This is the weekly Merger Arbitrage Performance Review – March 14, 2021. This report focusses on the performance of the AJRD, SPWH, CHNG, PNM & SOGO merger arbitrage spreads during the period 8th March – 12th March. These stocks were selected from the weekly largest top 20 investable US cash based merger spreads that was available as at 7th March, immediately prior to the analysis period. Investors and traders can follow the latest Top 20 (T20) list each week compiled by Merger Arbitrage Limited to review this week’s largest pending cash merger arbitrage spreads. Regular followers will already be familiar with our rules for inclusion in the T20 Index.
Following the performance table of investment returns, the first section of this report compares and reviews the performance of the broader market with the MNA. Then we more specifically discuss the performance of the overall T20 Index. The next sections detail the biggest winners & losers from the T20 portfolio followed by the conclusion. The information contained in this weekly Merger Arbitrage Performance Review – March 14, 2021 assists traders in making merger arbitrage investments and event driven trading decisions. Click this link for the archive of spread performance reviews from previous weeks.
Additional live news updates for these deals can be found on our customized T20 Index news feed. Even more specific merger details & news can be found on the dedicated news and merger factsheet pages including popular deals such as GLUU, LITE–COHR, CHNG, AJRD & TLRY–APHA.
Table of Returns
Merger Arbitrage Performance Review - March 14, 2021
| Merger Arbitrage Limited | The Market | ||
|---|---|---|---|
| Product | Weekly Change | Product | Weekly Change |
| T20 Index | 0.60% | SPY | 2.72% |
| Index Dispersion | 0.96% | VIX | 16.10% |
| Winners | 16 | MNA | 1.39% |
| Losers | 4 | ||
Market Performance Review
Equity markets steamed ahead again during the week as fears over inflation and the direction of interest rates subsided. Swings in the technological sector took the market higher with real estate also performing well. The announcement of core (excluding food and energy) consumer prices only increasing 0.1% in February which was below expectations helped reduce inflationary fears. However, Treasury yields increased on Friday to end higher overall for the week although market sentiment has firmed in general.
By the close on Friday, the SPDR S&P 500 ETF (SPY) index fund had moved higher by 2.72%. Accordingly, the VIX responded by moving lower and by the end of the week was down 16.10%. The IQ Merger Arbitrage ETF (MNA) also had a positive week. Gains in Xilinx (XLNX) and Inphi (IPHI) were at the forefront of the rise as their respective acquirer stocks appreciated in line with the tech sector. CIT Group also continued to move ahead and rose by an additional 10.74%. By the close on Friday, the ETF was showing a gain of 1.39%. The fund still resides in negative territory for the calendar year showing a loss of 1.47%
Merger Arbitrage Portfolio Performance Review
Cash merger arbitrage spreads as measured by the Merger Arbitrage Limited T20 Index performed well during the week. The gain was in large part due to the rises in Aerojet Rocketdyne (AJRD), Sportsman’s Warehouse (SPWH), Change Healthcare (CHNG) & PNM Resources (PNM). The only significant blight on performance was the decline in Sogou (SOGO).
There were no deal closures during the week although Cubic (CUB), Cardtronics (CATM), Michaels (MIK), Pandion Therapeutics (PAND) & HMS (HMSY) were removed as their spreads were no longer amongst the largest top 20 merger arbitrage spreads. More spread details about this week’s index list can be found on our Spread Tracker page.
The T20 index had a mildly volatile week and eventually closed up for the period by 0.60%. The index was comprised of a complete complement of 20 merger arbitrage cash deals. Despite the negative performance, winners outpaced by the losers by a margin of 16 to 4 with 0 non-movers. The standard deviation of the individual index returns was 0.96%. This figure is reasonably below both the long term but slightly above the medium term average.
Merger Arbitrage Performance Review - March 14, 2021
Aerojet Rocketdyne (AJRD)
Following a previous drop, we stated we had initiated a small position in this stock which is now showing a profit. We are happy to maintain the position for the time being. By the end of the week, the stock finished higher by $1.10 at $47.16, a gain of 2.39% against an offer price of $51. NOTE: This deal no longer includes the special dividend payment of $5.00 which has now been paid. This leaves the simple spread at 8.14% and is in part due to the long deal closing timeline, (2H, 2021).
Sportsman’s Warehouse (SPWH)
By the close on Friday, the stock had finished higher by $0.40, at $17.38, a rise of 2.39%. This leaves the simple spread at 3.57%.
Change Healthcare (CHNG)
We continue to hold our position in this stock. As mentioned previously, should the spread subsequently narrow, we will look to bank some profits and take our money off the table. By the end of the week, the stock finished up $0.50 at $22.90, a rise of 2.23% against an offer price of $25.75. This leaves the simple spread at an attractive 12.45% and is the highest in our merger arbitrage index.
PNM Resources (PNM)
By the close on Friday had finished highr by $0.79, at $48.21, a rise of 1.67%. This leaves the simple spread at 6.51%.
Sogou (SOGO)
By the close on Friday, the stock had finished lower by $0.12, at $8.17, a fall of 1.45%. This leaves the simple spread at 10.16%, and is now the second largest in the index.
