Merger Arbitrage Mondays - Standard General Acquires Tegna For $8.6 billion Or $24 Per Share In Cash

Merger activity remained steady with five new deals announced, four deals completed and one deal terminated. Two of the five new deals announced were potential deals in the works.

TEGNA Inc. TGNA

Founded in 1906 and headquartered in Tysons, Virginia, TEGNA is a digital media and marketing services company. It was created on June 29, 2015, when the Gannett Company split into two publicly traded companies.

We first added TEGNA as a potential deal in the works on August 16, 2019, when Apollo Global Management APO approached the company about a deal. TEGNA’s price after this announcement was $14.28. On January 21, 2020, another large investor in Tegna TGNA wanted the company to pursue a merger or sale. During March 2020 even as the nation was coming to grips with a new pandemic and the market dropped sharply, Tegna received four competing offers.

Bidding War Timeline

• On March 6, 2020, Gray Television GTN made an offer to acquire Tegna TGNA for approximately $8.5 billion in a cash plus stock deal worth $20 per share.
• Media mogul Byron Allen made a bid for the company on March 11, 2020.
• A week later, on March 17, 2020, the Najafi Companies announced the delivery of an offer to Tegna’s (TGNA) board of directors to jointly acquire the company. Gray Television withdrew its offer the same day.
• The following day on March 30, 2020, shares of Tegna TGNA fell the most since November 2008, Apollo Global Management ended its pursuit of the broadcaster, the second suitor to withdraw an offer during the ongoing turmoil in global markets. TGNA’s closing price on March 30 was $10.31.
• On September 21, 2021, Tegna once again received takeover interest from media mogul Byron Allen and Apollo Global Management. TGNA’s price after this announcement was $21.52.
• On November 5, 2021, Byron Allen raised $10 billion in preferred equity and debt for his bid for Tegna, hoping to prevail over a rival offer from investment firms Apollo Global Management and Standard General.
• On February 4, 2022, Tegna announced that it was in advanced discussions with one of its largest shareholders, Standard General, about a potential buyout at about $24 a share.
• On February 21, 2022, Bloomberg reported that Standard General and Apollo Global Management were nearing a deal to acquire Tegna. TGNA’s price before this announcement was $20.95.
• The deal was confirmed the next day on February 24, 2022, with Tegna agreeing to be acquired by an affiliate of Standard General for $24.00 per share in cash. The transaction has an enterprise value of approximately $8.6 billion, representing a premium of approximately 39% to TEGNA’s unaffected closing share price on September 14, 2021, the last full trading day prior to media speculation about a potential sale of TEGNA. TEGNA shareholders could also receive additional cash consideration in the form of an unusual “ticking fee”. The details of the “ticking fee” are given in the New Deals section below.

This was one of the “Deals In The Works” that appeared to have a high probability of closing given the level of interest from multiple parties, the specificity of the details that leaked and the fact that the company also confirmed that it was in advanced discussions.

You can find all the active deals listed below in our Merger Arbitrage Tool (MAT) that automatically updates itself during market hours.

There were two new deals announced in the Deals in the Works section last week.

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SPAC Arbitrage

There were three new SPAC IPOs filed and two new SPAC combinations announced last week. You can find the new SPAC IPO announcements in our SPACs tool here.

• Nukkleus NUKK announced the signing of a merger agreement for a proposed business combination with Brilliant Acquisition BRLI.
• FOXO Technologies, a technology company applying epigenetic science and AI to modernize the life insurance industry, entered into a definitive merger agreement with Delwinds Insurance Acquisition DWIN.

Weekly Spread Changes:

The table below shows weekly spread changes between February 18 and February 25, 2022.

Symbol Quote Acquiring Company Acquiring Company Quote Current Spread Last Week Spread Spread Change Weekly Deal Type NYSE: EXTN 5.77 Enerflex Ltd. (EFX.TO) 7.72 7.52% 4.76% 2.76% All Stock NYSE: PVG 14.33 Newcrest Mining Limited (NCMGY) 18.03 1.71% -0.72% 2.43% All Stock NASDAQ: JOBS 51.15 Garnet Faith Limited (N/A)   54.55% 52.61% 1.94% All Cash NYSE: SAVE 24.89 Frontier Group Holdings, Inc. (ULCC) 13.01 8.53% 7.42% 1.11% Cash Plus Stock NYSE: ATC 24.14 MKS Instruments, Inc. (MKSI) 151.25 1.69% 0.88% 0.81% Cash Plus Stock NASDAQ: CERN 93.41 Oracle Corporation (ORCL) 76.35 1.70% 3.88% -2.18% All Cash NASDAQ: MILE 1.21 Lemonade (LMND) 23.48 2.07% 4.41% -2.34% All Stock NASDAQ: ZNGA 9.18 Take-Two Interactive Software, Inc. (TTWO) 165.28 7.41% 11.54% -4.13% Special Conditions NASDAQ: AZPN 148.56 Emerson Electric Co. (EMR) 92.82 7.70% 12.00% -4.30% Special Conditions NASDAQ: CHNG 21.17 UnitedHealth Group Incorporated (UNH) 475.75 21.63% 28.05% -6.42% All Cash

Deal Statistics:

Total Number of Deals Closed in 2022  29 Total Number of Deals Not Completed in 2022   3 Total Number of Pending Deals Cash Deals  43 Stock Deals  15 Stock & Cash Deals   8 Special Conditions   9 Total Number of Pending Deals  75 Total Deal Size  $607.27 billion

New Deals:

• The acquisition of Houghton Mifflin Harcourt Company HMHC by Veritas Capital for $2.8 billion or $21 per share in cash. We added HMHC as a potential deal to the Deals in the Works section on January 14, 2022 and the price after the news of the potential deal came out was $16.16.
• The acquisition of TEGNA TGNA by Standard General for $8.6 billion or $24 per share in cash. TEGNA shareholders will receive additional cash consideration in the form of a “ticking fee” of $0.00167 per share per day (or $0.05 per month) if the closing occurs between the 9- and 12-month anniversary of signing, increasing to $0.0025 per share per day (or $0.075 per month) if the closing occurs between the 12- and 13-month anniversary of signing, $0.00333 per share per day (or $0.10 per month) if the closing occurs between the 13- and 14-month anniversary of signing, and $0.00417 per share per day (or $0.125 per month) if the closing occurs between the 14- and 15-month anniversary of signing. We added TGNA as a potential deal to the Deals in the Works section on September 21, 2022 and the price after the news of the potential deal came out was $21.52.
• The acquisition of Meritor MTOR by Cummins CMI for $3.7 billion or $36.50 per share in cash.
• The acquisition of Tenneco TEN by funds managed by affiliates of Apollo for $7.1 billion or $20 per share in cash.
• The acquisition of South Jersey Industries SJI by Infrastructure Investments Fund for $8.1 billion or $36 per share in cash.

Deal Updates:

• On February 22, 2022, McAfee MCFE received written notice from the Committee on Foreign Investment in the United States (“CFIUS”) that it had concluded action under Section 721 of the Defense Production Act of 1950, as amended, and determined there are no unresolved national security concerns regarding the transactions contemplated by the Agreement and Plan of Merger.
• On February 23, 2022, Oracle Corporation ORCL announced that the waiting period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, applicable to Oracle’s pending acquisition of Cerner Corporation CERN expired on February 22, 2022.
• On February 23, 2022, McAfee MCFE received written notice from the Competition Commission of Switzerland that the transactions contemplated by the Merger Agreement are authorized in Switzerland, and accordingly all applicable consents and approvals for the Merger required under the applicable antitrust laws in Switzerland have been received.
• On February 23, 2022, shareholders of R. R. Donnelley & Sons Company RRD approved the company’s merger with Chatham Asset Management at a special meeting of shareholders.
• On February 24, 2022, Change Healthcare CHNG issued the following statement regarding the announcement that DOJ intends to pursue litigation to block the proposed merger between Change Healthcare and UnitedHealth Group UNH: “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.”
• February 24, 2022: According to a New York Times report, The Department of Justice is expected to sue to block UnitedHealth’s UNH planned purchase of Change Healthcare CHNG. The agency is expected to argue in its lawsuit that the combination would give UnitedHealth sensitive data that it could use against its competitors in the industry.
• On February 24, 2022, shareholders of Spirit of Texas Bancshares STXB approved the company’s merger with Simmons First National Corporation SFNC at a special meeting of shareholders.
• On February 24, 2022, McAfee MCFE, received notice from the European Commission that the proposed merger is approved unconditionally under the EU Merger Regulation and the Agreement on the European Economic Area in the European Union/European Economic Area.
• On February 24, 2022, Apria APR announced that the waiting period has expired under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, in connection with its previously announced transaction with Owens & Minor OMI.
• On February 25, 2022, S&P Global SPGI and IHS Markit INFO announced that the UK’s Competition and Markets Authority and the European Commission have granted the final regulatory approvals necessary for the companies to close their merger.
• On February 25, 2022, Zynga ZNGA announced the completion of the “go-shop” period under the previously announced merger agreement with Take-Two Interactive Software TTWO.

Closed Deals:

• The acquisition of Vocera Communications (VCRA) by Stryker SYK on February 23, 2022. It took 48 days for this deal to be completed.
• The acquisition of Nuverra Environmental Solutions (NES) by Select Energy Services WTTR on February 23, 2022. It took 72 days for this deal to be completed.
• The acquisition of R. R. Donnelley & Sons Company (RRD) by Chatham Asset Management on February 25, 2022. It took 73 days for this deal to be completed.
• The acquisition of Monmouth Real Estate Investment Corporation (MNR) by Industrial Logistics Properties Trust ILPT on February 25, 2022. It took 112 days for this deal to be completed.

Terminated Deals:

• On February 25, 2022, Zendesk ZEN announced that it has terminated the agreement and plan of merger with Momentive Global MNTV, after it did not receive the approval of its stockholders to adopt the proposal.

Top 10 deals with largest updates:

Symbol  Announced  Date  Acquiring  Company Closing Price Last Price Closing Date Profit Annualized Profit NASDAQ: JOBS 06/21/2021 Garnet Faith Limited (N/A) $79.05 $51.15 03/31/2022  54.55%  622.16% NYSE: TMX 12/14/2021 Rentokil Initial plc (RTOKY) $55.00 $42.64 12/31/2022 2 8.99%  34.46% NASDAQ: CHNG 01/06/2021 UnitedHealth Group Incorporated (UNH) $25.75 $21.17 06/30/2022 2 1.63%  64.20% NASDAQ: ATVI 01/18/2022 Microsoft Corporation (MSFT) $95.00 $81.44 03/31/2023  16.65%  15.31% NASDAQ: TSEM 02/15/2022 Intel Corporation (INTC) $53.00 $46.86 02/15/2023  13.10%  13.55% NYSE: BRG 12/20/2021 Blackstone Real Estate (N/A) $29.85 $26.43 06/30/2022  12.94%  38.40% NASDAQ: SAFM 08/09/2021 Cargill and Continental Grain Company (N/A) $203.00 $179.91 06/30/2022  12.83%  38.09% NYSE: PNM 10/21/2020 Avangrid, Inc. (AGR) $50.30 $44.93 06/30/2022  11.95%  35.47% NYSE: SJR 03/15/2021 Rogers Communications Inc. (RCI) $32.40 $29.59 06/30/2022  9.50% 28.18% NYSE: SJI 02/24/2022 Infrastructure Investments Fund (N/A) $36.00 $33.11 12/31/2022  8.73% 10.38%

Conclusion:

SPACs have been in a challenging environment the last several months where many SPACs have declined precipitously after merging with an operating company. In this environment it is not surprising that two active SPAC business combinations were terminated last week.

While multiple active deals in the MAT received required approvals, Change Healthcare CHNG faced significant challenges with the Department of Justice and Zendesk ZEN terminated its merger agreement with Momentive Global MNTV following pressure from shareholders to scuttle the deal.

Russia’s invasion of Ukraine has also had an impact on some of the active deals in the MAT. According to a post in Seeking Alpha, shares of GCP Applied Technologies GCP, which agreed to a $2.3B sale to Saint-Gobain in December, and Kraton KRA, which is being acquired by DL Chemical, fell because these deals require Russian approval.

Disclaimer: I have long positions in TEGNA (TGNA), Arena Pharmaceuticals (ARNA) and Bluerock Residential Growth REIT (BRG). Please do your own due diligence before buying or selling any securities mentioned in this article. We do not warrant the completeness or accuracy of the content or data provided in this article.