Archive for July, 2010

Merger Arbitrage Mondays – July 05, 2010

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July 5, 2010 | Merger Arbitrage | Author Asif

The activity on the Merger and Acquisition front increased again last week with three new deals being announced and four deals closing.

The new deals announced include the acquisition of Wainwright Bank & Trust Company (WAIN) by Eastern Bank for $19 per share in cash, the acquisition of Abraxis (ABII) by Celgene (CELG) in a cash plus stock deal where shareholders of Abraxis will receive $58 and 0.2617 shares of Celgene for each Abraxis share they own, and the acquisition of Argon ST (STST) by Boeing (BA) for $34.50 per share in cash.

The deals that closed include the acquisition of Symyx Technolgies (SMMX) by Accelrys (ACCL) on June 30, 2010, the acquisition of Thomas Weisel Partners Group (TWPG) by Stifel Financial (SF) on June 30, 2010, the acquisition of Infogroup (IUSA) by affiliates of CCMP Capital Advisors on July 01, 2010 and the acquisition of HealthTronics (HTRN) by Endo Pharmaceuticals (ENDP) on July 02, 2010.

While the injunction on the Portec Rail Products (PRPX) acquisition by L. B. Foster (FSTR) was lifted, the DOJ investigation is ongoing and hence we have updated the closing date for that deal to 8/31/2010.

Voluntary Disclosure: I own long positions in Coca-Cola Enterprises (CCE) and Portec Rail Products (PRPX) in my personal portfolio.

  Symbol Announced
Date
Acquiring
Company
Closing
Value
Closing
Price
Last
Price
Closing
Date
Profit Annu.

Profit

+ ATBC 05/10/2010 Jacksonville Bancorp (JAXB) N/A $2.83 $2.10 09/30/2010 34.76% 145.84%
+ WX 04/26/2010 Charles River Laboratories (CRL) $1.6 billion $20.25 $15.85 12/31/2010 27.76% 56.60%
+ AYE 02/11/2010 FirstEnergy (FE) $8.5 billion $23.08 $20.14 03/31/2011 14.59% 19.80%
+ SSE 02/23/2010 Naugatuck Valley Financial Corp (NVSL) $19.5 million $7.25 $6.45 08/16/2010 12.40% 107.79%
+ EMMS 05/25/2010 JS Acquisition and Alden Global Capital (N/A) $3 billion $2.40 $2.20 09/30/2010 9.09% 38.14%
+ BGH 06/11/2010 Buckeye Partners LP (BPL) $1.14 billion $41.03 $38.20 12/31/2010 7.41% 15.11%
+ ECLP 06/09/2010 Allscripts-Misys Healthcare (MDRX) $1.3 billion $18.92 $17.69 11/15/2010 6.98% 19.14%
+ DIVX 06/02/2010 Sonic Solutions (SNIC) $323 million $7.72 $7.26 09/30/2010 6.38% 26.77%
+ EFJI 05/17/2010 Francisco Partners (N/A) N/A $1.50 $1.42 09/30/2010 5.63% 23.64%
+ Q 04/22/2010 Century Link (CTL) $10.6 billion $5.52 $5.24 04/21/2011 5.27% 6.63%
+ PINN 02/24/2010 Investor Group lead by Scotia Waterous (USA) (N/A) $11 million $0.34 $0.3235 08/21/2010 5.10% 39.61%
+ ALOY 06/24/2010 ZelnickMedia (N/A) $126.5 million $9.80 $9.38 12/31/2010 4.48% 9.13%
+ TTIL 06/09/2010 Teoco Corp. (N/A) $58 million $3.00 $2.88 09/30/2010 4.17% 17.48%
+ SWWC 03/03/2010 Institutional Investors (N/A) $275 million $11.00 $10.60 03/31/2011 3.77% 5.12%
+ TSFG 05/17/2010 TD Bank Financial Group (N/A) $61 million $0.28 $0.27 09/30/2010 3.70% 15.54%
+ PRPX 02/17/2010 L.B. Foster Co. (FSTR) $112 million $11.71 $11.36 08/31/2010 3.08% 19.73%
+ GLG 05/17/2010 Man Group (N/A) $1.6 billion $4.50 $4.37 09/30/2010 2.97% 12.48%
+ PSYS 05/17/2010 Universal Health (N/A) $3.1 billion $33.75 $32.79 12/31/2010 2.93% 5.97%
+ WAIN 06/29/2010 Eastern Bank (N/A) $163 million $19.00 $18.47 12/31/2010 2.87% 5.85%
+ VETS 06/02/2010 VCA Antech Inc (WOOF) $41.25 million $0.34 $0.331 09/30/2010 2.72% 11.41%
+ ME 04/15/2010 Apache (APA) $2.7 billion $21.92 $21.36 09/30/2010 2.62% 11.00%
+ BNE 02/24/2010 RR Donnelley (RRD) $481 million $11.50 $11.22 09/30/2010 2.50% 10.47%
+ ODSY 05/24/2010 Gentiva Health Services (GTIV) $1.0 billion $27.00 $26.37 09/30/2010 2.39% 10.02%
+ SII 02/19/2010 Schlumberger (SLB) $7.5 billion $38.29 $37.52 09/30/2010 2.04% 8.56%
+ ORCD 03/16/2010 eMusic (N/A) $12.77 million $2.05 $2.01 08/16/2010 1.99% 17.29%
+ CYBS 04/21/2010 Visa Inc. (V) $2.0 billion $26.00 $25.52 09/30/2010 1.88% 7.89%
+ PMACA 06/10/2010 Old Republic International (ORI) $228 million $6.62 $6.50 09/30/2010 1.88% 7.87%
+ PFWD 04/16/2010 Oracle Corp. (ORCL) $685 million $17.00 $16.70 06/30/2010 1.80% 0.00%
+ IDC 05/04/2010 Silver Lake & Warburg Pincus (N/A) $3.4 billion $33.86 $33.31 09/30/2010 1.65% 6.93%
+ MAM 03/12/2010 Emera Inc (N/A) $75.7 million $45.00 $44.30 12/31/2010 1.58% 3.22%
+ OMNI 06/04/2010 Wellspring Capital Management (N/A) $122 million $2.75 $2.71 11/15/2010 1.48% 4.05%
+ BSMD 05/13/2010 Merit Medical Systems (MMSI) $96 million $4.38 $4.32 09/30/2010 1.39% 5.83%
+ VTIV 05/06/2010 Thomas H. Lee Partners (N/A) $1.1 billion $26.00 $25.65 09/30/2010 1.36% 5.72%
+ WEL 04/09/2010 Halliburton Company (HAL) $240 million $3.00 $2.96 09/30/2010 1.35% 5.67%
+ ATSI 04/29/2010 Medtronic (MDT) $350 million $4.00 $3.96 09/30/2010 1.01% 4.24%
+ VIRL 06/10/2010 Synopsys (SNPS) $315 million $12.00 $11.88 12/31/2010 1.01% 2.06%
+ RCNI 03/05/2010 ABRY Partners (N/A) $536 million $15.00 $14.86 09/30/2010 0.94% 3.95%
+ STBK 03/18/2010 Roma Financial Corp (ROMA) $14.7 million $2.52 $2.5001 08/16/2010 0.80% 6.92%
+ MDNU 06/11/2010 Danone (N/A) $62.3 million $4.00 $3.969 09/30/2010 0.78% 3.28%
+ RBI 03/15/2010 affiliate of Oncap Management Partners L.P. (N/A) $13.55 $13.45 08/16/2010 0.74% 6.46%
+ NADX 04/05/2010 GDC Holdings Inc. (N/A) $100 million $17.00 $16.88 09/30/2010 0.71% 2.98%
+ STST 06/30/2010 Boeing (BA) $775 million $34.50 $34.27 09/30/2010 0.67% 2.82%
+ GNA 06/02/2010 Gerdau (GGB) $1.7 billion $11.00 $10.94 08/31/2010 0.55% 3.51%
+ CPII 05/10/2010 Comtech (CMTL) $472.3 million $15.46 $15.38 09/30/2010 0.52% 2.17%
+ QUOT 06/11/2010 LQ Acquisition (N/A) $19 million $4.00 $3.98 09/30/2010 0.50% 2.11%
+ VRAD 05/17/2010 Providence Equity (N/A) $294 million $17.25 $17.17 09/30/2010 0.47% 1.95%
+ SY 05/12/2010 SAP (SAP) $5.8 billion $65.00 $64.70 09/30/2010 0.46% 1.95%
+ MIR 04/12/2010 RRI Energy In. (RRI) $1.6 billion $10.69 $10.64 12/31/2010 0.45% 0.92%
+ EVVV 06/01/2010 Covidien plc (COV) $2.6 billion $22.50 $22.41 07/31/2010 0.40% 5.64%
+ SBP 06/24/2010 ABLASA (N/A) N/A $12.69 $12.64 07/22/2010 0.40% 8.49%
+ DBTK 05/17/2010 Vision Solutions (N/A) $242 million $10.55 $10.51 09/30/2010 0.38% 1.60%
+ MIL 03/01/2010 Merck (MRK) $6 billion $107.00 $106.63 09/30/2010 0.35% 1.46%
+ WMZ 05/24/2010 Williams Partners L.P. (WPZ)   $31.75 $31.64 09/30/2010 0.34% 1.41%
+ SMTS 06/16/2010 Covidien (COV) $299 million $25.00 $24.93 07/31/2010 0.28% 3.94%
+ AIPC 06/21/2010 Ralcorp Holdings (RAH) $1.2 billion $53.00 $52.87 09/30/2010 0.25% 1.03%
+ DCP 04/12/2010 Cerberus Capital Management (N/A) $1.5 billion $17.55 $17.51 11/15/2010 0.23% 0.63%
+ SXE 05/07/2010 CGI Group (N/A) $904 million $37.50 $37.42 09/30/2010 0.21% 0.90%
+ PALM 04/28/2010 Hewlett – Packard (HPQ) $1.2 billion $5.70 $5.69 07/31/2010 0.18% 2.47%
+ CKR 03/01/2010 Apollo Management VII (N/A) $694 million $12.55 $12.53 07/07/2010 0.16% 29.13%
+ SENO 05/05/2010 Bard (BARD.PK) $200 million $11.00 $11.00 09/30/2010 0.00% 0.00%
+ BELM 03/29/2010 Avnet (AVT) $252 million $7.00 $7.00 07/15/2010 0.00% 0.00%
+ CRN 04/19/2010 GeoGroup (GEO) $685 million $26.90 $26.93 09/30/2010 -0.12% -0.51%
+ NGA 04/01/2010 AZZ Inc. (AZZ) $125.6 million $7.50 $7.52 08/31/2010 -0.27% -1.70%
+ VRX 06/21/2010 Biovail Corporation (BVF) $3.3 billion $50.38 $51.32 12/31/2010 -1.84% -3.75%
+ SNWL 06/03/2010 investor group led by private equity firm Thoma Bravo LLC (N/A) $636 million $11.50 $11.78 12/31/2010 -2.38% -4.85%
+ CAL 05/03/2010 United (UAUA) $1.2 billion $19.52 $20.10 12/31/2010 -2.89% -5.89%
+ ABII 06/30/2010 Celgene (CELG) $2.9 billion $71.28 $74.25 12/31/2010 -4.00% -8.16%
+ ARD 04/04/2010 SandRidge Energy Inc. (SD) $1.6 billion $30.78 $32.19 09/30/2010 -4.38% -18.37%
+ DTG 04/26/2010 Hertz (HTZ) $1.3 billion $38.57 $41.70 12/31/2010 -7.50% -15.29%
+ TLCR 06/07/2010 Grifols (N/A) $3.4 billion $19.00 $21.16 12/31/2010 -10.21% -20.82%
+ MCCC 06/01/2010 Chief Executive Rocco Commisso (N/A) $590 million $6.00 $6.75 N/A -11.11% 0.00%
+ CCE 02/25/2010 The Coca-Cola Company (KO) $12.3 billion N/A $26.03 10/01/2010 N/A N/A

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Insider Weekends – July 2, 2010

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July 4, 2010 | Insider Buying | Author Asif

Happy 4th of July and welcome to the fourth edition of Insider Weekends. We saw a significant drop in insider selling last week while insider buying more than doubled even after removing Carl Icahn’s purchase of Lions Gate Entertainment (LGF) stock.

Sell/Buy Ratio:

The insider Sell/Buy ratio is calculated by dividing the total insider sales in a given week by total insider buying in that week. The adjusted ratio for last week was just 2.55 despite a large options related sale by Safra Catz, the President of Oracle Corp (ORCL), who sold 750,000 shares generating  $16.48 million. In other words, insiders sold less than 3 times as much stock as they purchased. This compares very favorably with the week prior when the ratio stood at 43.46. We are calculating an adjusted ratio by removing transactions by funds and trying as best as possible only to retain information about insiders and 10% owners who are not funds.

Notable Insider Buys Last Week:

1. Agilysys (AGYS) $7.29

Once again this week, the biggest insider purchase if you don’t take into account stock offerings and Carl Icahn increasing his stake in Lions Gate, was the acquisition of 188,790 shares of this IT services provider by its Director Andrew Cueva for $1.32 million. Mr. Cueva, Managing Director of New York based hedge fund MAK Capital has served on the Agilysys board since June 2008.

Key Statistics:

P/E: 47.35 Forward P/E: 21.44 Industry P/E: 19.46
P/S: 0.25 Price/Book: 0.79 EV/EBITDA: 15.49
Market Cap: 167.2 million Avg. Daily Volume:167,155 52 Week Range:$3.95 – $12.50

2. Lennar Corp. (LEN) $13.65

Jonathan M. Jaffe, Vice President & COO of this home builder acquired 91,088 shares at $14.14 per share, paying $1.3 million. It is interesting to see this purchase even as the home builder confidence index plunged to 17 in June from a two year high of 22 in May.

Key Statistics:

P/E: N/A Forward P/E: 17.06 Industry P/E: 19.82
P/S: 0.86 Price/Book: 1.07 EV/EBITDA: 136.56
Market Cap: 2.52 billion Avg. Daily Volume: 7,301,820 52 Week Range: $7.98 – $21.79

3. China Marine Food Group Limited (CMFO) $4.20

China Marine Food Group has been the subject of a number of critical and informative articles written by an anonymous short seller called “Chinese Company Analyst”. Check out his recent article titled “China Marine Food Group: Auditor’s Role in Another Alleged Fraud“. In light of those articles, it is very interesting to see the CEO Pengfei Liu purchase 190,500 shares of this food processing and packaging company paying $3.97 per share on the open market for a total of $756,855. Kent C McCarthy, a 10% owner also acquired 90,000 shares at $4.12 per share, paying $370,656.

Key Statistics:

P/E: 6.86 Forward P/E: 4.00 Industry P/E: N/A
P/S: 1.53 Price/Book: 1.20 EV/EBITDA: 3.89
Market Cap: 119.67 million Avg. Daily Volume: 328,592 52 Week Range: $3.07 – $8.63

4. Stein Mart (SMRT) $6.20

Chairman of the Board, Jay Stein acquired 80,000 shares of this retail apparel company at an average price of $6.25 per share, paying $500,451. President & CEO, David Stovall Jr. acquired 10,000 shares at $6.25 per share, paying $62,947.

Key Statistics:

P/E: 12.60 Forward P/E: 7.85 Industry P/E: 14.53
P/S: 0.22 Price/Book: 1.16 EV/EBITDA: 3.24
Market Cap: 268.94 million Avg. Daily Volume: 211,348 52 Week Range: $5.95 – $13.75

5. Pep Boys – Manny, Moe & Jack (PBY) $8.28

Director James A Mitarotonda acquired 35,000 of this automotive repair and maintenance provider at $8.94 per share, paying $313,037. EVP-CFO Raymond L Arthur acquired 11,800 shares at $8.4 per share, paying $99,120. President & CEO Michael Odell acquired 5,984 shares at $8.36 per share, paying $50,024 and EVP – Merchandising & Marketing Scott Webb acquired 5,000 shares at $8.47 per share, paying $42,350.

Key Statistics:

P/E: 18.16 Forward P/E: 10.75 Industry P/E: 18.31
P/S: 0.23 Price/Book: 0.96 EV/EBITDA: 4.80
Market Cap: 434.45 million Avg. Daily Volume: 509,038 52 Week Range: $7.76 – $13.42

Stein Mart and Pep Boys appear to be the most attractive candidates for further research. Another insider purchase worth mentioning is the acquisition of 500,000 shares of Champion Industries (CHMP) by its CEO Marshall Reynolds. The odd thing about this purchase is that 5 other members of the management team at Champion including the President, CFO and three Senior VPs sold exactly 100,000 shares each on the same day Mr. Reynolds acquired those 500,000 shares.

Notable Insider Sales Last Week:

1. Liberty Global (LBTYA) $26.04

CEO Michael Fries sold 50,000 shares of this broadband internet and telephone provider generating $1.35 million at a selling price of $26.92 per share. Senior VP Frederick Westerman III also sold 40,000 shares for $25.97 generating $1.04 million.

Key Statistics:

P/E: 11.14 Forward P/E: N/A Industry P/E: 14.97
P/S: 0.59 Price/Book: 1.94 EV/EBITDA: 5.23
Market Cap: 6.82 billion Avg. Daily Volume: 2,602,800 52 Week Range: $14.46 – $29.85

2. Cavalo Growers (CVGW) $19.01

President, CEO and Chairman Lecil Cole sold 128,000 shares of this avacado and guacamole producer, generating $2.35 million at an average selling price of $18.36 per share.

Key Statistics:

P/E: 23.35 Forward P/E: 14.08 Industry P/E: 13.32
P/S: 0.76 Price/Book: 3.4 EV/EBITDA: 13.63
Market Cap: 278.5 million Avg. Daily Volume: 63,958 52 Week Range: $15.09 – $21.15

3. National Instruments Corporation (NATI) $30.78

President James Truchard sold 35,000 shares, generating $1.15 million at a selling price of 32.87. Director Jeffrey Kodosky sold 20,000 shares, generating $656,632 at an average selling price of $32.83 per share.

Key Statistics:

P/E: 68.71 Forward P/E: 19.48 Industry P/E: 26.92
P/S: 3.37 Price/Book: 3.63 EV/EBITDA: 21.7
Market Cap: 2.39 billion Avg. Daily Volume: 246,538 52 Week Range: $21.20 – $36.98

4. ArcSight (ARST) $21.48

Executive VP and CTP Hugh Njemanze sold 30,000 shares of this enterprise security software company, generating $670,098 at a selling price of $22.34 per share. Senior VP of World Wide Field Operations Kevin Mosher also sold 30,000 shares, generating $671,264 at an average selling price of $22.37 per share. Director Ernest Von Simon sold 15,000 shares, generating 355,446 at a selling price of $23.70.

Key Statistics:

P/E: 27.4 Forward P/E: 23.87 Industry P/E: 21.61
P/S: 4.15 Price/Book: 5.55 EV/EBITDA: 26.29
Market Cap: 732.34 million Avg. Daily Volume: 542,855 52 Week Range: $14.23 – $29.33

5. Illumina (ILMN) $43.09

CEO Jay Flatley sold 30,000 shares of ILMN, generating $1.32 million at a selling price of $43.86 per share

Key Statistics:

P/E: 79.65 Forward P/E: 32.64 Industry P/E: 14.97
P/S: 7.53 Price/Book: 5.54 EV/EBITDA: 27.05
Market Cap: 5.25 billion Avg. Daily Volume: 1,581,610 52 Week Range: $25.59 – $45.72

Voluntary Disclosure: I hold a long position in Lions Gate Entertainment.

Contributing author: Ann Kumar

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Special Reports 5: Going Bananas and The Short Case for AIMCO (AIV)

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July 1, 2010 | Special Updates | Author Asif

Nobel prize winning economist Paul Krugman wrote an Op-Ed piece in the New York Times last weekend titled The Third Depression that certainly caught the attention of Wall Street if not its intended audience of government leaders. Whether you believe in Krugman’s thesis that deflation remains the more immediate threat or not, recent economic indicators ranging from new home sales in May to consumer confidence are pointing to slow growth or a double dip recession. Private company ADP’s report on Wednesday that private employers added just 13,000 jobs in June does not help the situation with the high ...

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