15 Merger Arbitrage Opportunities in 2023

Published on July 14, 2023 at 4:36 pm by Swati Goyal in Mergers & Acquisitions, News, Tech

In this article we present the list of 15 merger arbitrage opportunities in 2023. Click to skip ahead and see the 5 Merger Arbitrage Opportunities in 2023.

Merger Arbitrage is a popular investment strategy that strives to take advantage of uncertainties between when a merger or acquisition is announced and when it’s completed. When executed properly, it can guarantee annualized gains of between 3% and 5% or more. With Lina Khan at the helm of the Federal Trade Commission (FTC), behemoths are struggling to close M&A deals presenting unique arbitrage opportunities. The agency moving to block Amgen’s $27.8 billion takeover of Horizon affirms how the agency is going against the most powerful businesses resulting in the widening of arbitrage spreads that hedge funds and investors are taking advantage of.

The merger arbitrage strategy entails buying and selling stocks of two merging companies to create risk-free profit. It mostly takes two forms. Pure Arbitrage entails buying the target company with the expectation that its share price will increase when the acquisition news hits the market.

If an investor already owns shares prior to the announcement, they can benefit from the share price increasing on the acquirer tabling a premium price for the shares. The difference between the price the acquirer is buying the target company and the prevailing market price is the arbitrage spread. The wider the spread, the greater the prospects of earning with the merger arbitrage strategy.

On the other hand, speculative arbitrage entails buying the target company in an M&A deal in anticipation that its share price will go up once the deal closes. If the deal falls through for several reasons, the share price often drops, resulting in losses for people who bought the stocks after the announcement.

The merger arbitrage strategy is not risk-free and comes with its fair share of risks. The uncertainty of whether the merger will be completed is one of the biggest risks exacerbated with MS Khan at the FTC in recent years.

For the longest time, MS Khan had insisted that the FTC was simply backing and not biting as behemoths turned to mergers and acquisitions to grow their monopolistic powers. Two years into her tenure at the FTC, Wall Street is increasingly learning how far she is willing to take the fight against America’s powerful businesses.

Merger arbitrage investors had their worst month of the year in May as Khan ramped up the FTC push to block deals over antitrust concerns. The agency has already sought to block Amgen’s takeover of Horizon Therapeutics.

It has also sought to block Microsoft’s $69 billion acquisition of Activision Blizzard, triggering another merger arbitrage opportunity. The agency insists that the Xbox maker acquiring Activision will gain access to one of the most important gaming franchises in Call of Duty and also affect competition in the gaming sector.

Faced with the mounting regulatory pressure targeting behemoths like Google, Amazon and Meta looking to complete M&A deals, hedge funds are having to switch up their playbook. While some have resorted to unwinding struggling positions, others have resorted to trading swings in spreads as deal prospects fluctuate.

Merger arbitrage opportunities increase whenever there is market turbulence. During such periods share prices decline, resulting in wider arbitrage spreads. Some events that cause arbitrage spreads to widen include regulatory uncertainties that trigger share price losses and interest rate hikes that affect sentiments in the equity markets.

The widening of the arbitrage spreads presents some of the best opportunities for high-risk tolerant investors confident that a given M&A deal will come to fruition. Hedge funds take advantage of such interesting opportunities to enter and play out the overblown spreads through merger arbitrage strategy.

Considering the regulatory uncertainties and the widening arbitrage spreads due to market turbulence, we present some of the best merger arbitrage opportunities for 2023.

Kritchanut/Shutterstock.com

Our Methodology

The article considers the stocks based on the merger or acquisition value and the difficulties involved in completing them. The article also considers the arbitrage opportunities based on the offered takeover prices. The stocks are ranked according to the acquisition bid size.

Merger Arbitrage Opportunities in 2023

15. Amazon.com, Inc. (NASDAQ:AMZN)’s $1.7B Acquisition of iRobot

Consideration: $61 a share

Spread: 29%

Main Risk: Regulatory Scrutiny

Amazon.com, Inc. (NASDAQ:AMZN)’s foray into the smart home space has seen it table a $1.7 billion bid to acquire iRobot, a company best known for the Roomba-branded autonomous branded vacuum cleaners. However, the deal has attracted regulatory scrutiny, with the latest being from the

The U.K. E.U. regulators are also looking to scrutinize the deal on privacy grounds concerning how Amazon might combine data from the two companies to gain a competitive advantage.

Amazon.com, Inc. (NASDAQ:AMZN)’s $1.7 billion deal translates to $61 a share for iRobot. Given that iRobot stock is trading for about $47 a share, the arbitrage spread stands at $14 or 29%.

14. Thoma Bravo $2.3B Acquisition of ForgeRock

Consideration: $23.25 a share

Spread: 17.6%

Main Risk: Regulatory Approval

Software investment firm Thoma Bravo has agreed to acquire global digital identity leader ForgeRock. The $2.3 billion deal values FORG at about $23.25 a share. ForgeRock shareholders have already approved the transaction and are awaiting regulatory approvals. The closing time has been extended, awaiting regulatory approval.

With ForgeRock trading for $19.77 a share compared to the $23.25 acquisition bid, the arbitrage spread stands at $3.48 or 17.6%.

13. China Merchant $3.4B Acquisition of Chindata Group Holdings Limited (NASDAQ:CD)

Consideration: $9.2 a share

Spread: 11.2%

Main Risk: N/A

An arm of Chinese state-owned conglomerate China Merchants Group has tabled a $3.4 billion takeover bid for Chindata Group Holdings Limited (NASDAQ:CD). The takeover bid translates to a non-binding offer of $9.2 a share of Chindata stock. The acquisition bid comes amid growing demand for data centers and cloud services in China amid the widespread adoption of AI technologies.

The $9.2 a share offer translates to an 11.2% arbitrage spread as Chindata is currently trading at about $8.23 a share

12. Maxlinear Inc (NASDAQ:MXL)’s $3.8B Acquisition of Silicon Motion Corp

Consideration: $93.54 a share

Spread: 46%

Main Risk: China-US Tensions

Maxlinear Inc (NASDAQ:MXL) has inched a step closer to completing the acquisition of Silicon Motion Corp, a company that develops NAND flash controllers. The provider of radio frequency has tabled a $3.8 billion takeover bid that values Silicon Motion at $93.54 a share.

Regulatory approval from China has been the sticking point in the deal, given that Maxlinear Inc (NASDAQ:MXL) is based in the U.S. while Silicon Motion has its base in Taiwan, with China its biggest market.

With SIMO shares going for about $63.65 a share, the arbitrage spread on the stock stands at $29.89 or 46%.

11. JetBlue Airways Corporation (NASDAQ:JBLU)’s $3.8B Acquisition of Spirit Airlines

Consideration: $31 a share

Spread: 61%

Main Risk: N/A

JetBlue Airways Corporation (NASDAQ:JBLU) bid to acquire Spirit Airline for $3.8 billion hangs in the balance. A merger of the two is expected to result in the fifth-largest airline in the country. However, there are concerns that the merger will eliminate the unique competition Spirit provides in the market by offering ultra-low-cost airline seats. The Justice Department has moved to block the deal, arguing it will negatively impact consumers.

Given that JetBlue has proposed a $31 a-share takeover, the arbitrage spread stands at $11.79 or 61% of Spirit Airlines’ current share price of $19.21 a share.

10. L3Harris Technologies Inc (NYSE:LHX)’s $4.7B Acquisition of Aerojet Rocketdyne

Consideration: $58 a share

Spread: 3.5%

Main Risk: Regulatory Approval

L3Harris Technologies Inc (NYSE:LHX), one of the largest defence contractors, reached an agreement to acquire Aerojet Rocketdyne in a $4.7 billion deal. The $ 58-a-share deal reached last year raises concerns about whether it will strangle competition in the defence sector. A merger arbitrage opportunity remains in play amid regulatory pressures and uncertainty.

With Aerojet Rocketdyne trading for about $56.01 a share, the arbitrage spread is about $2, going by L3Harries $58 a share acquisition bid. Consequently, there is a prospect of gaining 3.5% on acquiring the stock at current levels.

9. Exxon Mobil Corporation (NYSE:XOM) $4.9 Acquisition of Denbury Inc. (NYSE:DEN)

Consideration: $89.45

Spread: 3.24%

Main Risk: Regulatory Scrutiny

Exxon Mobil has move to enhance its network of carbon dioxide pipeline in the US with $4.9 billion bid to acquire Texas based Denburry for $89.45 a share. With the acquisition the company is to gain access to over 2,092 kilometers of pipelines dedicated to transporting CO2. If approved the deal will be the company’s largest acquisition in six years. However, Exxon Mobil Corporation (NYSE:XOM) will have to navigate regulatory scrutiny to close the deal. The acquisition presents a merger arbitrage opportunity. The arbitrage spread currently stands at 3.24%.

8. Intel Corporation (NASDAQ:INTC)’s $5.4B Acquisition of Tower Semiconductor

Consideration: $53 a share

Spread: 41%

Main Risk: Regulatory Approvals

Intel Corporation (NASDAQ:INTC) is looking to strengthen its prospects in the foundry market with the acquisition of Israel-based Tower Semiconductor. Intel has already tabled a $5.4 billion bid that values Tower Semiconductor at $53 a share. The deal has been delayed for over 12 months as the two seek regulatory approvals and customary closing conditions.

Given that Tower Semiconductor is trading for $37.42 a share, the arbitrage spread stands at $15.58 or 41%. Acquiring the stock at current levels presents an opportunity to gain 41% upon the deal closing.

7. Standard General’s $8.6B Acquisition of Tegna

Consideration: $24 a share

Spread: 46%

Main Risk: Industry opposition

Tegna is the subject of an acquisition drive spearheaded by a consortium of buyers that includes Standard General, Apollo and Cox Media. The deal has already hit market turbulence in the wake of various industry players and unions raising their concerns that a merger of the two will control too much of the market share. There are also concerns that people might lose jobs in the two companies, with concerns of reduced local news coverage.

Amid the concerns, the arbitrage spread of the proposed merger has widened. With Tegna trading for about $16.33 a share and the buyers proposing a $24 a share takeover, the arbitrage spread stands at $7.67 or a spread of about 46%.

6. Adobe Inc (NASDAQ:ADBE)’s $20B Acquisition of Figma

Consideration: N/A

Spread: N/A

Main Risk: Regulatory Pressure

Adobe Inc (NASDAQ:ADBE) has moved to strengthen its bid to enhance digital experience by tabling a $20 billion takeover bid of Figma, a leading web-first collaborative design platform. The two hope to come together to reimagine the future of creativity and productivity by accelerating creativity on the web while advancing product design.

Nevertheless, the $20 billion merger faces a lengthy antitrust investigation in the European Union. European antitrust officials plan to start a formal investigation on concerns that a merger of the two will lead to less innovation and higher prices.

If approved, the $20 billion deal could strengthen Adobe’s edge in the digital design market, given that Figma will have an addressable market of $16.5 billion by 2025 and add approximately $200 million in net new ARR this year.

The prospect of Adobe Inc (NASDAQ:ADBE)’s share price increasing due to the transaction presents a unique merger arbitrage opportunity.

Click to continue reading and see 5 Merger Arbitrage Opportunities in 2023.

AI Fire Sale: Insider Monkey’s #1 AI Stock Pick Is On A Steep Discount

Published on May 1, 2024 at by Inan Dogan, PhD

Artificial intelligence is the greatest investment opportunity of our lifetime. The time to invest in groundbreaking AI is now, and this stock is a steal!

The whispers are turning into roars.

Artificial intelligence isn’t science fiction anymore.

It’s the revolution reshaping every industry on the planet.

From driverless cars to medical breakthroughs, AI is on the cusp of a global explosion, and savvy investors stand to reap the rewards.

Here’s why this is the prime moment to jump on the AI bandwagon:

Exponential Growth on the Horizon: Forget linear growth – AI is poised for a hockey stick trajectory.

Imagine every sector, from healthcare to finance, infused with superhuman intelligence.

We’re talking disease prediction, hyper-personalized marketing, and automated logistics that streamline everything.

This isn’t a maybe – it’s an inevitability.

Early investors will be the ones positioned to ride the wave of this technological tsunami.

Ground Floor Opportunity: Remember the early days of the internet?

Those who saw the potential of tech giants back then are sitting pretty today.

AI is at a similar inflection point.

We’re not talking about established players – we’re talking about nimble startups with groundbreaking ideas and the potential to become the next Google or Amazon.

This is your chance to get in before the rockets take off!

Disruption is the New Name of the Game: Let’s face it, complacency breeds stagnation.

AI is the ultimate disruptor, and it’s shaking the foundations of traditional industries.

The companies that embrace AI will thrive, while the dinosaurs clinging to outdated methods will be left in the dust.

As an investor, you want to be on the side of the winners, and AI is the winning ticket.

The Talent Pool is Overflowing: The world’s brightest minds are flocking to AI.

From computer scientists to mathematicians, the next generation of innovators is pouring its energy into this field.

This influx of talent guarantees a constant stream of groundbreaking ideas and rapid advancements.

By investing in AI, you’re essentially backing the future.

The future is powered by artificial intelligence, and the time to invest is NOW.

Don’t be a spectator in this technological revolution.

Dive into the AI gold rush and watch your portfolio soar alongside the brightest minds of our generation.

This isn’t just about making money – it’s about being part of the future.

So, buckle up and get ready for the ride of your investment life!

Act Now and Unlock a Potential 10,000% Return: This AI Stock is a Diamond in the Rough (But Our Help is Key!)

The AI revolution is upon us, and savvy investors stand to make a fortune.

But with so many choices, how do you find the hidden gem – the company poised for explosive growth?

That’s where our expertise comes in.

We’ve got the answer, but there’s a twist…

Imagine an AI company so groundbreaking, so far ahead of the curve, that even if its stock price quadrupled today, it would still be considered ridiculously cheap.

That’s the potential you’re looking at. This isn’t just about a decent return – we’re talking about a 10,000% gain over the next decade!

Our research team has identified a hidden gem – an AI company with cutting-edge technology, massive potential, and a current stock price that screams opportunity.

This company boasts the most advanced technology in the AI sector, putting them leagues ahead of competitors.

It’s like having a race car on a go-kart track.

They have a strong possibility of cornering entire markets, becoming the undisputed leader in their field.

Here’s the catch (it’s a good one): To uncover this sleeping giant, you’ll need our exclusive intel.

We want to make sure none of our valued readers miss out on this groundbreaking opportunity!

That’s why we’re slashing the price of our Premium Readership Newsletter by a whopping 75%.

For a ridiculously low price of just $24, you can unlock a year’s worth of in-depth investment research and exclusive insights – that’s less than a single restaurant meal!

Here’s why this is a deal you can’t afford to pass up:

The Name of the Game-Changing AI Stock: Our in-depth report dives deep into our #1 AI stock’s groundbreaking technology and massive growth potential.
Ad-Free Browsing: Enjoy a year of investment research free from distracting banner and pop-up ads, allowing you to focus on uncovering the next big opportunity.
Lifetime Money-Back Guarantee: If you’re not absolutely satisfied with our service, we’ll provide a full refund ANYTIME, no questions asked.

Space is Limited! Only 1000 spots are available for this exclusive offer. Don’t let this chance slip away – subscribe to our Premium Readership Newsletter today and unlock the potential for a life-changing investment.

Here’s what to do next:

Head over to our website and subscribe to our Premium Readership Newsletter for just $24.
Enjoy a year of ad-free browsing, exclusive access to our in-depth report on the revolutionary AI company, and the upcoming issues of our Premium Readership Newsletter over the next 12 months.
Sit back, relax, and know that you’re backed by our ironclad lifetime money-back guarantee.

Don’t miss out on this incredible opportunity! Subscribe now and take control of your AI investment future!

Subscribe Now!

A New Dawn is Coming to U.S. Stocks

Published on May 2, 2024 at by Insider Monkey Staff

I work for one of the largest independent financial publishers in the world – representing over 1 million people in 148 countries.

We’re independently funding today’s broadcast to address something on the mind of every investor in America right now…

Should I put my money in Artificial Intelligence?

Here to answer that for us… and give away his No. 1 free AI recommendation… is 50-year Wall Street titan, Marc Chaikin.

Marc’s been a trader, stockbroker, and analyst. He was the head of the options department at a major brokerage firm and is a sought-after expert for CNBC, Fox Business, Barron’s, and Yahoo! Finance…

But what Marc’s most known for is his award-winning stock-rating system. Which determines whether a stock could shoot sky-high in the next three to six months… or come crashing down.

That’s why Marc’s work appears in every Bloomberg and Reuters terminal on the planet…

And is still used by hundreds of banks, hedge funds, and brokerages to track the billions of dollars flowing in and out of stocks each day.

He’s used this system to survive nine bear markets… create three new indices for the Nasdaq… and even predict the brutal bear market of 2022, 90 days in advance.

Click to continue reading…

Insider Monkey Ads

Markets

Insider Trading

Hedge Funds

Retirement

Opinion

Log In

Sign Up