Merger Arbitrage Mondays - Standard Industries Finally Bags W. R. Grace
Summary
- Merger activity increased last week with seven new deals announced.
- 24 deals announced in the month of April.
- The acquisition of Proofpoint by Thoma Bravo.
Merger activity increased last week with seven new deals announced and four deals completed. In keeping with what we have been seeing for several weeks, two of these seven new deals were banking-related mergers.
There were a total of 24 deals announced in the month of April for a total deal value of over $114 billion. Looking back one year, we had only 2 deals announced in April 2020, which was the lowest deal volume we had seen in a decade. Four of the seven deals announced last week were multi-billion dollar deals.
Founded in 1854 and headquartered in Columbia, Maryland, W. R. Grace (GRA) is a global specialty chemical company, that operates through two business segments - Catalysts Technologies and Materials Technologies. We added W. R. Grace as a potential deal in the works on November 9, 2020, when it received a proposal from 40 North Management LLC, one of its shareholders, to acquire all outstanding common shares of the Company for $60 per share in cash. On January 11, 2021, 40 North Management increased its offer to acquire all of the outstanding shares of common stock of GRA for $65 per share in cash and further increased the offer to $70 on April 1, 2021. On April 26, 2021, W. R. Grace entered into a definitive agreement under which Standard Industries Holdings will acquire Grace in an all-cash transaction valued at approximately $7.0 billion, including Grace’s pending pharma fine chemistry acquisition. 40 North is a "related investment" business of Standard Industries. The $70 purchase price represents a premium of approximately 59% over Grace’s closing stock price of $44.05 on November 6, 2020, the last trading day prior to the announcement of 40 North’s initial proposal to acquire the Company on November 9, 2020.
SPAC Arbitrage
There were 3 new SPAC IPOs and 4 new SPAC business combinations announced last week.
- Clarus Therapeutics and Blue Water Acquisition (BLUW) announced a definitive business combination agreement that will result in Clarus becoming a publicly-traded company.
- Shapeways, Inc. and Galileo Acquisition Corp. (GLEO) announced that they have entered into a definitive merger agreement.
- Enjoy Technology Inc. and Marquee Raine Acquisition Corp. (MRAC) entered into a definitive merger agreement.
- Sonder Holdings Inc. and Gores Metropoulos II, Inc. (GMII) announced that they have entered into a definitive agreement to combine.
Weekly Spread Changes:
The table below shows weekly spread changes between April 23, 2021, and April 30, 2021.
| Symbol | Quote | AcquiringCompany | AcquiringCompany Quote | CurrentSpread | Last WeekSpread | Spread ChangeWeekly | DealType |
|---|---|---|---|---|---|---|---|
| DOYU | 9.11 | HUYA Inc. (HUYA) | 17.62 | 41.19% | 28.62% | 12.57% | All Stock |
| AJRD | 46.72 | Lockheed Martin Corporation (LMT) | 380.56 | 9.16% | 4.94% | 4.22% | All Cash |
| MX | 25.01 | South Dearborn Limited (N/A) | 15.95% | 12.10% | 3.85% | All Cash | |
| KSU | 292.21 | Canadian Pacific Railway Limited (CP) | 373.13 | -6.76% | -10.06% | 3.30% | Cash Plus Stock |
| LEAF | 8.86 | Graham Holdings Company (GHC) | 635.61 | -4.06% | -6.70% | 2.64% | All Cash |
| HCAP | 9.04 | Portman Ridge Finance Corporation (PTMN) | 2.38 | 11.48% | 14.46% | -2.98% | Cash Plus Stock |
| CADE | 22.25 | BancorpSouth Bank (BXS) | 29.59 | -1.29% | 1.97% | -3.26% | Cash Plus Stock |
| MRLN | 22.55 | HPS Investment Partners LLC (N/A) | 0.00 | 4.21% | 8.70% | -4.49% | All Cash |
| SJR | 28.93 | Rogers Communications Inc. (RCI) | 49.23 | 11.99% | 16.59% | -4.60% | Special Conditions |
| OTC:CXDC | 1.07 | Faith Dawn Limited and Faith Horizon (N/A) | 12.15% | 17.07% | -4.92% | All Cash |
Deal Statistics:
| Total Number of Deals Closed in 2021 | 66 |
| Total Number of Deals Not Completed in 2021 | 3 |
| Total Number of Pending Deals | |
| Cash Deals | 44 |
| Stock Deals | 25 |
| Stock & Cash Deals | 15 |
| Special Conditions | 4 |
| Total Number of Pending Deals | 88 |
| Total Deal Size | $704.04 billion |
New Deals:
- The acquisition of Flagstar Bancorp (FBC) by New York Community Bancorp (NYCB) for $2.6 billion in an all stock deal. Under terms of the agreement, Flagstar shareholders will receive 4.0151 shares of New York Community common stock for each Flagstar share they own.
- The acquisition of Proofpoint (PFPT) by Thoma Bravo for $12.3 billion or $176 per share in cash.
- The acquisition of W. R. Grace (GRA) by Standard Industries Holdings for $7 billion or $70 per share in cash. We added GRA as a potential deal to the Deals in the Works section on November 9, 2020, and the price after the news of the potential deal came out was $55.99.
- The acquisition of First Choice Bancorp (FCBP) by Enterprise Financial Services (EFSC) for $397.7 million in an all stock deal. Under the terms of the agreement, each holder of FCBP common stock will receive 0.6603 shares of EFSC common stock for each FCBP common share held.
- The merger of Tremont Mortgage Trust (TRMT) with RMR Mortgage Trust (RMRM) for $252.33 million in an all stock deal. Under the terms of the merger agreement, each TRMT common share will be converted into 0.520 of one newly issued RMRM common share.
- The acquisition of VEREIT (VER) by Realty Income Corporation (O) for $17.66 billion in an all stock deal. Under the terms of the agreement, VEREIT shareholders will receive 0.705 shares of Realty Income stock for every share of VEREIT stock they own. Immediately following the acquisition, both companies will spin off their combined office properties into a separate publicly traded REIT.
- The acquisition of Tarena International (TEDU) by Kidedu Holdings Limited for $230.6 million or $4 per share in cash.
Deal Updates:
- On April 26, 2021, FBL Financial Group (FFG) announced that it has received the necessary approvals from the Financial Industry Regulatory Authority in relation to its proposed transaction with Farm Bureau Property & Casualty Insurance Company.
- On April 27, 2021, Cubic Corporation (CUB) announced that the shareholders of the company approved a proposal to adopt the merger agreement entered into between the company and an affiliate of Veritas Capital.
- On April 28, 2021, shareholders of CoreLogic (CLGX) approved the company’s merger with Stone Point Capital and Insight Partners at a special meeting of shareholders.
- On April 29, 2021, shareholders of Cantel Medical (CMD) approved the company’s merger with STERIS (STE) at a special meeting of shareholders.
- On April 29, 2021, Noble Midstream Partners (NBLX) announced that it expects to close the previously announced merger transaction with Chevron Corporation (CVX) in mid-May.
- On April 30, 2021, Cooper Tire & Rubber Company (CTB) announced that its stockholders overwhelmingly voted to approve the agreement and plan of merger with The Goodyear Tire & Rubber Company (GT).
- On April 30, 2021, Boston Private Financial Holdings (BPFH) reminded shareholders that the previously adjourned special meeting of shareholders to vote on the proposed transaction with SVB Financial Group (SIVB) will reconvene on May 4, 2021.
- On April 30, 2021, Linx S.A. (LINX) announced that its merger with StoneCo (STNE) is subject to Brazilian antitrust authority (CADE) approval and other customary closing conditions. There can be no assurance that such approval will be obtained or that the merger will be consummated, on a timely basis or at all. We have extended the closing date for this deal to June 30, 2021.
Closed Deals:
- The acquisition of Glu Mobile (GLUU) by Electronic Arts (EA) on April 29, 2021. It took 80 days for this deal to be completed.
- The acquisition of RigNet (RNET) by Viasat (VSAT) on April 30, 2021. It took 130 days for this deal to be completed.
- The acquisition of Aphria (APHA) by Tilray (TLRY) on April 30, 2021. It took 135 days for this deal to be completed.
- The acquisition of Waddell & Reed Financial (WDR) by Macquarie Asset Management on April 30, 2021. It took 149 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 |
|---|---|---|---|---|---|---|---|
| DOYU | 10/12/2020 | HUYA Inc. (HUYA) | $12.86 | $9.11 | 06/30/2021 | 41.19% | 254.83% |
| MX | 03/26/2021 | South Dearborn Limited (N/A) | $29.00 | $25.01 | 12/31/2021 | 15.95% | 23.96% |
| CHNG | 01/06/2021 | UnitedHealth Group Incorporated (UNH) | $25.75 | $22.95 | 12/31/2021 | 12.20% | 18.33% |
| OTC:CXDC | 06/15/2020 | Faith Dawn Limited and Faith Horizon (N/A) | $1.20 | $1.07 | 05/10/2021 | 12.15% | 554.32% |
| SJR | 03/15/2021 | Rogers Communications Inc. (RCI) | $32.40 | $28.93 | 06/30/2022 | 11.99% | 10.33% |
| HCAP | 12/23/2020 | Portman Ridge Finance Corporation (PTMN) | $10.08 | $9.04 | 06/30/2021 | 11.48% | 71.00% |
| XLNX | 10/27/2020 | Advanced Micro Devices, Inc. (AMD) | $140.66 | $127.96 | 12/31/2021 | 9.93% | 14.91% |
| AJRD | 12/20/2020 | Lockheed Martin Corporation (LMT) | $51.00 | $46.72 | 12/31/2021 | 9.16% | 13.76% |
| OSN | 12/17/2020 | New Ossen Group Limited (N/A) | $5.10 | $4.71 | 06/30/2021 | 8.28% | 51.23% |
| COHR | 03/25/2021 | II-VI Incorporated (IIVI) | $281.10 | $259.99 | 12/31/2021 | 8.12% | 12.19% |
Conclusion:
The number of new deals announced in a month this year has been consistently increasing from 16 deals announced in January 2021, 19 in February 2021, 21 in March 2021, to 24 in April 2021. The SPAC frenzy on the other hand has almost fizzled out with just 13 SPAC IPOs announced in the month of April when compared to the record-breaking 111 SPAC IPOs that were announced in March 2021.
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.
I have been an active investor for more than two decades and my background in technology has helped me built tools that inform my investing process, especially as it relates to event-driven strategies that require updated data and processes. The focus on my Inside Arbitrage service is to provide investors with the right combination of tools and analysis to help them take advantage of strategies that can perform well across market cycles.
Analyst’s Disclosure: I am/we are long CHNG, BPY. 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.
I have long positions in Change Healthcare (CHNG) and Brookfield Property Partners (BPY). 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.
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