After twelve new deals were announced during the prior two weeks, merger activity ground to a halt last week with no new deals announced. Oracle (ORCL) completed its massive $24.3 billion deal for healthcare software company Cerner and in a trend we have been seeing for several weeks, yet another SPAC business combination fell apart. There was plenty of activity in current deals that are yet to consummated, including Thoma Bravo negotiating a slightly lower price (a 3.41% cut) for Anaplan (PLAN), additional saber rattling between Elon Musk and Twitter (TWTR) where the company agreed to give Mr. Musk unrestricted access to its data through its "firehose" API, and JetBlue (JBLU) sweetening its offer for Spirit (NYSE:SAVE).
We wrote the following in our Merger Arbitrage post regarding Frontier Group's (ULCC) acquisition of Spirit Airlines.
On February 7, 2022, Frontier Group Holdings announced that it is acquiring Spirit Airlines for $6.6 billion in a cash plus stock deal, representing a premium of 19% over the February 4 closing price of Spirit, and a 26% premium based on the 30 trading-day volume-weighted average prices of Frontier and Spirit. Bill Franke, Chairman of Frontier Airlines has been the visionary behind this deal for over a decade. He was the Chairman of Spirit Airlines from 2006 to 2013. Bill Franke was involved in the IPOs of both Spirit and Frontier through Indigo Partners, a private equity firm that was co-founded by him.
Headquartered in Miramar, Florida, Spirit Airlines is a low-cost carrier that is known for its low ticket prices and for charging fees for other amenities like carry-ons, water, and even for printing a boarding pass. Spirit’s merger with Frontier would create a big player in the low-budget airfare market. The deal is currently trading at a spread of 7% or an annualized return of 8% assuming the deal closes by the end of the year.
The deal has been on a roller coaster ride since it was announced. Here is a timeline of all the events since announcement:
The current spread on the deal is -5.28%, reflecting the sweetened offer from JetBlue.
There was one new SPAC IPO filed and one new SPAC combination announced last week.
The table below shows weekly spread changes between June 3 and June 10, 2022.
|Symbol||Quote||Acquiring Company||Acquiring Company Quote||Current Spread||Last Week Spread||Spread Change Weekly||Deal Type|
|(VG)||18.31||Ericsson (ERIC)||7.53||14.69%||8.25%||6.44%||All Cash|
|(HLG)||13.5||Hailiang Education International Limited (N/A)||6.00%||0.14%||5.86%||All Cash|
|(AUY)||5.65||Gold Fields Limited (GFI)||10.19||8.21%||2.46%||5.75%||All Stock|
|(VMW)||125.41||Broadcom Inc. (AVGO)||541.27||13.63%||7.96%||5.67%||Special Conditions|
|(BKI)||66.51||Intercontinental Exchange, Inc. (ICE)||97.78||27.80%||22.20%||5.60%||Special Conditions|
|(PTRS)||9||OceanFirst Financial Corp. (OCFC)||19.13||-4.09%||-2.39%||-1.70%||All Stock|
|(SUMR)||11.54||Kids2, Inc. (N/A)||0.00||3.99%||5.82%||-1.83%||All Cash|
|(RDBX)||13.2||Chicken Soup for the Soul Entertainment, Inc. (CSSE)||8.76||-94.23%||-91.22%||-3.01%||All Stock|
|(PCSB)||19.07||Brookline Bancorp, Inc. (BRKL)||13.39||-6.73%||-3.33%||-3.40%||All Stock|
|(SAVE)||22.28||Frontier Group Holdings, Inc. (ULCC)||9.92||-5.28%||0.74%||-6.02%||Cash Plus Stock|
|Total Number of Deals Closed in 2022||80|
|Total Number of Deals Not Completed in 2022||4|
|Total Number of Pending Deals|
|Stock & Cash Deals||8|
|Total Number of Pending Deals||88|
|Aggregate Deal Consideration||$933.26 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.
|Symbol||Announced Date||Acquiring Company||Closing Price||Last Price||Closing Date||Profit||Annualized Profit|
|(TWTR)||04/25/2022||Elon Musk (N/A)||$54.20||$38.98||12/31/2022||39.05%||70.55%|
|(BKI)||05/04/2022||Intercontinental Exchange, Inc. (ICE)||$85.00||$66.51||06/30/2023||27.80%||26.49%|
|(ATVI)||01/18/2022||Microsoft Corporation (MSFT)||$95.00||$76.48||06/30/2023||24.22%||23.08%|
|(TEN)||02/23/2022||Apollo Global Management, Inc. (APO)||$20.00||$16.6||12/31/2022||20.48%||37.01%|
|(BLCT)||04/30/2022||Multelements Limited (N/A)||$1.60||$1.34||12/31/2022||19.40%||35.06%|
|(SIMO)||05/05/2022||MaxLinear, Inc. (MXL)||$108.67||$91.04||06/30/2023||19.37%||18.46%|
|(CHNG)||01/06/2021||UnitedHealth Group Incorporated (UNH)||$27.75||$23.38||12/31/2022||18.69%||33.77%|
|(SJR)||03/15/2021||Rogers Communications Inc. (RCI)||$32.40||$27.64||06/30/2022||17.22%||349.21%|
|(NLSN)||03/29/2022||Evergreen Coast Capital Corporation (N/A)||$28.00||$24.4||12/31/2022||14.75%||26.66%|
|(TGNA)||02/22/2022||Standard General L.P. (N/A)||$24.00||$20.92||12/31/2022||14.72%||26.60%|
There were no new deals announced last week but multiple deals faced hurdles and went through amendments. Elon Musk accused Twitter for materially breaching its obligations under the merger agreement, Anaplan and Thoma Bravo amended their merger agreement, LHC Group and UnitedHealth Group received a request for additional information from the FTC, and Rogers Communications and Shaw Communications continue to face challenges from Canada's anti-trust regulator.
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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.
Disclosure: I/we have a beneficial long position in the shares of TWTR, 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 Biohaven Pharmaceutical (BHVN), Twitter (TWTR), 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.