Merger Arbitrage Mondays – April 11, 2016

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April 10, 2016 | Merger Arbitrage | | Author Asif

Even as company insiders took a break from buying their own stock, the M&A folks stepped up their game with six new deals announced and eight closing. However what stood out was not the number of deals but the number of M&A related lawsuits that were filed and the regulatory actions taken to block certain deals.

The mutually agreed upon termination of the Pfizer – Allergan deal mentioned in the “Deal Updates” section below was driven by the Treasury Department unveiling a set of rules targeting inversions and specifically the Pfizer – Allergan deal. Then there was the lawsuit by the Justice Department to block the Halliburton – Baker Hughes merger. To top it off, Williams Companies (WMB) decided to sue its merger partner Energy Transfer Equity (ETE) to unwind a private offering by ETE that was not beneficial to Williams Companies. ETE investors bid the stock up 17% last week following this development.

These actions are reminders to merger arbitrageurs about some of the risks involved in this strategy. Some of the spreads are large for a reason. Towards the end of March, I was exchanging thoughts with an investor on Twitter who said, “Announced deal merger arb spreads are wider than they have been in years”.  My response was “Only for the ones with regulatory risk (Office depot, Anthem), in the energy sector or Chinese going private mergers”.

Speaking of Office Depot (ODP), the stock is up a whopping 48% over the last month after a federal judge expressed skepticism about the government’s case to block the merger with Staples (SPLS). We do have a new Chinese going private merger as discussed in the New Deals section below and unsurprisingly the spread on the deal is a large 9.64% (13.28% annualized).

You can find all the active deals listed below in our Merger Arbitrage Tool that automatically updates itself during market hours.

Deal Statistics:

Total Number of Deals Closed in 2016 58
Total Number of Deals Not Completed in 2016 3
Total Number of Pending Deals
Cash Deals 46
Stock Deals 16
Stock & Cash Deals 19
Special Conditions 6
Total Number of Pending Deals 87
Total Deal Size $781.08 billion

New Deals:

  1. The acquisition of Virgin America (VA) by Alaska Air Group (ALK) for $4 billion or $57.00 per share in cash.
  2. The acquisition of Chicopee Bancorp (CBNK) by Westfield Financial (WFD) in an all stock deal. Under the terms of the agreement, shareholders of Chicopee Bancorp will receive 2.425 shares of Westfield common stock for each share of Chicopee common stock.
  3. The acquisition of Ruckus Wireless (RKUS) by Brocade Communications Systems (BRCD) for approximately $1.2 billion in a cash plus stock deal. Under the terms of the agreement, shareholders of Ruckus Wireless will receive $6.45 in cash and 0.75 shares of Brocade common stock for each share of Ruckus common stock.
  4. The acquisition of Ku6 Media (KUTV) by Shanda Investment Holdings Limited for $1.08 per American Depositary Share of the Company.
  5. The acquisition of SL Industries (SLI) by Handy & Harman (HNH) for $166.32 million or $40.00 per share in cash.
  6. The acquisition of Alliance Fiber Optic Products (AFOP) by Corning (GLW) for $305 million or $18.50 per share in cash.

Deal Updates:

  1. On April 6, 2016, Pfizer (PFEannounced that the merger agreement between Pfizer and Allergan (AGN) has been terminated by mutual agreement of the companies.

Closed Deals:

  1. The acquisition of Homeinns Hotel Group (HMIN) by BTG Hotels Group on April 1, 2016. It took 116 days for this deal to be completed.
  2. The acquisition of Lake Shore Gold (LSG) by Tahoe Resources (TAHO) on April 1, 2016. It took 53 days for this deal to be completed.
  3. The acquisition of National Penn Bancshares (NPBC) by BB&T Corporation (BBT) on April 4, 2016. It took 231 days for this deal to be completed.
  4. The acquisition of LeapFrog Enterprises (LF) by VTech Holdings Limited on April 4, 2016. It took 59 days for this deal to be completed.
  5. The acquisition of Rentech Nitrogen Partners (RNF) by CVR Partners (UAN) on April 4, 2016. It took 238 days for this deal to be completed.
  6. The acquisition of Atmel Corporation (ATML) by Microchip Technology (MCHP) on April 4, 2016. It took 76 days for this deal to be completed.
  7. The acquisition of Youku Tudou (YOKU) by Alibaba Group Holding Limited (BABA) on April 5, 2016. It took 151 days for this deal to be completed.
  8. The acquisition of JAVELIN Mortgage Investment (JMI) by ARMOUR Residential REIT (ARR) on April 6, 2016. It took 35 days for this deal to be completed.

Top 10 deals with largest spreads:

Symbol Announced

Date

Acquiring

Company

Closing

Price

Last

Price

Closing

Date

Profit Annualized

Profit

WMB 09/28/2015 Energy Transfer Equity, L.P. (ETE) $43.50 $16.24 06/30/2016 167.86% 765.85%
BHI 11/16/2014 Halliburton Company (HAL) $60.81 $43.11 04/30/2016 41.06% 788.72%
CI 07/24/2015 Anthem, Inc. (ANTM) $177.45 $130.41 12/31/2016 36.07% 49.88%
HUM 07/03/2015 Aetna Inc. (AET) $216.18 $171.03 12/31/2016 26.40% 36.50%
ODP 02/04/2015 Staples, Inc. (SPLS) $9.66 $7.66 05/16/2016 26.13% 272.45%
APOL 02/08/2016 A consortium of investors including The Vistria Group, LLC, funds affiliated with Apollo Global Management, LLC and and Najafi Companies (N/A) $9.50 $7.815 12/31/2016 21.56% 29.81%
NKA 06/14/2015 Brookfield Infrastructure (N/A) $4.23 $3.52 12/31/2016 20.17% 27.89%
RAD 10/27/2015 Walgreens Boots Alliance, Inc. (WBA) $9.00 $8.02 12/31/2016 12.22% 16.89%
BXLT 01/11/2016 Shire plc (SHPG) $44.86 $40.26 06/30/2016 11.42% 52.11%
ALR 02/01/2016 Abbott Laboratories (ABT) $56.00 $50.28 06/30/2016 11.38% 51.90%

List of all pending deals:

Symbol Announced

Date

Acquiring

Company

Deal

Type

Closing

Value

Closing

Price

Last

Price

Volume Closing

Date

Profit Annu.

Profit

+ WMB 09/28/2015 Energy Transfer Equity, L.P. (ETE) Special Conditions $37.7 billion $43.50 $16.24 16,672,801 06/30/2016 167.86% 765.85%
+ BHI 11/16/2014 Halliburton Company (HAL) Cash Plus Stock N/A $60.81 $43.11 5,278,741 04/30/2016 41.06% 788.72%
+ CI 07/24/2015 Anthem, Inc. (ANTM) Cash Plus Stock $54.2 billion $177.45 $130.41 2,366,863 12/31/2016 36.07% 49.88%
+ HUM 07/03/2015 Aetna Inc. (AET) Cash Plus Stock $37 billion $216.18 $171.03 1,404,749 12/31/2016 26.40% 36.50%
+ ODP 02/04/2015 Staples, Inc. (SPLS) Cash Plus Stock $6.3 billion $9.66 $7.66 4,191,933 05/16/2016 26.13% 272.45%
+ APOL 02/08/2016 A consortium of investors including The Vistria Group, LLC, funds affiliated with Apollo Global Management, LLC and and Najafi Companies (N/A) All Cash $1.1 billion $9.50 $7.815 2,096,048 12/31/2016 21.56% 29.81%
+ NKA 06/14/2015 Brookfield Infrastructure (N/A) All Cash $911.9 million $4.23 $3.52 13,869 12/31/2016 20.17% 27.89%
+ RAD 10/27/2015 Walgreens Boots Alliance, Inc. (WBA) All Cash $17.2 billion $9.00 $8.02 13,075,072 12/31/2016 12.22% 16.89%
+ BXLT 01/11/2016 Shire plc (SHPG) Cash Plus Stock $32 billion $44.86 $40.26 6,075,107 06/30/2016 11.42% 52.11%
+ ALR 02/01/2016 Abbott Laboratories (ABT) All Cash $5.8 billion $56.00 $50.28 542,216 06/30/2016 11.38% 51.90%
+ IM 02/17/2016 Tianjin Tianhai Investment Company, Ltd. (N/A) All Cash $6 billion $38.90 $35.04 1,142,584 12/31/2016 11.02% 15.23%
+ KUTV 04/05/2016 Shanda Investment Holdings Limited (N/A) All Cash N/A $1.08 $0.985 50,711 12/31/2016 9.64% 13.33%
+ VBIV 10/26/2015 SciVac Therapeutics Inc. (SVACF) All Stock N/A $2.50 $2.28 67,942 04/30/2016 9.52% 182.84%
+ HTCH 11/02/2015 TDK Corporation (N/A) Special Conditions $126 million $4.00 $3.69 113,759 06/30/2016 8.40% 38.33%
+ TYC 01/25/2016 Johnson Controls Inc. (JCI) All Stock $16.5 billion $38.24 $35.42 2,569,579 09/30/2016 7.96% 16.88%
+ ITC 02/09/2016 Fortis Inc. (FTS.TO) Cash Plus Stock $11.3 billion $45.64 $42.91 870,231 12/31/2016 6.36% 8.79%
+ AMTG 02/26/2016 Apollo Commercial Real Estate Finance, Inc. (ARI) Cash Plus Stock $641 million $14.14 $13.31 128,893 08/15/2016 6.20% 17.96%
+ CVC 09/17/2015 Altice (N/A) All Cash $17.7 billion $34.90 $32.93 1,657,275 06/30/2016 5.98% 27.29%
+ NPD 03/16/2016 China Neptunus Drugstore Holding Ltd. and Neptunus Global Limited (N/A) All Cash $258.66 million $2.62 $2.48 49,005 09/30/2016 5.65% 11.98%
+ VAL 03/20/2016 The Sherwin-Williams Company (SHW) All Cash $11.3 billion $113.00 $107.01 729,304 03/31/2017 5.60% 5.77%
+ HE 12/03/2014 NextEra Energy, Inc. (NEE) Special Conditions $4.3 billion $33.50 $32.02 256,710 06/30/2016 4.62% 21.09%
+ MY 02/03/2016 A consortium of investors (the �Buyer Consortium�), including Mr. Chuanwei Zhang , the Chairman and Chief Executive Officer of the Company (N/A) All Cash $408 million $2.51 $2.40 405,591 06/30/2016 4.58% 20.91%
+ AF 10/29/2015 New York Community Bancorp Inc. (NYCB) Cash Plus Stock $2 billion $15.53 $14.85 606,259 12/31/2016 4.58% 6.33%
+ MTSN 12/01/2015 Beijing E-Town Dragon Semiconductor Industry Investment Center (N/A) All Cash $300 million $3.80 $3.64 194,895 06/30/2016 4.40% 20.05%
+ FGL 11/09/2015 Anbang Insurance Group Co., Ltd. (N/A) All Cash N/A $26.80 $25.73 937,360 06/30/2016 4.16% 18.97%
+ CBNK 04/04/2016 Westfield Financial Inc. (WFD) All Stock $110 million $18.33 $17.68 13,266 12/31/2016 3.69% 5.11%
+ MCOX 12/22/2015 Minat Associated Co. Ltd. (N/A) All Cash N/A $4.00 $3.87 3,000 06/30/2016 3.36% 15.33%
+ VA 04/04/2016 Alaska Air Group, Inc. (ALK) All Cash $4 billion $57.00 $55.15 1,407,859 01/01/2017 3.35% 4.62%
+ MEG 01/27/2016 Nexstar Broadcasting Group, Inc. (NXST) Special Conditions $4.6 billion $17.14 $16.60 507,641 12/15/2016 3.25% 4.79%
+ BNK 11/09/2015 Bank of the Ozarks, Inc. (OZRK) Special Conditions $402.5 million $25.00 $24.27 33,155 04/30/2016 3.01% 57.78%
+ TWC 05/26/2015 Charter Communications, Inc. (CHTR) Cash Plus Stock $78.7 billion $209.56 $204.46 1,158,862 06/30/2016 2.49% 11.38%
+ FCTY 03/10/2016 Midland Financial Co. (N/A) All Cash N/A $11.22 $10.99 9,968 12/31/2016 2.09% 2.89%
+ EDE 02/09/2016 Algonquin Power & Utilities Corp. (AQN.TO) All Cash $2.4 billion $34.00 $33.37 585,031 03/31/2017 1.89% 1.95%
+ DATE 12/07/2015 FutureWorld Inc. (N/A) All Cash N/A $7.56 $7.43 20,861 04/30/2016 1.75% 33.61%
+ SNDK 10/21/2015 Western Digital Corporation (WDC) Cash Plus Stock $19 billion $77.79 $76.52 2,402,458 09/30/2016 1.66% 3.52%
+ PNX 09/29/2015 Nassau Reinsurance Group Holdings L.P. (N/A) All Cash $217.2 million $37.50 $36.90 29,829 06/30/2016 1.63% 7.42%
+ ATNY 02/29/2016 an affiliate of private equity firm J. F. Lehman & Company (N/A) All Cash $110 million $2.00 $1.97 16,458 06/30/2016 1.52% 6.95%
+ FMER 01/26/2016 Huntington Bancshares Incorporated (HBAN) Cash Plus Stock $3.4 billion $21.05 $20.74 1,026,013 09/30/2016 1.48% 3.15%
+ ADT 02/16/2016 An Affiliate of Certain Funds Managed By Affiliates of Apollo Global Management, LLC (N/A) All Cash $6.94 billion $42.00 $41.44 2,341,733 06/30/2016 1.35% 6.17%
+ MNRK 12/17/2015 Towne Bank (TOWN) All Stock $221 million $17.05 $16.83 15,312 06/30/2016 1.31% 5.98%
+ FNFG 10/30/2015 KeyCorp. (KEY) Cash Plus Stock $4.1 billion $9.59 $9.47 1,046,286 09/30/2016 1.26% 2.68%
+ IHS 03/21/2016 Markit Ltd. (MRKT) All Stock N/A $121.67 $120.18 333,592 12/31/2016 1.24% 1.72%
+ WIBC 12/07/2015 BBCN Bancorp, Inc. (BBCN) All Stock $1 billion $10.26 $10.14 196,806 06/30/2016 1.21% 5.52%
+ DSKY 12/31/2015 Dream Investment Holdings Limited (N/A) All Cash N/A $14.00 $13.86 73,249 06/30/2016 1.01% 4.61%
+ CPGX 03/17/2016 TransCanada Corporation (TRP) All Cash $13 billion $25.50 $25.25 5,293,271 12/31/2016 0.99% 1.37%
+ GAS 08/24/2015 Southern Company (SO) All Cash $12 billion $66.00 $65.38 383,836 12/31/2016 0.95% 1.31%
+ CNL 10/20/2014 Macquarie Infrastructure and Real Assets (MIRA) and British Columbia Investment Management Corporation (bcIMC) (N/A) All Cash $4.7 billion $55.37 $54.87 5,288,063 04/30/2016 0.91% 17.51%
+ RRM 02/26/2016 SES (N/A) All Cash $242 million $13.29 $13.19 493 08/15/2016 0.76% 2.20%
+ HOT 11/16/2015 Marriott International, Inc. (MAR) Special Conditions $13.6 billion $79.53 $78.97 7,640,467 06/30/2016 0.71% 3.24%
+ KLAC 10/21/2015 Lam Research Corporation (LRCX) Cash Plus Stock $10.6 billion $72.56 $72.07 599,779 06/30/2016 0.68% 3.10%
+ ARG 11/17/2015 Air Liquide (N/A) All Cash $13.4 billion $143.00 $142.05 367,707 08/15/2016 0.67% 1.94%
+ NTI 12/21/2015 Western Refining, Inc. (WNR) Cash Plus Stock N/A $23.53 $23.38 105,150 06/30/2016 0.62% 2.83%
+ BONA 12/15/2015 Mountain Tiger International Limited (N/A) All Cash $1 billion $13.70 $13.63 429,724 06/30/2016 0.51% 2.34%
+ FCS 11/18/2015 ON Semiconductor Corp. (ON) All Cash $2.4 billion $20.00 $19.90 1,271,992 04/14/2016 0.50% 61.14%
+ CBNJ 01/05/2016 OceanFirst Financial Corp. (OCFC) Cash Plus Stock $208.1 million $13.53 $13.47 13,915 09/30/2016 0.47% 1.00%
+ RSTI 03/16/2016 Coherent Inc. (COHR) All Cash $942 million $32.50 $32.36 476,940 12/31/2016 0.43% 0.60%
+ PULB 12/03/2015 First Busey Corporation (BUSE) All Stock $210.7 million $15.56 $15.50 10,386 06/30/2016 0.41% 1.85%
+ TFM 03/14/2016 Apollo Global Management, LLC (APO) All Cash $1.36 billion $28.50 $28.39 1,189,139 06/30/2016 0.39% 1.77%
+ SLI 04/07/2016 Handy & Harman Ltd. (HNH) All Cash $166.32 million $40.00 $39.85 54,435 06/30/2016 0.38% 1.72%
+ TE 09/05/2015 Emera (N/A) All Cash $10.4 billion $27.55 $27.45 1,264,542 06/30/2016 0.36% 1.66%
+ AVNU 01/29/2016 Pinnacle Financial Partners Inc. (PNFP) Cash Plus Stock $201.4 million $19.35 $19.29 25,916 09/15/2016 0.30% 0.70%
+ JAH 12/14/2015 Newell Rubbermaid Inc. (NWL) Cash Plus Stock $13 billion $58.79 $58.62 5,139,491 06/30/2016 0.29% 1.32%
+ AFOP 04/07/2016 Corning Inc. (GLW) All Cash $305 million $18.50 $18.45 10,044,890 06/30/2016 0.27% 1.24%
+ VSCP 03/25/2016 BioTelemetry, Inc. (BEAT) All Cash $15.5 million $4.05 $4.04 6,686 09/30/2016 0.25% 0.53%
+ PNY 10/26/2015 Duke Energy Corporation (DUK) All Cash $6.7 billion $60.00 $59.86 378,996 12/31/2016 0.23% 0.32%
+ TUMI 03/03/2016 Samsonite International S.A. (N/A) All Cash $1.8 billion $26.75 $26.69 294,657 06/30/2016 0.22% 1.03%
+ BLT 12/10/2015 American Securities LLC and P2 Capital Partners, LLC (N/A) All Cash $855 million $10.00 $9.98 532,392 06/30/2016 0.20% 0.91%
+ HPY 12/15/2015 Global Payments Inc. (GPN) Cash Plus Stock $4.3 billion $101.56 $101.38 228,078 05/31/2016 0.18% 1.30%
+ CKEC 03/03/2016 AMC Entertainment Holdings, Inc. (AMC) All Cash $1.1 billion $30.00 $29.95 297,681 12/31/2016 0.17% 0.23%
+ POWR 02/24/2016 Southern Company (SO) All Cash $431 million $18.75 $18.72 264,532 06/30/2016 0.16% 0.73%
+ NEWP 02/23/2016 MKS Instruments, Inc. (MKSI) All Cash $980 million $23.00 $22.99 167,570 06/30/2016 0.04% 0.20%
+ RKUS 04/04/2016 Brocade Communications Systems, Inc. (BRCD) Cash Plus Stock $1.2 billion $13.73 $13.72 3,197,136 07/31/2016 0.04% 0.12%
+ NTLS 08/10/2015 Shenandoah Telecommunications Co. (SHEN) All Cash $640 million $9.25 $9.25 211,702 03/31/2016 0.00% 0.00%
+ JMG 10/07/2015 Gannett Co., Inc. (GCI) All Cash $280 million $12.00 $12.01 352,880 04/30/2016 -0.08% -1.60%
+ STR 02/01/2016 Dominion Resources, Inc. (D) All Cash $4.4 billion $25.00 $25.03 1,060,145 12/15/2016 -0.12% -0.18%
+ RSE 02/25/2016 an affiliate of Brookfield Asset Management Inc. (N/A) All Cash $2.8 billion $18.25 $18.31 95,210 09/30/2016 -0.33% -0.70%
+ CKP 03/02/2016 an affiliate of CCL Industries Inc. (N/A) All Cash $443 million $10.15 $10.20 316,359 09/30/2016 -0.49% -1.04%
+ BITI 01/19/2016 Acorda Therapeutics, Inc. (ACOR) All Cash $363 million $25.60 $25.79 17,535 09/30/2016 -0.74% -1.56%
+ WCN 01/19/2016 Progressive Waste Solutions Ltd. (BIN) All Stock N/A $63.36 $63.94 618,713 06/30/2016 -0.90% -4.11%
+ COB 11/23/2015 Capital Bank Financial Corp. (CBF) All Stock $350 million $12.81 $13.03 223,709 03/31/2016 -1.69% 56.10%
+ CHEV 11/24/2015 MainSource Financial Group, Inc. (MSFG) All Stock $107.4 million $14.21 $14.53 287 09/30/2016 -2.19% -4.64%
+ FXCB 12/08/2015 Univest Corporation of Pennsylvania (UVSP) All Stock $244.3 million $18.62 $19.22 22,452 09/30/2016 -3.15% -6.68%
+ HFFC 11/30/2015 Great Western Bancorp. Inc. (GWB) All Stock $139.5 million $17.46 $18.03 8,493 06/30/2016 -3.17% -14.45%
+ LPSB 03/10/2016 Horizon Bancorp (HBNC) All Stock $94.1 million $15.15 $15.80 4,320 09/30/2016 -4.14% -8.78%
+ ABCW 01/12/2016 Old National Bancorp. (ONB) All Stock 461 million $41.61 $44.18 23,330 06/30/2016 -5.81% -26.52%
+ FSYS 09/01/2015 Westport Innovations Inc. (WPRT) All Stock $126.36 million $4.92 $5.44 21,071 03/31/2016 -9.60% 318.41%
+ CACQ 12/22/2014 Caesars Entertainment Corporation (CZR) All Stock N/A $4.50 $5.64 15,897 03/31/2015 -20.18% 19.54%

Disclaimer: Clients of Signal Partners, LLC  and I may have positions in any of these stocks at any time. 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.

Connect with me on LinkedIn: http://www.linkedin.com/in/asifsuria or follow me on Twitter@asifsuria




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