Benzinga
Published May 09, 2022 15:06
Updated May 09, 2022 15:40
Merger Arbitrage Mondays - Black Knight (BKI) To Be Acquired By Intercontinental Exchange (ICE)
Merger activity decreased last week with three new deals announced and four deals completed. Two of the three deals announced were potential deals in the works. We saw yet another SPAC business combination fall apart.
Black Knight (NYSE: BKI)
Founded in 2013 and headquartered in Jacksonville, Florida, Black Knight provides innovative, high-performance software, data and analytics for mortgage and home equity lending and servicing to the mortgage industry. Solutions offered by the company include Loan Origination System, Loan Servicing System, Secondary Marketing Automation and Data and Analytics Marketplace. Mortgage Monitor and Originations Market Monitor are monthly benchmark data reports published by Black Knight.
We added Black Knight as a potential deal in the works on on April 5, 2022, when Bloomberg reported that the company was exploring a potential sale after receiving takeover interest. BKI's price after this announcement was $66.27. On May 4, 2022, the company entered into a definitive agreement to be acquired by Intercontinental Exchange (NYSE: ICE (NYSE:ICE)) in a deal valued at $13.1 billion. Investors can choose to receive the $85 per share consideration in cash (80%) or stock (20%) subject to proration, with the value of the cash election and the stock election equalized at closing.
ICE and Black Knight both offer loan origination software to mortgage lenders. According to Raymond James analyst Patrick O'Shaughnessy, this deal could potentially into antitrust issues as ICE's Ellie Mae Encompass platform is the largest provider of loan origination software and Black Knight's Empower is the "clear #2,". The current spread on the deal is 19.87% and we are treating it as a "special conditions" deal worth $85 per share.
According to the merger agreement, Black Knight will be charged a termination fee of $398 million if it terminates the agreement, and Intercontinental Exchange will be charged a termination fee of $725 million if it terminates the agreement.
You can find all the active deals listed below in our Merger Arbitrage Tool (MAT) that automatically updates itself during market hours.
Deals In The Works
There were three new deals announced in the Deals in the Works section last week.
SPAC Arbitrage
There was one new SPAC IPO filed and two 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 April 29 and May 7, 2022.
Symbol Quote Acquiring Company Acquiring Company Quote Current Spread Last Week Spread Spread Change Weekly Deal Type HTA 29.84 Healthcare Realty Trust Incorporated (HR) 30.81 19.40% 4.73% 14.67% Cash Plus Stock TEN 15.67 Apollo Global Management, Inc. (APO) 52.9 27.63% 16.48% 11.15% All Cash SAVE 19.74 Frontier Group Holdings, Inc. (ULCC) 9.62 4.00% -5.03% 9.03% Cash Plus Stock MBII 1.03 Bioceres Crop Solutions Corp. (BIOX) 13.47 15.08% 10.76% 4.32% All Stock VG 19.37 Ericsson (BS:ERICAs) (ERIC) 7.71 8.42% 5.21% 3.21% All Cash XENT 27.81 Medtronic plc (NYSE:MDT) 103.45 1.58% 3.22% -1.64% All Cash TWTR 49.8 Elon Musk (N/A) 8.84% 10.57% -1.73% All Cash NP 37.37 Schweitzer-Mauduit International, Inc. (SWM) 25.93 -5.77% -3.48% -2.29% All Stock AZPN 163.25 Emerson Electric Co. (NYSE:EMR) 88.01 -1.99% 0.92% -2.91% Special Conditions ATVI 77.84 Microsoft Corporation (NASDAQ:MSFT) 274.73 22.05% 25.66% -3.61% All Cash
Deal Statistics:
Total Number of Deals Closed in 2022 66 Total Number of Deals Not Completed in 2022 4 Total Number of Pending Deals Cash Deals 52 Stock Deals 10 Stock & Cash Deals 10 Special Conditions 8 Total Number of Pending Deals 80 Aggregate Deal Consideration $816.55 billion
New Deals:
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 situation" 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 TEN 02/23/2022 Apollo Global Management, Inc. (APO) $20.00 $15.67 12/31/2022 27.63% 42.56% BLCT 04/30/2022 Multelements Limited (N/A) $1.60 $1.29 12/31/2022 24.03% 37.01% ATVI 01/18/2022 Microsoft Corporation (MSFT) $95.00 $77.84 06/30/2023 22.05% 19.25% ZNGA 01/10/2022 Take-Two Interactive Software, Inc. (TTWO) $9.86 $8.08 06/30/2022 22.03% 151.71% BKI 05/04/2022 Intercontinental Exchange, Inc. (ICE) $85.00 $70.91 06/30/2023 19.87% 17.35% HTA 02/28/2022 Healthcare Realty Trust Incorporated (HR) $35.63 $29.84 09/30/2022 19.40% 48.84% SIMO 05/05/2022 MaxLinear, Inc. (MXL) $110.33 $92.68 06/30/2023 19.04% 16.63% CHNG 01/06/2021 UnitedHealth Group Incorporated (NYSE:UNH) $27.75 $23.47 12/31/2022 18.24% 28.09% MBII 03/16/2022 Bioceres Crop Solutions Corp. (BIOX) $1.19 $1.03 09/30/2022 15.08% 37.97% MILE 11/08/2021 Lemonade (LMND) $1.12 $0.98 06/30/2022 14.06% 96.80%
Conclusion:
SPAC activity dwindled again last week with only one SPAC IPO filed. Companies continued filing their first quarter earnings, and we can see a change in the spreads for some of the active deals. There was a significant change in the spread for the Healthcare Trust of America (HTA) deal last week, after Healthcare Realty Trust (HR), the company acquiring HTA received a $5 billion bid from Welltower (WELL).
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