Merger Arbitrage Mondays – April 26, 2010

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April 25, 2010 | Merger Arbitrage | | Author Asif

The Merger and Acquisition front last week saw three new deals and two deals that closed.

The three new deals include the acquisition of Qwest Communications International(Q) by CenturyTel (CTL) for $5.71 per share in an all stock deal that is expected to close more than a year later. Qwest Communications, a company tainted by insider trading by it’s guilty Ex-CEO Joe Nacchio, inched up just a little following the merger announcement and dropped on Friday on concerns that the deal may face regulatory approval issues and that CenturyTel may have a difficult time integrating this acquisition. The 8.19% spread on this deal is also the largest of the new merger announcements from last week. An arbitrage position that includes buying Qwest and shorting CenturyTel has to take into account the fact that CenturyTel’s dividend yield of 8.4% is larger than Qwest’s 6.1% yield, thereby reducing the spread to 5.89% after taking dividend payments on the short position into account.

The two other new deals include the acquisition of CyberSource (CYBS) by Visa (V) for $26 per share in cash and the acquisition of Cornell Companies (CRN) by The GEO Group (GEO) for a closing price of $27.82. Under the terms of the definitive agreement, stockholders of Cornell will have the option to elect to receive either

  • 1.3 shares of GEO common stock for each share of Cornell common stock or
  • An amount of cash consideration equal to the greater of (i) the fair market value of one share of GEO common stock plus $6.00 or (ii) the fair market value of 1.3 shares of GEO common stock.

The deals that closed were the acquisition of Lodgian (LGN) by LoneStar on April 20, acquisition of Facet Biotech (FACT) by Abbott (ABT) on April 21 and acquisition of Chordiant Software (CHRD) by Pegasystems (PEGA).

Update: The closing price for ADG was originally specified as $6. This was a mistake and the actual closing price is $7.25 as specified in the details section (clicking on the + sign) and in previous blog entries.

Symbol Anno.

Date

Acquiring

Company

Closing

Value

Closing

Price

Last

Price

Closing

Date

Profit Annu.

Profit

+ ADG 1/19/2010 Chemring Group Plc $59 million $7.25 5.82 5/31/2010 24.57% 256.23%
+ AYE 2/11/2010 FirstEnergy $8.5 billion 25.02 21.57 3/31/2011 15.99% 17.43%
+ SSE 2/23/2010 Naugatuck Valley Financial Corp $19.5 million 7.25 6.67 8/16/2010 8.70% 28.85%
+ Q 4/22/2010 Century Link $10.6 billion 5.71 5.28 6/30/2011 8.14% 7.01%
+ ARD 4/4/2010 SandRidge Energy Inc. $1.6 billion 39.71 37.65 9/30/2010 5.47% 12.97%
+ STBK 3/18/2010 Roma Financial Corp $14.7 million 2.52 2.39 8/16/2010 5.44% 18.05%
+ SWWC 3/3/2010 Institutional Investors $275 million 11 10.58 5/17/2010 3.97% 69.00%
+ PINN 2/24/2010 Investor Group lead by Scotia Waterous (USA) $11 million 0.34 0.33 5/17/2010 3.03% 52.67%
+ SII 2/19/2010 Schlumberger $7.5 billion 50.63 49.15 9/30/2010 3.01% 7.14%
+ BNE 2/24/2010 RR Donnelley $481 million 11.5 11.2 9/30/2010 2.68% 6.35%
+ MAM 3/12/2010 Emera Inc. $75.7 million 45 44 12/31/2010 2.27% 3.39%
+ ORCD 3/16/2010 eMusic $12.77 million 2.05 2.01 8/16/2010 1.99% 6.60%
+ ME 4/15/2010 Apache $2.7 billion 26.53 26.03 9/30/2010 1.92% 4.55%
+ RCNI 3/5/2010 Abry $1.2 billion 15 14.72 9/30/2010 1.90% 4.51%
+ CRN 4/19/2010 GeoGroup $685 million 27.82 27.31 9/30/2010 1.87% 4.43%
+ WEL 4/9/2010 Halliburton Company $240 million 3 2.95 9/30/2010 1.69% 4.02%
+ DCP 4/12/2010 Cerberus Capital Management $1.5 billion 17.55 17.29 11/15/2010 1.50% 2.76%
+ CYBS 4/21/2010 Visa Inc. $2.0 billion 26 25.63 9/30/2010 1.44% 3.42%
+ RISK 3/1/2010 MSCI $1.55 billion 22.96 22.71 7/16/2010 1.10% 5.02%
+ RBI 3/15/2010 affiliate of Oncap Management Partners L.P. 13.55 13.41 8/16/10 1.04% 3.46%
+ PFWD 4/16/2010 Oracle Corp. $685 million 17 16.83 6/30/2010 1.01% 5.76%
+ SKIL 2/12/2010 consortium of private equity funds $1.2 billion 11.25 11.15 5/31/2010 0.90% 9.35%
+ MIR 4/12/2010 RRI Energy In. $1.6 billion 11.54 11.44 12/31/2010 0.87% 1.30%
+ MIL 3/1/2010 Merck $6 billion 107 106.22 9/30/2010 0.73% 1.74%
+ DCAI 4/14/2010 U.S. Renal Care $112 million 11.25 11.21 5/31/2010 0.36% 3.72%
+ NADX 4/5/2010 GDC Holdings Inc. $100 million 17 16.95 6/30/2010 0.29% 1.68%
+ BELM 3/29/2010 Avnet $252 million 7 6.99 6/30/2010 0.14% 0.82%
+ TWLL 3/22/2010 Intersil Corp. $400 million 18.5 18.48 5/17/2010 0.11% 1.88%
+ WEDC 3/30/2010 Microsemi Corporation $100 million 7 7 6/27/2010 0.00% 0.00%
+ CXG 3/22/2010 Consol Energy Inc. $363 million 38.25 38.26 5/5/2010 -0.03% -1.06%
+ PRPX 2/17/2010 L.B. Foster Co. $112 million 11.71 11.74 6/30/2010 -0.26% -1.46%
+ BWY 3/29/2010 Madison Dearborn Partners, LLC (MDP) $915 million 20 20.07 8/16/2010 -0.35% -1.16%
+ SMMX 4/5/2010 Accelrys Inc. $186 million 5.66 5.68 6/30/2010 -0.35% -2.01%
+ NGA 4/1/2010 AZZ Inc. $125.6 million 7.5 7.57 8/31/2010 -0.92% -2.70%
+ CFL 1/18/2010 Tyco International $2.9 billion 42.5 42.93 6/26/2010 -1.00% -6.09%
+ ZNT 2/18/2010 Fairfax Financial Holdings $I.4 billion 38 38.41 5/17/2010 -1.07% -18.55%
+ IUSA 3/8/2010 CCMP $460 million 8 8.17 6/30/2010 -2.08% -11.87%
+ TUTR 3/26/2010 Thoma Brava $141 million 5.6 5.76 7/31/2010 -2.78% -10.67%
+ CKR 3/1/2010 Thomas H. Lee $928 million 11.05 12.85 5/17/2010 -14.01% -243.47%
+ CCE 2/25/2010 The Coca-Cola Company $12.3 billion 28.25 10/1/2010 -100.00% -235.48%



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