M&A deals are always agreed on at a set price, and while it typically takes three to six months for the deal to close, that intermediary period can be telling.
Over that time, the real market price typically trades close to the M&A deal price if the market believes the deal will be completed; if there is a large difference between the M&A deal price and the actual market price of the stock, that typically indicates the market thinks that particular deal may night come to fruition.
For example, if Company A has indicated it will be buying Company B for $1,000 a share, a trading of Company B at or around $990 in the months ahead of the deal closure would indicate to investors that the market thinks the likelihood of the deal is good. If, however, Company B trades much below the deal price, at say $750, that indicates the market's belief is smaller the deal will go through.
Below are 10 of the largest differences in M&A price to actual price currently available on the market.
1. Energy Transfer Equity And Williams Companies
Energy Transfer Equity LP ETE is set to acquire Williams Companies Inc WMB on June 30, 2016.
Announced September 28, 2015, Williams Companies has since then traded significantly below the closing price of $43.50/share.
However, looking at Williams Companies' recent performance, the market seems to be indicating that it's wary toward the deal's closure.
With a 52-week range of $10.22–61.38 and a year to date fall of 43.62 percent, Williams Companies was recently seen trading up 6.90 percent at $14.40, indicating an approximated 225 percent profit potential.
2. SunEdison And Vivint Solar
Vivint Solar Inc VSLR is due to be acquired by Sunedison Inc SUNE in a deal set to close on March 31, 2016, more than eight months after the M&A announcement on July 20, 2015.
The closing price is set at $15.25/share, but despite a 52-week range of $5.42–16, Vivint Solar has been down over 37 percent year to date.
Vivint was recently seen trading up 9.36 percent on the day at $5.96, still significantly below the closing price and indicating an approximate 180 percent profit potential.
3. Staples And Office Depot
The M&A deal between Office Depot Inc ODP and Staples, Inc. SPLS was announced February of last year, and is set to be completed May 16, 2016.
The closing price has been set at $9.07/share. Over the past 52 weeks, Office Depot has flirted around the closing price, (52-week range of $4.83–9.70), but is down 11.35 percent year to date.
Office Depot was recently seen trading up 1.21 percent on the day at $5.00, an approximately 83.6 percent profit potential if actualized.
4. Brookfield Infrastructure And Niska Gas Storage
According to the deal documents from June 14, 2015, Brookfield Infrastructure Partners L.P. BIP will be acquiring Niska Gas Storage Partners LLC NKA on the last day of 2016.
With a closing price listed at $4.23/share, Niska Gas Storage has been trading significantly below the closing price over the last one year. However, the one-year movement is up an astonishing 103.57 percent, seeing a colossal jump mid-2015. That being said, Niska is up just 9.27 percent year to date, and is still trading below the closing price, having not breached the $4 handle in the past 52 weeks.
Niska was seen trading up 5.23 percent on the day at $3.42, indicating a approximated 35 percent profit potential if the deal goes through.
5. Aetna And Humana
Aetna Inc AET is set to acquire Humana Inc HUM on New Year's Eve 2016.
While the closing price is set at $208.15/share and Humana has traded within that range over the past 52 weeks, year to date, Humana has traded down more than 8 percent.
With a 52-week range of $151.79–219.79, Humana is trading on the year between ~$180 and $155.
Humana was recently seen trading up 2.13 percent on the day at $163.78, still indicating a significant profit potential of around 27 percent.
6. Halliburton And Baker Hughes
Baker Hughes Incorporated BHI will be acquired by Halliburton Company HAL for $51.60 on April 30, 2016.
Baker Hughes is down more than 36 percent over the past 52 weeks, and down almost 12 percent year to date.
Baker Hughes was recently seen trading up 2.43 percent on the day at $40.87, indicating an approximated 30 percent profit potential if the deal goes through.
7. Western Digital And SanDisk
Western Digital Corp WDC is set to acquire SanDisk Corporation SNDK on September 30, 2016, for $86.50.
While SanDisk has traded around the closing price over the past year (52-week range of $44.28–87.43), the company is down more than 18 percent on the year and more than 10 percent year to date.
Recently seen trading at $67.76, SanDisk is still below the closing price. The difference indicates an approximated 28 percent profit potential.
8. Anthem And Cigna
CIGNA Corporation CI will be acquired by Anthem Inc ANTM December 31, 2016. The closing price is set at $166.02/share.
However, there is currently about a 27 percent profit potential due to the difference between the deal price and the actual trading price of Cigna.
Cigna has a 52-week range of $113.25–170.68, but year to date has been down 9.5 percent. Cigna was recently seen trading up 1.63 percent on the day at $132.43.
9. Marriott And Starwood Hotels & Resorts
On June 30, 2016, Marriott International Inc MAR is set to acquire Starwood Hotels & Resorts Worldwide Inc HOT for $79.88 per share.
Due to where the stock has recently been trading, there is a profit potential of approximately 20 percent if the deal closes.
Starwood Hotels & Resorts was recently seen trading up 1.80 percent on the day at $65.16.
10. Pfizer And Allergan
For $331.77/share, Pfizer Inc. PFE is set to acquire Allergan plc Ordinary Shares AGN on December 31, 2016.Over the past 52 weeks, Allergan has traded between $237.50 and $340.34; however, year to date, the company is down more than 10 percent.
If the deal were to go through around the current trading prices (seen flat on the day at $280.84), there is a profit potential of around 20 percent.
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