Market Overview

Forget the Mavericks Beating the Heat: Today is Merger Monday!

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While Dirk Nowitzki was busy making Mark Cuban look like the genius he is, and while LeBron James was busy LaChoking away yet another championship opportunity, the financial world was busy buying, selling, and merging themselves into a frenzy. Here is a roundup of some of the weekend's mergers and acquisitions, along with a few Benzinga trading ideas for how to play the merger season.

Boots on the Ground VF Corporation (NYSE: VFC) and The Timberland Company (NYSE: TBL) today jointly announced that they have signed a definitive merger agreement. VF will pay Timberland shareholders $43 per share, representing a total enterprise value of approximately $2 billion net of cash acquired. The merger agreement was unanimously approved by both companies' Boards of Directors.

Delicious Burgers (and Chicken) Wendy's/Arby's Group, Inc. (NYSE: WEN), today announced a definitive agreement for the sale of Arby's Restaurant Group, Inc. to a buyer formed by Roark Capital Group. Wendy's/Arby's Group will retain an 18.5% ownership interest in the Arby's® business. Atlanta-based Arby's is the second largest quick-service sandwich chain in the U.S. with more than 3,600 restaurants systemwide. Roark Capital Group is an Atlanta-based private equity firm that focuses on investing in franchise, brand management and restaurant companies. Wendy's/Arby's Group had previously announced that it was exploring strategic alternatives for Arby's.

Giant Holding Company! MacAndrews & Forbes Holdings Inc. today announced that it has proposed a transaction pursuant to which M & F Worldwide Corp. (NYSE: MFW) would be merged with a subsidiary of M&F and all outstanding shares of common stock of MFW not owned by M&F would be converted into the right to receive $24.00 in cash per share.

Non-Light-Saber Science Stuff Gerber Scientific, Inc. (NYSE: GRB) and Vector Capital Corporation ("Vector") today announced that they have entered into a definitive merger agreement under which funds affiliated with Vector will acquire the Company.

Under the terms of the merger agreement, the shareholders of the Company will receive $11.00 per share in cash, or approximately $281.8 million in total. The cash consideration represents a 24% premium to the Company's average closing share price over the last 30 days and a 35% premium to the closing share price on Friday, June 10, 2011.

In addition to the cash payment, each shareholder of the Company will receive for each share they own a non-transferable right to receive contingent cash payments at future times, if recoveries are made pursuant to certain litigation claims in respect of U.S. Patent 5,537,135 (a computerized "print to cut" technology patent).

Hold me closer Allied World Assurance Co Holdings (NYSE: AWH) agreed to buy Transatlantic Holdings (NYSE: TRH) for $3.2 billion in stock.

Transatlantic shareholders will receive 0.88 AWH share each, or $51.10 per share, representing a 16.1% premium over TRH's closing price on Friday.

Action Items

Bullish: Traders who believe that this merger news is good for the economy and the market might want to consider the following trades:

  • PowerShares DB USD Index Bullish (NYSE: UUP) The premier dollar ETF is an investment for those who see the dollar rising on a bullish economy.
  • Google (NASDAQ: GOOG) is a company that cannot seem to stop buying and selling pieces of other companies. In a merger-happy environment, Google might have the cash and willpower to take advantage and acquire underpriced, useful assets.

Bearish: Traders who believe that mergers are bad news for the market may consider taking positions in the following:

  • ProShares UltraPro Short Dow30 (NYSE: SDOW) is a riskier bet that lets you short the Dow and earn (or lose) 300% of the movement. It's a possible big gain if the short play works, or a big loss if it does not work out.
  • United States Oil Fund (NYSE: USO) could be a smart play for bears, depending on your reasoning and logic. If the market is down BECAUSE of the mergers, oil doesn't necessarily make sense. But if the mergers point to a market that will go down or stay down, then perhaps oil will rise (as speculators need to bet somewhere along the way). Not the most obvious play, but perhaps worth looking at if you think things are really headed south.

Neither Benzinga nor its staff recommend that you buy, sell, or hold any security. We do not offer investment advice, personalized or otherwise. Benzinga recommends that you conduct your own due diligence and consult a certified financial professional for personalized advice about your financial situation.

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