Merger activity decreased last week, with three new deals announced and four deals completed. Two of the three deals announced were potential deals in the works. We saw yet another SPAC business combination fall apart.
Founded in 2013 and headquartered in Jacksonville, Florida, Black Knight provides innovative, high-performance software, data and analytics for mortgage and home equity lending and servicing to the mortgage industry. Solutions offered by the company include Loan Origination System, Loan Servicing System, Secondary Marketing Automation and Data and Analytics Marketplace. Mortgage Monitor and Originations Market Monitor are monthly benchmark data reports published by Black Knight.
We added Black Knight as a potential deal in the works on April 5, 2022, when Bloomberg reported that the company was exploring a potential sale after receiving takeover interest. BKI's price after this announcement was $66.27. On May 4, 2022, the company entered into a definitive agreement to be acquired by Intercontinental Exchange, Inc. (ICE) in a deal valued at $13.1 billion. Investors can choose to receive the $85 per share consideration in cash (80%) or stock (20%) subject to proration, with the value of the cash election and the stock election equalized at closing.
ICE and Black Knight both offer loan origination software to mortgage lenders. According to Raymond James analyst Patrick O'Shaughnessy, this deal could potentially into antitrust issues as ICE's Ellie Mae Encompass platform is the largest provider of loan origination software and Black Knight's Empower is the "clear #2." The current spread on the deal is 19.87% and we are treating it as a "special conditions" deal worth $85 per share.
According to the merger agreement, Black Knight will be charged a termination fee of $398 million if it terminates the agreement, and Intercontinental Exchange will be charged a termination fee of $725 million if it terminates the agreement.
There was one new SPAC IPO filed and two new SPAC combinations announced last week. You can find the new SPAC IPO announcements in our SPACs tool here.
The table below shows weekly spread changes between April 29 and May 7, 2022.
|Symbol||Quote||AcquiringCompany||AcquiringCompany Quote||CurrentSpread||Last WeekSpread||Spread ChangeWeekly||DealType|
|(HTA)||29.84||Healthcare Realty Trust Incorporated (HR)||30.81||19.40%||4.73%||14.67%||Cash Plus Stock|
|(TEN)||15.67||Apollo Global Management, Inc. (APO)||52.9||27.63%||16.48%||11.15%||All Cash|
|(SAVE)||19.74||Frontier Group Holdings, Inc. (ULCC)||9.62||4.00%||-5.03%||9.03%||Cash Plus Stock|
|(MBII)||1.03||Bioceres Crop Solutions Corp. (BIOX)||13.47||15.08%||10.76%||4.32%||All Stock|
|(VG)||19.37||Ericsson (ERIC)||7.71||8.42%||5.21%||3.21%||All Cash|
|(XENT)||27.81||Medtronic plc (MDT)||103.45||1.58%||3.22%||-1.64%||All Cash|
|(TWTR)||49.8||Elon Musk (N/A)||8.84%||10.57%||-1.73%||All Cash|
|(NP)||37.37||Schweitzer-Mauduit International, Inc. (SWM)||25.93||-5.77%||-3.48%||-2.29%||All Stock|
|(AZPN)||163.25||Emerson Electric Co. (EMR)||88.01||-1.99%||0.92%||-2.91%||Special Conditions|
|(ATVI)||77.84||Microsoft Corporation (MSFT)||274.73||22.05%||25.66%||-3.61%||All Cash|
|Total Number of Deals Closed in 2022||66|
|Total Number of Deals Not Completed in 2022||4|
|Total Number of Pending Deals|
|Stock & Cash Deals||10|
|Total Number of Pending Deals||80|
|Aggregate Deal Consideration||$816.55 billion|
Please do your own due diligence on deals with large spreads. Some of these large spreads might be related to regulatory issues or because of the way the deal is structured. We classify some of these deals as "special situation" deals in our merger arbitrage tool and provide additional details to help with the analysis. There may be unique situations related to special dividends, spinoffs, proration, etc. that need to be accounted for when looking at these spreads.
|(TEN)||02/23/2022||Apollo Global Management, Inc. (APO)||$20.00||$15.67||12/31/2022||27.63%||42.56%|
|(BLCT)||04/30/2022||Multelements Limited (N/A)||$1.60||$1.29||12/31/2022||24.03%||37.01%|
|(ATVI)||01/18/2022||Microsoft Corporation (MSFT)||$95.00||$77.84||06/30/2023||22.05%||19.25%|
|(ZNGA)||01/10/2022||Take-Two Interactive Software, Inc. (TTWO)||$9.86||$8.08||06/30/2022||22.03%||151.71%|
|(BKI)||05/04/2022||Intercontinental Exchange, Inc. (ICE)||$85.00||$70.91||06/30/2023||19.87%||17.35%|
|(HTA)||02/28/2022||Healthcare Realty Trust Incorporated (HR)||$35.63||$29.84||09/30/2022||19.40%||48.84%|
|(SIMO)||05/05/2022||MaxLinear, Inc. (MXL)||$110.33||$92.68||06/30/2023||19.04%||16.63%|
|(CHNG)||01/06/2021||UnitedHealth Group Incorporated (UNH)||$27.75||$23.47||12/31/2022||18.24%||28.09%|
|(MBII)||03/16/2022||Bioceres Crop Solutions Corp. (BIOX)||$1.19||$1.03||09/30/2022||15.08%||37.97%|
SPAC activity dwindled again last week with only one SPAC IPO filed. Companies continued filing their first quarter earnings, and we can see a change in the spreads for some of the active deals. There was a significant change in the spread for the Healthcare Trust of America (HTA) deal last week, after Healthcare Realty Trust (HR), the company acquiring HTA received a $5 billion bid from Welltower (WELL).
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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.
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