Merger Arbitrage: Bristol Myers Buys Turning Point Therapeutics

Another week and another deal with big pharma buying out a development stage oncology company. Given the real synergies to be had through young companies partnering with big pharma to leverage their manufacturing expertise and distribution networks, regulators have allowed most of them to go through and they tend to close quickly. This explains why the spread on this Bristol Myers Squibb deal for Turning Point Therapeutics has a small spread of 1.89% or 5.85% annualized if the deal closes by the end of Q3 2022. Merger activity decreased last week with five new deals announced and two deals completed. One of the five new deals announced was a potential deal in the works.

Turning Point Therapeutics (NASDAQ:TPTX)

Headquartered in San Diego, Turning Point Therapeutics is a clinical-stage oncology company that specializes in the discovery and development of targeted cancer therapies designed to address treatment resistance. The company’s programs are tyrosine kinase inhibitors (TKIs) designed that target genetic drivers of cancer by helping overcome treatment resistance. Turning Point’s lead candidate Repotrectinib, a TKI is being evaluated in an ongoing Phase 1/2 trial for patients with ROS1+ advanced NSCLC (non-small-cell lung cancer) and NTRK+ (Neurotrophic tyrosine receptor kinase) advanced solid tumors. Repotrectinib has earned three breakthrough-therapy tags and has demonstrated a longer duration of response compared to existing ROS1 agents in first-line NSCLC during a phase 1/2 trial.

On June 3, 2020, Turning Point Therapeutics entered into an agreement to be acquired by Bristol Myers Squibb (NYSE:BMY) for $76 per share in cash, representing a premium of 122.48% to Turning Point’s price on June 2, 2022. According to the press release,

Bristol Myers Squibb expects repotrectinib to be approved in the U.S. in the second half of 2023 and become a new standard of care for patients with ROS1-positive NSCLC in the first-line setting. The company also plans to continue to explore the potential of Turning Point Therapeutics’ promising pipeline of novel compounds.

If approved, repotrectinib will compete for lung cancer treatments with Bristol Myers’ own drug Opdivo, and other cancer drugs made by Roche, Merck and AstraZeneca. The deal is expected to be completed in the third quarter of 2022. According to the merger agreement, the termination fee to be paid by Turning Point and the reverse termination fee to be paid by Bristol Meyers is $138 million.

SPAC Arbitrage

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

1. On May 31, 2022, Cardio Diagnostics and Mana Capital Acquisition (MAAQ) announced that they have entered into a definitive business combination agreement that will result in Cardio Diagnostics becoming a publicly listed company.
2. On May 31, 2022, Freightos Limited, a global freight booking and payment platform, and Gesher I Acquisition Corp. (GIAC) entered into a definitive merger agreement.
3. On June 1, 2022, Rally Communitas Corp., a technology company for mass mobility in the United States doing business under the “Rally” and “OurBus” brands, and Americas Technology Acquisition Corp. (ATA), announced the signing of a definitive business combination agreement.

Terminated

1. On May 31, 2022, RedBall Acquisition (RBAC) and SeatGeek, mutually agreed to terminate their previously announced business combination agreement.
2. On June 1, 2022, Forbes Global Media Holdings announced that its shareholders have terminated the Business Combination Agreement with Magnum Opus Acquisition Limited (OPA).

Weekly Spread Changes:

The table below shows weekly spread changes between May 29 and June 3, 2022.

Symbol	Quote	AcquiringCompany	AcquiringCompany Quote	CurrentSpread	Last WeekSpread	Spread ChangeWeekly	DealType
(SUMR)	11.34	Kids2, Inc. (N/A)	0.00	5.82%	1.78%	4.04%	All Cash
(NP)	38.13	Schweitzer-Mauduit International, Inc. (SWM)	27.97	-0.38%	-4.23%	3.85%	All Stock
(NLSN)	25.37	Evergreen Coast Capital Corporation (N/A)		10.37%	8.40%	1.97%	All Cash
(MNDT)	21.79	Alphabet Inc. (GOOG)	2291.28	5.55%	3.98%	1.57%	All Cash
(FHN)	22.81	The Toronto-Dominion Bank (TD)	75.94	9.60%	8.23%	1.37%	Special Conditions
(BLCT)	1.38	Multelements Limited (N/A)	0.00	15.94%	19.40%	-3.46%	All Cash
(HTA)	30.13	Healthcare Realty Trust Incorporated (HR)	27.85	8.43%	12.20%	-3.77%	Cash Plus Stock
(GTYH)	6.15	GI Partners (N/A)	0.00	2.44%	6.96%	-4.52%	All Cash
(SAVE)	20.74	Frontier Group Holdings, Inc. (ULCC)	9.81	0.74%	7.93%	-7.19%	Cash Plus Stock
(HLG)	14.29	Hailiang Education International Limited (N/A)		0.14%	9.40%	-9.26%	All Cash

Deal Statistics:

Total Number of Deals Closed in 2022	79
Total Number of Deals Not Completed in 2022	4
Total Number of Pending Deals
Cash Deals	58
Stock Deals	15
Stock & Cash Deals	8
Special Conditions	8
Total Number of Pending Deals	89
Total Deal Size	$933.26 billion

New Deals:

1. The acquisition of TherapeuticsMD (TXMD) by EW Healthcare Partners for $177 million or $10 per share in cash.
2. The merger of CatchMark Timber Trust (CTT) and PotlatchDeltic Corporation (PCH) in an all-stock transaction. Under the terms of the agreement, CatchMark stockholders will receive 0.23 common shares of PotlatchDeltic stock for each common share of CatchMark that they own.
3. The acquisition of Yamana Gold (AUY) by Gold Fields Limited (GFI) for $6.7 billion in an all stock deal. Under the terms of the Transaction, all of the outstanding Yamana Shares will be exchanged at a ratio of 0.6 of an ordinary share in Gold Fields or 0.6 of a Gold Fields American depositary share for each Yamana Share.
4. The acquisition of Sprague Resources (SRLP) by Hartree Partners for $1.44 billion or $19 per share in cash. We added SELP as a potential deal to the Deals in the Works section on January 11, 2022, and the price after the news of the potential deal came out was $17.08.
5. The acquisition of Turning Point Therapeutics (TPTX) by Bristol Myers Squibb (BMY) for $1.66 billion or $76 per share in cash.

Deal Updates:

1. On May 31, 2022, The Commissioner of Competition’s application to seek an interim injunction has been resolved on the basis that Rogers Communications (RCI) and Shaw Communications (SJR) have agreed to not proceed with closing their proposed merger until either a negotiated settlement is agreed with the Commissioner or the Competition Tribunal has ruled on the matter.
2. On May 31, 2022, Spirit Airlines (SAVE) disagreed with Institutional Shareholder Services’ recommendation regarding the company’s definitive merger agreement with Frontier Group Holdings (ULCC).
3. On May 31, 2022, First Horizon Corporation (FHN) received shareholder approval for The Toronto-Dominion Bank (TD) to acquire First Horizon.
4. On May 31, 2022, Sierra Oncology (SRRA), announced the expiration of the waiting period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976 with respect to SailPoint’s pending transaction with Thoma Bravo.
5. On June 1, 2022, SailPoint Technologies Holdings (SAIL) announced the expiration of the waiting period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976 with respect to SailPoint’s pending transaction with Thoma Bravo.
6. On June 1, 2022, Terminix Global Holdings (TMX) announced that it has completed the divestment of its pest management businesses in the U.K. and Norway. Completion of the divestment and the previously announced completion of the antitrust review process in the U.S. satisfy two of the closing conditions to the Company’s pending merger with Rentokil Initial (OTCPK:RTOKY).
7. On June 1, 2022, Oracle (ORCL) announced that all required antitrust approvals have been obtained for its proposed acquisition of Cerner (CERN), and confirmed that expiration of the offer at the end of the day on June 6, 2022.
8. On June 2, 2022, Spirit Airlines (SAVE) and Frontier Group Holdings (ULCC) announced an amendment to their previously announced merger agreement. Under the terms of the amended merger agreement, Frontier would pay a reverse termination fee of $250 million, or $2.23 per share, to Spirit in the unlikely event the combination is not consummated for antitrust reasons.
9. On June 2, 2022, Healthcare Trust of America (HTA) announced that the special meeting of stockholders will be on July 15, 2022.
10. On June 3, 2022, Bloomberg reported that Tegna’s (TGNA) sale to Standard General is coming under more scrutiny from US regulators after critics said the deal would boost prices for consumers. In a letter Friday, the Federal Communications Commission posed a series of questions including how the deal for 64 TV stations would improve local broadcasting.
11. On June 3, 2022, shareholders of Mandiant (MNDT) approved the company’s merger with Alphabet (GOOG) at a special meeting of shareholders.
12. Twitter (TWTR) announced the expiration of the waiting period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, with respect to the previously announced agreement for Twitter to be acquired by affiliates of Elon Musk.

Closed Deals:

1. The acquisition of Checkmate Pharmaceuticals (CMPI) by Regeneron Pharmaceuticals (REGN) on May 31, 2022. It took 42 days for this deal to be completed.
2. The acquisition of TriState Capital Holdings (TSC) by Raymond James Financial (RJF). It took 224 days for this deal to be completed.

Top 10 deals with largest spreads:

Please do your own due diligence on deals with large spreads. Some of these large spreads might be related to regulatory issues or because of the way the deal is structured. We classify some of these deals as “special situation” deals in our merger arbitrage tool and provide additional details to help with the analysis. There may be unique situations related to special dividends, spinoffs, proration, etc. that need to be accounted for when looking at these spreads.

Symbol	AnnouncedDate	AcquiringCompany	ClosingPrice	LastPrice	ClosingDate	Profit	AnnualizedProfit
(TWTR)	04/25/2022	Elon Musk (N/A)	$54.20	$40.16	12/31/2022	34.96%	61.05%
(BKI)	05/04/2022	Intercontinental Exchange, Inc. (ICE)	$85.00	$69.56	06/30/2023	22.20%	20.77%
(ATVI)	01/18/2022	Microsoft Corporation (MSFT)	$95.00	$77.89	06/30/2023	21.97%	20.56%
(SIMO)	05/05/2022	MaxLinear, Inc. (MXL)	$108.98	$91.74	06/30/2023	18.79%	17.59%
(CHNG)	01/06/2021	UnitedHealth Group Incorporated (UNH)	$27.75	$23.79	12/31/2022	16.65%	29.07%
(TEN)	02/23/2022	Apollo Global Management, Inc. (APO)	$20.00	$17.2	12/31/2022	16.28%	28.43%
(BLCT)	04/30/2022	Multelements Limited (N/A)	$1.60	$1.38	12/31/2022	15.94%	27.84%
(SJR)	03/15/2021	Rogers Communications Inc. (RCI)	$32.40	$28.38	06/30/2022	14.16%	206.81%
(BRG)	12/20/2021	Blackstone Real Estate (N/A)	$29.85	$26.7	06/30/2022	11.80%	172.25%
(ATC)	07/01/2021	MKS Instruments, Inc. (MKSI)	$22.85	$20.65	09/30/2022	10.63%	33.18%

Conclusion:

Spirit Airlines (SAVE) and Frontier Group Holdings (ULCC) appear intent on going through with their merger despite the higher offer by JetBlue. It is interesting to see that the two major advisory firms have differing opinions about the deal with Glass Lewis supporting Frontier’s deal with Spirit while ISS urging shareholders to vote against it. Another surprise last week was Tegna’s (TGNA) sale to Standard General coming under additional scrutiny from US regulators. In a world where cord cutting has become the norm, it is hard to imagine regulators step in and block a deal for TV stations. This reminds me of the FTC’s decision to block the merger of Staples and Office Depot back in 2016.

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