceanwide of Genworth's New York-domiciled insurance company, Genworth Life Insurance Company of New York (GLICNY). Genworth and Oceanwide are targeting closing the transaction on or about March 31, 2020.
- On March 2, 2020, Cincinnati Bell announced that it received a binding proposal from Macquarie for $13.50 per share in cash. Cincinnati Bell’s Board, in consultation with its legal and financial advisors, carefully reviewed the terms of MIRA’s proposal, as well as the amended Brookfield transaction and determined that entering into the amendment to the Brookfield merger agreement was in the best interests of Cincinnati Bell and its shareholders. On March 4, 2020, Cincinnati Bell announced that it has amended its definitive merger agreement with Brookfield Infrastructure and its institutional partners to increase the consideration payable to holders of outstanding shares of Cincinnati Bell common stock to $13.50 per share in cash from $12.50 per share in cash. On March 5, 2020, the company announced that it had once again amended its definitive merger agreement with Brookfield Infrastructure and its institutional partners to increase the consideration payable to holders of outstanding shares of Cincinnati Bell common stock to $14.50 per share in cash from $13.50 per share in cash. On March 6, 2020, Cincinnati Bell notified Brookfield that its Board has determined MIRA's proposal to acquire Cincinnati for $15.50, constitutes a "Superior Company Proposal", and that Cincinnati Bell intends to terminate the Brookfield merger agreement and enter into a definitive agreement with MIRA in connection with MIRA's proposal. Pursuant to the terms of the Brookfield merger agreement, Brookfield has the right until 11:59 p.m. ET on March 12, 2020, to negotiate revisions to the existing merger agreement between Cincinnati Bell and Brookfield so that the proposal from MIRA would no longer constitute a "Superior Company Proposal".
- On March 2, 2020, Tallgrass Energy (TGE) announced that a special meeting of shareholders of TGE will be held on April 16, 2020 to consider and vote upon a proposal to approve the Agreement and Plan of Merger.
- On March 3, 2020, AbbVie (ABBV) and Allergan (AGN) announced that the European Commission has approved the divestiture of brazikumab, an investigational IL-23 inhibitor in development for autoimmune diseases, to AstraZeneca. The European Commission’s approval of AbbVie’s pending acquisition of Allergan in January was conditional upon the divestiture of brazikumab to a suitable purchaser.
- March 5, 2020: According to Reuters, U.S. national security officials have recommended that President Donald Trump block Infineon Technologies AG's proposed deal to buy Cypress Semiconductor, as it poses a security risk.
- On March 6, 2020, Aircastle Limited (AYR) announced that its shareholders have voted to approve the previously announced agreement and plan of merger.
Closed Deals:
- The acquisition of Primo Water Corporation (PRMW) by Cott Corporation (COT) on March 2, 2020. It took 49 days for this deal to be completed.
- The acquisition of CSS Industries (CSS) by IG Design Group on March 4, 2020. It took 44 days for this deal to be completed.
Top 10 deals with largest spreads:
| Symbol | Announced Date | Acquiring Company | Closing Price | Last Price | ClosingDate | Profit | Annualized Profit |
|---|---|---|---|---|---|---|---|
| CY | 06/02/2019 | Infineon Technologies AG (IFNNY) | $23.85 | $16.37 | 03/31/2020 | 45.69% | 725.13% |
| NTGN | 01/16/2020 | BioNTech SE (BNTX) | $2.40 | $1.67 | 06/30/2020 | 43.69% | 139.89% |
| GNW | 10/23/2016 | China Oceanwide Holdings Group Co., Ltd. (N/A) | $5.43 | $4.41 | 03/31/2020 | 23.13% | 367.05% |
| FIT | 11/01/2019 | Google LLC (GOOG) | $7.35 | $6.22 | 06/30/2020 | 18.17% | 58.17% |
| SORL | 11/29/2019 | Ruili International Inc. (N/A) | $4.72 | $4.23 | 06/30/2020 | 11.58% | 37.09% |
| KEM | 11/11/2019 | Yageo Corporation (N/A) | $27.20 | $24.43 | 12/31/2020 | 11.34% | 13.89% |
| LACQ | 12/30/2019 | GTWY Holdings Limited (N/A) | $11.50 | $10.35 | 06/30/2020 | 11.11% | 35.58% |
| TSG | 10/02/2019 | Flutter Entertainment PLC (OTCPK:PDYPF) | $25.46 | $23.06 | 09/30/2020 | 10.40% | 18.43% |
| TGE | 12/17/2019 | Blackstone Infrastructure Partners (N/A) | $22.45 | $20.61 | 06/30/2020 | 8.93% | 28.58% |
| IOTS | 02/20/2020 | Dialog Semiconductor Plc (DLGNF) | $12.55 | $11.64 | 09/30/2020 | 7.82% | 13.85% |
The number of active deals in our Merger Arbitrage Tool increased last week to 76 with an aggregate deal consideration of $493.4 billion, an increase from last week's $473.61 billion. Cypress Semiconductor Corporation moved to the top of our table of "Top 10 deals with largest spreads", followed by Neon Therapeutics (NTGN), Genworth Financial and Fitbit (FIT). KEMET Corporation (KEM) moved into the fifth place in our table with a spread of 11.34%.
This article was written by
I am an entrepreneur and investor with a focus on event driven strategies including merger arbitrage, spinoffs, (legal) insider trading, buybacks and SPACs. I was one of the earliest contributors on Seeking Alpha and started publishing here in 2005. For more than a decade I have been writing every week about M&A and interesting insider transactions. My work has been mentioned in Barron's, Dow Jones, BNN Bloomberg and other publications.
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