Merger Arbitrage Mondays - WindAcre Doubles Its Stake In Nielsen Holdings (NLSN) And Other Deals

 

Merger activity decreased last week with three new deals announced and six deals completed.

Tivity Health TVTY

Originally known as American Healthways, Tivity Health was founded in 1981. The company provides fitness, health improvement and social engagement solutions through programs that include

• SilverSneakers, a health and fitness program that provides gym access and fitness classes for members of Medicare Advantage, Medicare Supplement, and group retiree plans.
• Prime Fitness, a nationwide network of of fitness locations, that offers basic multi-access to a wide range of gyms, sports facilities, specialty studios, through commercial health plans, employers, and other sponsoring organizations.
• WholeHealth Living, a program that offers a continuum of services related to complementary, alternative, and physical medicine.

The company reviewed various strategic alternatives after receiving an unsolicited proposal from Stone Point Capital. Tivity's Board agreed that Stone Point's bid was best suited for the company and entered into a definitive agreement to be acquired by Stone Point on April 5, 2022 in an all cash deal worth $32.50 per share. The deal is expected to close in the third quarter of 2022.

This deal comes after Tivity went through a difficult two year period that began with the dismissal of the-then CEO Donato Tramuto, whose 2019 purchase of Nutrisystem resulted in a $287 million loss for the company. The new CEO Richard Ashworth sold Nutrisystem for $575 million, which was less than half of what the company had paid for it two years ago. Before joining Tivity, Mr. Ashworth served as Walgreens' President and spent 30 years at Walgreens. Tivity, however rebounded after this setback and has done very well under Mr. Ashworth's tenure.

Nielsen Holdings NLSN

Within a week of agreeing to be acquired by a private equity consortium, Nielsen Holdings is experiencing troubled waters.

WindAcre Partners, which owns a 9.6% stake in the company opposed the transaction on April 6, 2022. WindAcre had also stated that it would increase its stake in Nielsen, making the takeover more difficult. Between April 6 to April 8, Windacre bought over 31 million Nielsen shares, at prices ranging between $27.05 per share and $27.71 per share, for a total of over $870 million, bringing WindAcre’s investment in Nielsen to more than $1.6 billion and doubling its stake in Nielsen Holdings to 18.9%.

According to a report by Bloomberg, WindAcre said that it would offer its support to the deal if it received about another $1 billion in equity.

Change Healthcare CHNG

The acquisition of Change Healthcare (CHNG) by UnitedHealth Group (UNH) has been going through hurdles for almost a year now. A timeline of the DOJ's investigation into this deal:

• On May 6, 2021, The American Antitrust Institute (AAI) warned that UnitedHealth Group's planned acquisition of Change Healthcare could stifle competition. The nonprofit wrote in a letter to the Department of Justice (DOJ) that the deal was "likely to harm competition and consumers."
• On August 12, 2021, Change Healthcare and UnitedHealth Group entered into a timing agreement with the DOJ, agreeing to not consummate the merger before 120 days following the date on which both parties have certified substantial compliance with the Second Request unless they have received written notice from the DOJ before the end of the 120-day period, stating that the DOJ had closed its investigation of the pending Merger.
• On November 1, 2021, the companies entered into an amendment to the Timing Agreement with the DOJ, once again agreeing not to consummate the merger before February 22, 2022, unless they had received written notice from the DOJ, before the given date stating that the DOJ had closed its investigation.
• On December 9, 2021, UnitedHealth Group delivered written notice to Change Healthcare that it was exercising its unilateral right to extend the Outside Date to April 5, 2022.
• On February 18, 2022, Change Healthcare and United Healthcare disclosed that the U.S. Dept of Justice had until February 27 to sue to block the transaction.
• On February 24, 2022, Change Healthcare issued the following statement regarding the announcement that the DOJ intended to pursue litigation to block the proposed merger between the two companies: “We are aware and disappointed that DOJ has filed litigation to prevent Change Healthcare from closing our merger with UHG. As we previously disclosed, UHG extended our merger agreement through April 5, 2022. We will continue our support of UHG in working toward closing the merger as we comply with our obligations under the merger agreement.”
• The latest development to this deal came on April 5, 2022 with the companies agreeing to extend their merger agreement to December 31, 2022. As part of the extension, UHG will pay a $650 million termination fee to Change Healthcare if the merger is unable to be completed because of the court’s decision. Change Healthcare will pay a special cash dividend of $2.00 per share to its shareholders at or about the time of the closing.

We wrote to Change Healthcare's investor relations team and they were able to confirm that the special dividend would only be paid out if the deal closes. We adjusted the price of the deal in our merger arbitrage tool to include this special dividend.

SPAC Arbitrage

There was one new SPAC IPOs filed and three new SPAC combinations announced last week. One SPAC business combination was terminated last week.

You can find the new SPAC IPO announcements in our SPACs tool here.

• Hypebeast Limited, the go-to platform for contemporary culture and lifestyle and a premier destination for editorially-driven commerce and news, and Iron Spark I Inc. (ISAA), entered into a definitive merger agreement that is expected to result in Hypebeast acquiring Iron Spark and becoming dual-listed on NASDAQ and the Hong Kong Stock Exchange.
• Westrock Coffee Holdings announced its plan to go public via a business combination with Riverview Acquisition Corp. (RVAC).
• Caravelle Group, an ocean technology company providing international shipping services and a carbon-neutral solution for wood desiccation entered into a definitive merger agreement with Pacifico Acquisition (PAFO).

Terminated

• On April 5, 2022, MDH Acquisition (MDH) and Olive Ventures Holdings mutually agreed to terminate their previously announced agreement and plan of merger.

Weekly Spread Changes:

The table below shows weekly spread changes between April 1 and April 8, 2022.

Symbol Quote Acquiring Company Acquiring Company Quote Current Spread Last Week Spread Spread Change Weekly Deal Type TEN 17.7 Apollo Global Management, Inc. (APO) 57.56 12.99% 9.41% 3.58% All Cash PTRS 8.95 OceanFirst Financial Corp. (OCFC) 18.74 15.98% 13.57% 2.41% Special Conditions ZNGA 9.02 Take-Two Interactive Software, Inc. (TTWO) 141.31 9.31% 7.06% 2.25% Special Conditions MBII 0.9701 Bioceres Crop Solutions Corp. (BIOX) 12.35 12.03% 10.00% 2.03% All Stock AZPN 165 Emerson Electric Co. (EMR) 94.57 -3.03% -4.17% 1.14% Special Conditions EXTN 6.99 Enerflex Ltd. (EFX.TO) 8.87 3.09% 4.94% -1.85% All Stock POLY 40.38 HP Inc. (HPQ) 38.63 -0.94% 1.09% -2.03% All Cash EMCF 38 Farmers National Banc Corp. (FMNB) 16.05 -9.19% -2.72% -6.47% All Stock PBIP 15.96 Fulton Financial Corporation (FULT) 16.01 2.86% 9.75% -6.89% Cash Plus Stock SAVE 26.25 Frontier Group Holdings, Inc. (ULCC) 10.73 -13.71% 8.69% -22.40% Cash Plus Stock

Deal Statistics:

Total Number of Deals Closed in 2022 59 Total Number of Deals Not Completed in 2022 4 Total Number of Pending Deals Cash Deals 44 Stock Deals 10 Stock & Cash Deals 9 Special Conditions 8 Total Number of Pending Deals 71 Aggregate Deal Consideration $710.05 billion

New Deals:

• The acquisition of Tivity Health (TVTY) by funds managed by Stone Point Capital for $2 billion or $32.50 per share in cash.
• The acquisition of Tufin Software Technologies (TUFN) by Turn/River Capital for $570 million or $13.00 per share in cash.
• The acquisition of CDK Global (CDK) by Brookfield Business Partners for $8.3 billion or $54.87 per share in cash.

Deal Updates:

• On April 4, 2022, Citizens Financial Group (CFG) and Investors Bancorp (ISBC) announced that the expected close date of the previously announced merger between the two companies is April 6, 2022.
• On April 4, 2022, SOC Telemed (TLMD) announced that its stockholders approved the acquisition of SOC Telemed by Patient Square Capital.
• On April 4, 2022, the waiting period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the “HSR Act”), expired in connection with the previously announced proposed merger between Volt Information Sciences (VOLT) and Vega Consulting.
• On April 5, 2022, Optum and Change Healthcare (CHNG) have agreed to extend their merger agreement to December 31, 2022. As part of the extension, Optum will pay a $650 million fee to Change Healthcare in the event the merger is unable to be completed because of the court’s decision. Change Healthcare will pay a special cash dividend of $2.00 per share to its shareholders at or about the time of the closing.
• On April 5, 2022, Spirit Airlines (SAVE) announced that it has received an unsolicited proposal from JetBlue Airways (JBLU) to acquire all of the outstanding shares of Spirit's common stock in an all-cash transaction for $33.00 per share.
• On April 6, 2022, Nielsen (NLSN) holder WindAcre 9.6% said it plans to take steps to block the sale of the TV measurement company to a private equity consortium.
• On April 7, 2022, The Board of Directors of Spirit Airlines (SAVE) determined that the unsolicited proposal received from JetBlue Airways (JBLU) could reasonably be likely to lead to a “Superior Proposal”. Spirit intends to engage in discussions with JetBlue with respect to JetBlue’s proposal.

Closed Deals:

• The acquisition of SPX FLOW (FLOW) by Lone Star Funds on April 5, 2022. It took 113 days for this deal to be completed.
• The acquisition of BP Midstream Partners (BPMP) by BP p.l.c. (BP) on April 5, 2022. It took 106 days for this deal to be completed.
• The acquisition of SOC Telemed (TLMD) by Patient Square Capital on April 6, 2022. It took 62 days for this deal to be completed.
• The acquisition of Investors Bancorp (ISBC) by Citizens Financial Group (CFG) on April 6, 2022. It took 252 days for this deal to be completed.
• The acquisition of Houghton Mifflin Harcourt Company (HMHC) by Veritas Capital on April 7, 2022. It took 44 days for this deal to be completed.
• The acquisition of Spirit of Texas Bancshares (STXB) by Simmons First National Corporation (SFNC) on April 8, 2022. It took 140 days for this deal to be completed.

Top 10 deals with largest spreads:

Please do your own due diligence on deals with large spreads. Some of these large spreads might be related to regulatory issues or because of the way the deal is structured. We classify some of these deals as "special conditions" deals in our merger arbitrage tool and provide additional details to help with the analysis. There may be unique situations related to special dividends, spinoffs, proration, etc. that need to be accounted for when looking at these spreads.

Symbol Announced Date Acquiring Company Closing Price Last Price Closing Date Profit Annualized Profit ATVI 01/18/2022 Microsoft Corporation (MSFT) $95.00 $80.09 06/30/2023 18.62% 15.24% CHNG 01/06/2021 UnitedHealth Group Incorporated (UNH) $27.75 $23.76 12/31/2022 16.79% 23.13% PTRS 11/04/2021 OceanFirst Financial Corp. (OCFC) $10.38 $8.95 06/30/2022 15.98% 72.00% WLL 03/07/2022 Oasis Petroleum Inc. (OAS) $91.88 $80.32 12/31/2022 14.40% 19.83% TEN 02/23/2022 Apollo Global Management, Inc. (APO) $20.00 $17.7 12/31/2022 12.99% 17.90% BRG 12/20/2021 Blackstone Real Estate (N/A) $29.85 $26.52 06/30/2022 12.56% 56.58% MBII 03/16/2022 Bioceres Crop Solutions Corp. (BIOX) $1.09 $0.9701 09/30/2022 12.03% 25.38% ZNGA 01/10/2022 Take-Two Interactive Software, Inc. (TTWO) $9.86 $9.02 06/30/2022 9.31% 41.96% TSEM 02/15/2022 Intel Corporation (INTC) $53.00 $48.55 02/15/2023 9.17% 10.76% MILE 11/08/2021 Lemonade (LMND) $1.24 $1.14 06/30/2022 8.48% 38.19%

Conclusion:

It was an active week on the merger front, with five potential deals in the works announced, multiple deals receiving required approvals, a bidding war for Spirit Airlines (SAVE), Nielsen Holdings facing issues with its largest stake holder and Change Healthcare (CHNG) entering into yet another deal amendment.

On March 30, 2022, the SEC proposed new stringent rules for SPACs, that would require these public shell companies to provide more investor disclosures, especially about their ownership and performance forecasts. We have been seeing a gradual decline in SPAC activity in the past few months and last week there was only one new SPAC IPO filed and another SPAC business combination was terminated.