Merger activity decreased last week with three new deals announced and two deals completed.
Alleghany Corporation (NYSE:Y)
Incorporated in 1929 and based in New York, Alleghany Corporation was originally created as a holding company for railroad interests by railroad entrepreneurs Oris and Mantis Van Sweringen. Alleghany operates in three segments: reinsurance, insurance, and Alleghany Capital, providing property and casualty reinsurance and insurance products in the United States and internationally.
Berkshire Hathaway (BRK.A, BRK.B) announced last week that it will acquire all outstanding Alleghany shares for $848.02 per share in cash, for a total equity value of approximately $11.6 billion, representing a premium of 29% to Alleghany’s average stock price over the last 30 days. The transaction aligns well with Berkshire's interests in both insurance and reinsurance.
According to an article from S&P Global, "Another element that makes the $11.6 billion deal attractive to Berkshire is that Alleghany has a brokered reinsurance unit, whereas The Berkshire Hathaway Reinsurance Group, the company's reinsurance arm, sells directly to clients. A quota share with Alleghany's reinsurance company has given Berkshire good insight into the business and increased its broker market distribution, UBS analyst Brian Meredith said in a note."
This deal will also unite Warren Buffett with his 'long time friend', Alleghany CEO Joe Brandon. Brandon was the CEO of General Re from 2001 to 2008 before joining Alleghany as the president of its insurance group in 2011.
This is one of the five largest acquisitions in Berkshire's history and it ends Buffett's six-year drought of large acquisitions.
After the transaction is completed, Alleghany will operate as an independent unit of Berkshire. The agreement includes a 25-day "go-shop" period, during which Alleghany may solicit other acquisition offers. According to the merger agreement, no break-up fee would be owed to either party if the merger fell through.
There was one new deal announced in the Deals in the Works section last week.
On March 25, 2022, Bloomberg reported that Gulfport Energy (GPOR) had discussed merging with rival oil and gas explorer Ascent Resources. We had added Gulfport Energy as a potential deal in the works on September 23, 2021, when Reuters had reported that, after emerging from bankruptcy earlier in 2021, the company was exploring strategic options including a possible sale. GPOR's price after this announcement was $79.98.
There was one new SPAC IPO filed and four new SPAC combinations announced last week.
The table below shows weekly spread changes between March 18 and March 25, 2022.
|Symbol||Quote||Acquiring Company||Acquiring Company Quote||CurrentSpread||Last Week Spread||Spread Change Weekly||Deal Type|
|MBII||1.08||Bioceres Crop Solutions Corp. (BIOX)||13.86||12.93%||7.05%||5.88%||All Stock|
|GFED||32.12||QCR Holdings, Inc. (QCRH)||57.3||4.85%||0.00%||4.85%||All Stock|
|PTRS||9.46||OceanFirst Financial Corp. (OCFC)||21.02||9.73%||7.56%||2.17%||Special Conditions|
|TEN||17.88||Apollo Global Management, Inc. (APO)||62.5||11.86%||10.44%||1.42%||All Cash|
|OCDX||18.15||Quidel Corporation (QDEL)||109.2||2.81%||1.80%||1.01%||Cash Plus Stock|
|FHN||23.4||The Toronto-Dominion Bank (TD)||81.71||6.84%||8.65%||-1.81%||Special Conditions|
|VNE||36.84||Qualcomm Incorporated (QCOM)||157.97||0.43%||2.35%||-1.92%||All Cash|
|SJR||31.41||Rogers Communications Inc. (RCI)||54.64||3.15%||5.57%||-2.42%||Special Conditions|
|JOBS||54.05||Garnet Faith Limited (N/A)||12.86%||15.97%||-3.11%||All Cash|
|AZPN||157.85||Emerson Electric Co. (EMR)||98.51||1.36%||9.48%||-8.12%||Special Conditions|
|Total Number of Deals Closed in 2022||45|
|Total Number of Deals Not Completed in 2022||3|
|Total Number of Pending Deals|
|Stock & Cash Deals||10|
|Total Number of Pending Deals||76|
|Aggregate Deal Consideration||$672.22 billion|
|Symbol||Announced Date||Acquiring Company||Closing Price||Last Price||Closing Date||Profit||Annualized Profit|
|ATVI||01/18/2022||Microsoft Corporation (MSFT)||$95.00||$79.6||06/30/2023||19.35%||15.38%|
|CHNG||01/06/2021||UnitedHealth Group Incorporated (UNH)||$25.75||$21.97||06/30/2022||17.21%||66.81%|
|MBII||03/16/2022||Bioceres Crop Solutions Corp. (BIOX)||$1.22||$1.08||09/30/2022||12.93%||25.38%|
|JOBS||06/21/2021||Garnet Faith Limited (N/A)||$61.00||$54.05||06/30/2022||12.86%||49.93%|
|SAFM||08/09/2021||Cargill and Continental Grain Company (N/A)||$203.00||$180.54||06/30/2022||12.44%||48.31%|
|BRG||12/20/2021||Blackstone Real Estate (N/A)||$29.85||$26.59||06/30/2022||12.26%||47.61%|
|TEN||02/23/2022||Apollo Global Management, Inc. (APO)||$20.00||$17.88||12/31/2022||11.86%||15.57%|
|ATC||07/01/2021||MKS Instruments, Inc. (MKSI)||$24.79||$22.41||03/31/2022||10.62%||1291.95%|
|WLL||03/07/2022||Oasis Petroleum Inc. (OAS)||$95.57||$87.06||12/31/2022||9.78%||12.84%|
|PTRS||11/04/2021||OceanFirst Financial Corp. (OCFC)||$10.38||$9.46||06/30/2022||9.73%||37.76%|
Multiple deals received required approvals as we come closer to the end of the first quarter of 2022. SPAC IPOs continue to dwindle with only one SPAC IPO filed last week. SPAC business combinations on the other hand kept up pace with four new combinations announced last week. One of the SPAC business combinations announced last week is structured as a 'Reverse Morris Trust'. Ligand Pharmaceuticals (LGND) signed a definitive merger agreement with Avista Public Acquisition Corp. II (AHPA), providing for the spin-off of OmniAb, which will be merged with a newly formed subsidiary of APAC. The combined company will be led by Ligand’s President, Matt Foehr, and will be renamed “OmniAb, Inc."
Editor's Note: This article discusses one or more securities that do not trade on a major U.S. exchange. Please be aware of the risks associated with these stocks.
A Combination Of Tools And Analysis For Event-Driven Strategies.
For over a decade we built tools to help event-driven investors that focus on strategies like merger arbitrage. The Inside Arbitrage service provides the best combination of tools and analysis for various event-driven strategies like risk arbitrage, spinoffs and SPACs.
We also track insider purchases and companies that are buying back their own stock while their insiders are making open market purchases. We use these strategies for idea generation and then do detailed work to identify opportunities for our model portfolio and personal portfolios. Click here to learn more.
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.
Disclosure: I/we have a beneficial long position in the shares of BRK.A, BRK.B, FHN, TSEM, HTA, TGNA, BRG either through stock ownership, options, or other derivatives. 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: Disclaimer: I have long positions in Berkshire Hathaway (BRK.A, BRK.B), First Horizon (FHN), Tower Semiconductor (TSEM), Healthcare Trust of America (HTA), TEGNA (TGNA) and Bluerock Residential Growth REIT (BRG). 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.