Mergers and Acquisitions

Trade the pink sheets? Small bank M&A arbitrage, 5% spread.

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“combined company will have approximately $1.7 billion in assets, $1.3 billion in loans, $1.5 billion in deposits and operate 29 branches throughout King, Pierce, Snohomish and Thurston Counties” [1]
Trade the pink sheets? Here’s an M&A arbitrage opp announced today.  Sound Credit Union is taking over Washington Bancorp, Inc. (OTC Pink: WGTB).  WGTB owns the Bank of Washington.

Deal is $6.40 cash per share… current market is $6.07/sh.  If you can find some liquidity in this OTC stock, you are looking at around a 5% return.  Timing of deal is mentioned to close in Q1 2019 and will be updating shareholders with more info later in the Q4 this year.

“The transaction has been unanimously approved by the boards of directors of both institutions and is subject to regulatory approval, approval by the shareholders of Washington Bancorp, Inc. and other customary approvals” [1]

Sources:

[1] https://www.businesswire.com/news/home/20180921005409/en/Sound-Credit-Union-Washington-Bancorp-Announce-Strategic/

Dividend Investing | Mergers and Acquisitions

Cigna-Express Scripts DOJ Approval Means Good News for CVS-Aetna Deal

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In December 2017, CVS agreed to acquire Aetna for $69 billion. [2]
M&A positive signal:  With the U.S. Department of Justice now approving Cigna’s acquisition of Express Scripts (should be completed end of 2018), investors sitting/waiting on the CVS-Aetna deal have reason to smile:

“The Cigna decision bodes well for rivals CVS Health and Aetna, in terms of their bid to become an integrated PBM and health insurer.” [1]

We already know from previous media reports that things are looking good for DOJ approval of the deal and a current CNBC article sums it up nicely:

“CVS (CVS) and Aetna (AET) have expressed confidence that they will receive anti-trust clearance and close the deal by year’s end. Reuters reports that a source [familiar] with matter said a decision in their merger could come by the end of this month.” [1]

Arbitrage notes:  There is still a positive (yet small) price gap in the CVS-AET deal.  As of today, with AET at $205/sh and CVS at $78, if you factor in the deal terms, it’s about a 2.6% basic return.  If they can pull it off within 3 months, that’s roughly 11% annualized.

For a contrarian view of this arbitrage play, check out this pretty good article at Investor Place from Sept. 11:

Aetna Stock Should Have More Upside, But There’s One Key Risk

Sources:

[1] https://www.cnbc.com/2018/09/17/doj-clears-cignas-acquisition-of-express-scripts.html

[2] Pic: https://en.wikipedia.org/wiki/CVS_Health

[3] https://www.businesswire.com/news/home/20180917005680/en/U.S.-Department-Justice-Grants-Clearance-Cigna%E2%80%99s-Acquisition

[4] https://investorplace.com/2018/09/aetna-stock-should-have-more-upside-but-theres-one-key-risk/