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We see a lot of chatter about potential deals every week and while most of these deals don't come to fruition, a surprisingly large number do. We analyzed 200 potential deals in our "deals in the works" (DITW) database in December 2018 and updated our analysis in October 2021 after the number had grown to 477 potential deals. In a post we wrote about a potential deal for the largest operator of medical office buildings, Healthcare Trust of America (NYSE:HTA), we mentioned the following,
Interestingly, the success rate has improved to 43.4% and potential deals classified as “unsolicited bid” had the highest success rate with more than 51% of them ending up with a definitive merger agreement. Contrary to what I would have expected, “companies seeking strategic alternatives” had the worst track record with just 31% of them ending up with an acquirer.
Going deeper into the rabbit hole and looking at the potential returns for the three categories yielded even more interesting results. Successful deals that we tracked as a result of an unsolicited bid generated 11.38% returns after the news of the potential deal was out. Since these returns occurred in a relatively short period of time, the annualized returns worked out to 183.59%.
Last week we saw not one, but three different companies turn down unsolicited bids, claiming the offers were too low. While I understand why copper and gold mining company Turquoise Hill Resources (NYSE:TRQ) turned down an offer by Rio Tinto, I was not expecting RV dealer, Lazydays Holdings (NASDAQ:LAZY), to turn down the $25 per share offer from B. Riley (RILY). Given a combination of rising gas prices and rising interest rates, one would think that a company that sells or services RVs might be close to a cyclical peak and choose to bow out at the top. Maybe these three companies discussed below are rejecting the offers as a negotiating ploy or it is possible that they see better days ahead.
Merger activity increased last week with four new deals announced and two deals completed. We also saw a significant rise in new potential deals in the works last week.
Anaplan, Inc. (NYSE:PLAN)
Anaplan is a company that connects organizations and people through a cloud-based connected planning platform. It was founded in 2008, and is headquartered in San Francisco. Anaplan's proprietary Hyperblock technology, lets companies contextualize real-time performance, and forecast future outcomes. On March 18, 2022, activists Sachem Head and Corvex disclosed stakes in the company and said they plan to nominate directors.
Late on Sunday night, Thoma Bravo announced that it is acquiring PLAN for $10.7 billion or $66 per share in cash, representing a premium of approximately 46% to the volume weighted average price of Anaplan stock for the five days ending March 18, 2022. Thoma Bravo agreed to pay 18 times trailing sales and 14 times Jan 2023 expected revenue of $746 million, which is richer than the valuation of most SaaS companies these days.
Deals In The Works
There were nine new deals announced in the Deals in the Works section last week.
Big Lots (NYSE:BIG)
Founded in 1967, and headquartered in Columbus, Ohio, Big Lots (BIG) is a discounted home furnishing chain. The company suffered due to supply chain disruptions caused by the pandemic but managed to bounce back towards the end of 2020. In June 2020, Big Lots completed its previously announced sale and leaseback transactions with affiliates of Oak Street Real Estate Capital, causing a potential buyout deal between Apollo Global Management to fall apart. We added Big Lots as a potential deal in the works on March 15, 2022, when the company received a letter from Mill Road Capital, that owns a 5.1% stake in the company, urging Big Lots to hire an adviser to pursue a sale, causing the stock to jump over 15%. According to a BofA analyst, Mill Road's claims that the retailer may be worth $55-$70 per share in a potential sale appears to "look optimistic,".
Potential Deals That Failed Last Week
Nielsen Holdings (NYSE:NLSN)
On March 14, 2022, The Wall Street Journal reported that a consortium of private-equity firms including Elliott Management is in advanced talks to buy TV-ratings company Nielsen Holdings for about $15 billion including debt. NLSN's price after this announcement was $22.85, representing a premium of over 30%. On Sunday, March 20, 2022, Nielsen's board "unanimously determined that the consortium's offer significantly undervalues the company and does not adequately compensate shareholders for Nielsen's growth prospects.
Turquoise Hill Resources (TRQ)
On March 14, 2022, Turquoise Hill Resources acknowledged receipt of a non-binding proposal from Rio Tinto International Holdings, outlining its proposal to acquire the approximately 49% of the outstanding shares of Turquoise Hill held by the Company's minority shareholders (approximately 99 million common shares) for cash consideration of C$34.00 per share. TRQ's price after this announcement was $26.55, reflecting a premium of almost 32% to TRQ's price on March 11, 2022. The potential deal was, however rejected by activist investor Pentwater Capital Management, the largest minority shareholder of Canada’s Turquoise Hill (TRQ) with a 10% stake in the company.
Lazydays Holdings (LAZY)
We had added Lazydays Holdings as a potential deal on March 10, 2022, when it received a $25 per share offer from shareholder B. Riley (RILY). B. Riley had given LAZY until 5 PM ET on March 16, 2022 to accept its offer. The company's Board of Directors, however, unanimously rejected B. Riley's non-binding, unsolicited proposal.
SPAC Arbitrage
There was one new SPAC IPOs filed and four new SPAC combinations announced last week. You can find the new SPAC IPO announcements in our SPACs tool here.
The table below shows weekly spread changes between March 11 and March 18, 2022.
Symbol Quote Acquiring Company Acquiring Company Quote Current Spread Last Week Spread Spread Change Weekly Deal Type MILE 1.3 Lemonade (LMND) 27.01 9.29% 3.17% 6.12% All Stock JOBS 52.6 Garnet Faith Limited (N/A) 15.97% 10.45% 5.52% All Cash CDR 27.3 Wheeler Real Estate Investment Trust, Inc. (WHLR) 2 6.23% 2.11% 4.12% All Cash SJI 34.01 Infrastructure Investments Fund (N/A) 0.00 5.85% 3.27% 2.58% All Cash ATVI 78.76 Microsoft Corporation (MSFT) 300.43 20.62% 18.29% 2.33% All Cash TLMD 2.97 Patient Square Capital (N/A) 1.01% 3.09% -2.08% All Cash VNE 36.15 Qualcomm Incorporated (QCOM) 153.99 2.35% 4.52% -2.17% All Cash TSEM 48.38 Intel Corporation (INTC) 47.45 9.55% 12.41% -2.86% All Cash AZPN 146.14 Emerson Electric Co. (EMR) 97 9.48% 14.71% -5.23% Special Conditions TMX 45.36 Rentokil Initial plc (RTOKY) 33.84 21.25% 36.41% -15.16% Special Conditions Deal Statistics: Total Number of Deals Closed in 2022 43 Total Number of Deals Not Completed in 2022 3 Total Number of Pending Deals Cash Deals 44 Stock Deals 12 Stock & Cash Deals 10 Special Conditions 8 Total Number of Pending Deals 74 Total Deal Size $660.01 billion New Deals:SPAC activity continued to stay low with only one new SPAC IPO filed last week. There were however, four new SPAC business combinations announced last week and two active combinations were terminated.
On March 16, 2022, Sen. Elizabeth Warren and Rep. Mondaire Jones introduced legislation to block deals worth more than $5 billion or that lead to high market shares. This arbitrary $5 billion threshold is going to be very limiting and can cause significant disruption in M&A if the legislation passes. The DOJ is also pursuing litigation to block the proposed merger between Change Healthcare (CHNG) and UnitedHealth Group (UNH) with an expected start date of August 1, 2022. According to Wells Fargo, MKS Instruments (MKSI) planned acquisition of Atotech (ATC) may have to be renegotiated or the deal may be cancelled as the March 31 deadline for deal termination approaches.