Merger Arbitrage Mondays – May 03, 2010

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May 3, 2010 | Merger Arbitrage | | Author Asif

We saw twice as many Merger and Acquisition announcements last week when compared to the prior week with six new deals announced. One deal closed and CKE scrapped the THL deal to accept Apollo’s takeover bid for $12.55 per share. The deal that closed was the acquisition of Techwell (TWLL) by Intersil Corporation on April 28.

Amongst the newly announced deals, the acquisition of Thomas Weisel Partners Group (TWPG) by Stifel Financial for $7.82 per share was at a very large premium of almost 80% over the previous day’s closing price. The deal for this San Francisco based investment bank is a stock-for-stock merger using a fixed exchange ratio of 0.1364 shares of Stifel common stock for each share of Thomas Weisel Partners common stock.

Another high profile deal was the acquisition of Dollar Thrifty Automotive Group (DTG) by Hertz for $41 per share, a 5.5 percent premium over Friday’s closing price of $38.85, the offer consists of 80% cash and 20% Hertz stock. I am still getting over the sticker shock of having rented a car at the Portland, Oregon airport for nearly $100/day a few weeks ago and this consolidation is probably going to push prices even higher.

It had become abundantly clear that smartphone maker PALM would not survive as an independent company following lackluster sales of the Palm Pre line of phones and rumors of an acquisition finally came to fruit last week when Hewlett-Packard announced the acquisition of Palm (PALM) for $5.7 per share in an all cash deal.

The acquisition of ATS Medical (ATSI) by Medtronic for $4.00 per share in a cash deal, the acquisition of Protection One (PONE) by GTCR for $15.5 per share in a cash deal and the acquisition of WuXi Pharmatech (WX) by Charles River Laboratories in a cash and stock transaction round out the six new deals. WuXi PharmaTech ADS holders will receive $11.25 in cash and $10.00 of Charles River common stock determined by an exchange ratio. This exchange ratio will be determined by dividing $10.00 by the weighted average Charles River common stock closing price as reported on the New York Stock Exchange for the 20-day trading period ending on the second business day prior to closing (Charles River Average Price). However, if the Charles River Average Price is equal to or greater than $43.1726, then the exchange ratio will be fixed at 0.2316, and if the Charles River Average Price is equal to or less than $37.1486, then the exchange ratio will be fixed at 0.2692.

Isn’t it great that you can leave these calculations to us and use the following table to figure out the spreads between the announced closing price and the current price?

  Symbol Anno.
Date
Acquiring
Company
Clo.
Value
Clo.
Price
Last
Price
Clo.
Date
Profit Annu.
Profit
+ ADG 1/19/2010 Chemring Group Plc $59 million 7.25 5.34 5/31/2010 35.77% 466.26%
+ AYE 2/11/2010 FirstEnergy $8.5 billion 25.26 21.78 3/31/2011 15.98% 17.78%
+ WX 4/26/2010 Charles River Laboratories $1.6 billion 21.25 19.2 12/31/2010 10.68% 16.37%
+ Q 4/22/2010 Century Link $10.6 billion 5.68 5.23 6/30/2011 8.60% 7.53%
+ SSE 2/23/2010 Naugatuck Valley Financial Corp $19.5 million 7.25 6.76 8/16/2010 7.25% 25.69%
+ ME 4/15/2010 Apache $2.7 billion 25.14 23.88 9/30/2010 5.28% 13.10%
+ STBK 3/18/2010 Roma Financial Corp $14.7 million 2.52 2.4 8/16/2010 5.00% 17.72%
+ SII 2/19/2010 Schlumberger $7.5 billion 49.75 47.76 9/30/2010 4.17% 10.35%
+ ARD 4/4/2010 SandRidge Energy Inc. $1.6 billion 38.38 36.93 9/30/2010 3.93% 9.75%
+ MAM 3/12/2010   $75.7 million 45 43.5001 12/31/2010 3.45% 5.29%
+ SWWC 3/3/2010 Institutional Investors $275 million 11 10.67 5/17/2010 3.09% 80.63%
+ PINN 2/24/2010 Investor Group lead by Scotia Waterous (USA) $11 million 0.34 0.33 5/17/2010 3.03% 79.00%
+ ORCD 3/16/2010 eMusic $12.77 million 2.05 1.99 8/16/2010 3.02% 10.68%
+ BNE 2/24/2010 RR Donnelley $481 million 11.5 11.18 9/30/2010 2.86% 7.11%
+ WEL 4/9/2010 Halliburton Company $240 million 3 2.93 9/30/2010 2.39% 5.93%
+ RCNI 3/5/2010 Emera Inc. $1.2 billion 15 14.69 9/30/2010 2.11% 5.24%
+ DCP 4/12/2010 Cerberus Capital Management $1.5 billion 17.55 17.2 11/15/2010 2.03% 3.87%
+ CKR 3/1/2010 Apollo Management VII $694 million 12.55 12.34 5/17/2010 1.70% 44.37%
+ CFL 1/18/2010 Tyco International $2.9 billion 42.5 41.94 6/26/2010 1.34% 9.20%
+ CYBS 4/21/2010 Visa Inc. $2.0 billion 26 25.68 9/30/2010 1.25% 3.09%
+ BWY 3/29/2010 Madison Dearborn Partners, LLC ("MDP") $915 million 20 19.78 8/16/2010 1.11% 3.94%
+ RBI 3/15/2010 affiliate of Oncap Management Partners L.P.   13.55 13.41 8/16/10 1.04% 3.70%
+ PFWD 4/16/2010 Oracle Corp. $685 million 17 16.83 6/30/2010 1.01% 6.47%
+ MIL 3/1/2010 Merck $6 billion 107 106.15 9/30/2010 0.80% 1.99%
+ SKIL 2/12/2010 consortium of private equity funds $1.2 billion 11.25 11.17 5/31/2010 0.72% 9.34%
+ RISK 3/1/2010 MSCI $1.55 billion 22.59 22.44 7/16/2010 0.67% 3.34%
+ ATSI 4/29/2010 Medtronic $350 million 4 3.98 9/30/2010 0.50% 1.25%
+ ZNT 2/18/2010 Fairfax Financial Holdings $I.4 billion 38 37.82 5/17/2010 0.48% 12.41%
+ DCAI 4/14/2010 U.S. Renal Care $112 million 11.25 11.21 5/31/2010 0.36% 4.65%
+ WEDC 3/30/2010 Microsemi Corporation $100 million 7 6.98 6/27/2010 0.29% 1.94%
+ PONE 4/26/2010 GTCR $828 million 15.5 15.47 6/30/2010 0.19% 1.24%
+ BELM 3/29/2010 Avnet $252 million 7 6.99 6/30/2010 0.14% 0.92%
+ NADX 4/5/2010 GDC Holdings Inc. $100 million 17 16.98 6/30/2010 0.12% 0.75%
+ CRN 4/19/2010 GeoGroup $685 million 27.53 27.5 9/30/2010 0.11% 0.27%
+ SMMX 4/5/2010 Accelrys Inc. $186 million 5.45 5.45 6/30/2010 0.00% 0.00%
+ NGA 4/1/2010 AZZ Inc. $125.6 million 7.5 7.5 8/31/2010 0.00% 0.00%
+ CXG 3/22/2010 Consol Energy Inc. $363 million 38.25 38.27 5/5/2010 -0.05% -9.54%
+ IUSA 3/8/2010 CCMP $460 million 8 8.01 6/30/2010 -0.12% -0.80%
+ TWPG 4/26/2010 Stifel Financial $300 million 7.82 7.85 6/30/2010 -0.38% -2.45%
+ TUTR 3/26/2010 Thoma Brava $141 million 5.6 5.65 7/31/2010 -0.88% -3.67%
+ PRPX 2/17/2010 L.B. Foster Co. $112 million 11.71 11.82 6/30/2010 -0.93% -5.96%
+ MIR 4/12/2010 RRI Energy In. $1.6 billion 11.54 11.66 12/31/2010 -1.03% -1.58%
+ PALM 4/28/2010 Hewlett – Packard $1.2 billion 5.7 5.81 7/31/2010 -1.89% -7.85%
+ DTG 4/26/2010 Hertz $1.2 billion 41 43.99 12/31/2010 -6.80% -10.42%
+ CCE 2/25/2010 The Coca-Cola Company $12.3 billion   27.73 10/1/2010 -100.00% -246.62%



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