Friday, August 12, 2016

Sequenom, Linkedin and Diamond Resorts

I initiated a ~10% position in Sequenom, Inc. (Ticker: SQNM) at $2.37. This company is being acquired by Lab Corp. (Ticker: LH) for $2.40 in cash via a tender offer, which expires on September 7th. I expect this deal to close on September 7th, which would equate to a net gain of ~ 1.26% (~15% annualized return). I see this as a rather straight forward deal with minimum risk. It was rather easy to build a position at the bid price of $1.37.

I also picked up some Linkedin (Ticker: LNKD) (long stock and short Puts). Everyone knows this story and is probably a core holding for many large merger arb funds. I see this as a very safe arb play and an area to park some extra cash. I anticipate a closing by the end of November, which would equate to a net gain of ~ 2% (~6% annualized return). A rather boring merger arb play, but sometimes you need to be a bit conservative.

Finally, I initiated a position (~ 8% position) in Diamond Resorts (Ticker: DRII) at $29.50. This time share company is being acquired by Apollo for $30.25 in cash via a tender offer. The first tender expired and has been extended to August 24th. I see a good chance that this deal will close on August 24th if they’re able to quickly complete the debt offering.

25 Comments:

At August 12, 2016, Anonymous Anonymous said...

Do you have any new insights on MHGC? On July 26th the stock jumped since the company said " it received an unsolicited takeover offer from an unnamed party referred to as 'Bidder V' for $2.75 per share in cash." Lately the stock price has come down. Can you sort out what is going on. Is the $2.75 bid off the table?
Thanks

 
At August 15, 2016, Blogger Money Turtle said...

The price decline in MHGC is concerning considering that there is a potential higher bid out there. I have no news to account for the drop in price...

 
At August 15, 2016, Blogger lamano said...

Today an article by the NY-post was published:

http://nypost.com/2016/08/15/potential-hotel-buyer-backs-out-in-fear-of-ron-burkle/

Any idea who this bidder was? I guess Bidder Q, as they are the only onces mentioned to have offered 3/share in the SEC docs...

 
At August 15, 2016, Blogger Money Turtle said...

Thanks for the article...

 
At August 16, 2016, Anonymous mergerpie said...

currently in QLIK. Everything cleared except for shareholder approval tomorrow. hope to be closing within the month.

 
At August 16, 2016, Anonymous Anonymous said...

again what about LXK yeld 17.5% and IM?

 
At August 16, 2016, Blogger Money Turtle said...

I'm not in either LXK or IM. If I had to pick one, I would probably go with LXK since it's further in the process in regards to CFIUS review, etc... Too many uncertainties with IM (CFIUS filing, questions from the China Stock Exchange, etc...)

 
At August 16, 2016, Anonymous Anonymous said...

LXK had today 18% yeld, I really don't understand what make you scared to enter in position on LXK.

 
At August 16, 2016, Blogger lamano said...

SQNM looks interesting. I guess the spread is caused by the combi of:
- HSR approval
- Minimum tender requirement of 50%
- Large downside in case the '1 in a 100' event happens (65%+)

MT, any thoughts on the minimum tender requirement?

Cheers
JG/lamano

 
At August 16, 2016, Anonymous mergerpie said...

mkto closed today which is a bit of a surprise and right on targeted date after the marketing period. mkto rose 1.32% when vista partners announced the closing. I guess some people were nervous about the lawsuits etc. Hope QLIK close within the next few days after the shareholder meeting tonight..

 
At August 16, 2016, Blogger Money Turtle said...

I may get into LXK at some point, but right now I have cash tied up in other deals.

I think the biggest concern with SQNM is HSR approval. I can see this deal getting done when the tender expires on September 7th. The company guidance is closing by year end, which is a bit conservative in my view.

And just saw this on DRII: "...Timeshare operator Diamond Resorts announced price talk of 7.75% area and 10.75% area on the secured (B1/B+) and unsecured (Caa1/CCC+) tranches of its bond offering, which will help finance private equity firm Apollo's takeover of the business.

The company increased the size of the bond by US$100m to US$1.1bn on Tuesday, after cutting a loan sale that is also part of the financing by the same amount. The deal is expected to price on Wednesday." This has a good shot at closing at the end of this month when the tender expires.

 
At August 18, 2016, Anonymous mergerpie said...

hi MT,

Did mexican regulatory approve the deal? i saw the UK and austrian approval in the sec filings but not the mexican. Also to date only 28% tendered. How much does the management and apollo owned to this point?

Regards

 
At August 18, 2016, Blogger Money Turtle said...

I have need seen approval from Mexico yet, but I imagine it should be soon. I have management owning ~ 30%.

 
At August 18, 2016, Anonymous mergerpie said...

Thanks MT for the info!

 
At August 19, 2016, Anonymous Anonymous said...

Hi MT,

Are you very confident in the acquisition of SQNM? It's down to $2.35 which yields a 2.38% return in under a month. Do you see any possible pitfalls that will cause the deal not to go through? If the deal is almost certain, it probably pays to go heavy on this.

What are your thoughts?

Thanks

 
At August 19, 2016, Blogger Money Turtle said...

SQNM: I believe it presents a relatively good risk return play. Antitrust approval is definitely on my mind. Lab Corp is a huge player, but here's a ton of competition in Sequenom's space so antitrust approval should not be an issue. Sequenom has actually been losing market share to its competitors. Lab Corp is paying a big premium so they should be able to meet the minimum tender requirement. I'm still at 10% for now...

In this game no deal is certain until it closes and the cash hits your account...

 
At August 21, 2016, Anonymous Anonymous said...

MDVN looks like 80 dollars deal... Congrats ..
I was more than half my portfolio in it
Aapltrader

 
At August 22, 2016, Blogger Money Turtle said...

Aapltrader: Congrats as well! The price well exceeded my expectations. I was looking for a 7 in the price.

 
At August 22, 2016, Anonymous mergerpie said...

Congrats MT,

Regarding DRII Mexican approval, see the link: https://www.cofece.mx/cofece/index.php/resoluciones-y-opiniones

and notifications under the docket no: CNT-079-2016 ..I am no good in Spanish..it seemed like the CFC received all docs on 11th Aug?

 
At August 23, 2016, Anonymous Anonymous said...

Laboratory Corp. of America Holdings' Purchase of Sequenom Moves Ahead With Expiry of Waiting Period
8:57 AM ET, 08/23/2016 - MT Newswires
08:57 AM EDT, 08/23/2016 (MT Newswires) -- Laboratory Corp. of America Holdings' (LH) planned acquisition of Sequenom (SQNM) has taken a step forward with the expiry of the waiting period under the Hart-Scott-Rodino Antitrust Improvements Act.

LabCorp and its Savoy Acquisition unit began a tender offer on August 9 for all of the outstanding shares of Sequenom for $2.40 net in cash.

The expiration of the waiting period satisfies one of the conditions necessary for completion of the deal. The tender offer is scheduled to expire at 12:01 a.m., Eastern Time, on Wednesday, September 7.
Price up today to $2.39

 
At August 23, 2016, Blogger Money Turtle said...

Thanks for the news on SQNM. Looks like this will be a done deal on 9/7.

 
At August 23, 2016, Anonymous mergerpie said...

DRII extended tender offer by 4 days to 30th Aug. The original date was extend to 24th Aug but that was before the mexican regulatory notice confirming they received all the documentations required on 10th Aug and adding 15 working days = 30th Aug.

So i guess the tender offer had succeeded in getting 50% or more and is now waiting for the final regulatory approval on 30th Aug to close.

 
At August 24, 2016, Blogger Money Turtle said...

Merger Pie,

Nice work on researching the Mexico approval on DRII. So far ~ 59% tendered so looking good for a closing on August 30th.

 
At August 27, 2016, Anonymous mergerpie said...

Thanks MT, I had learned a lot of your blog, so I would be delighted to contribute here too!

Newest SEC filing indicated that Mexican authorities had approved the transaction. I think DRII will close on 29/30 Aug (Mon, Tue) next week.

 
At August 27, 2016, Blogger Money Turtle said...

Mergerpie: Thanks for your informative post! Nice to know that Mexico has finally approved. Looks like all conditions of the tender have been met and will close in the 30th.

 

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