This is the weekly Merger Arbitrage Performance Review – April 25, 2021. This report focusses on the performance of the CHNG, MX, CCRC & TPCO merger arbitrage spreads during the period 19th April – 23rd April. These stocks were selected from the weekly largest top 20 investable US cash based merger spreads that was available as at 18th April, 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 – April 25, 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, IIVI–COHR, CHNG, AJRD & TLRY–APHA.
Table of Returns
Merger Arbitrage Performance Review - April 25, 2021
| Merger Arbitrage Limited | The Market | ||
|---|---|---|---|
| Product | Weekly Change | Product | Weekly Change |
| T20 Index | 0.01% | SPY | 0.12% |
| Index Dispersion | 1.46% | VIX | 6.65% |
| Winners | 13 | MNA | 1.23% |
| Losers | 5 | ||
Market Performance Review
The SPDR S&P 500 ETF (SPY) index fund declined throughout the week and despite a strong rally on Friday had finished lower by 0.12%. Accordingly, the VIX responded by moving in the opposite direction and by the end of the week was showing a gain of 6.65%.
The IQ Merger Arbitrage ETF (MNA) however had an extremely strong week. Perennial outperformers Xilinx (XLNX) and Inphi (IPHI) took a backseat this week as the focus of the positive performance was thrust upon Kansas City Southern (KSU) which received a rival bid from Canadian National Railway (CNI). The ETF benefitted from this rise without endearing a potentail loss on the increase in the share price of the original suitor Canadian Pacific (CP). By the close on Friday, the ETF was showing a gain of 1.23%. The fund has now clawed its way back into positive territory for the calendar year showing a gain of 1.17%.
Merger Arbitrage Portfolio Performance Review
Cash merger arbitrage spreads as measured by the Merger Arbitrage Limited T20 Index traversed the zero return line for much of the week (again) and were just short of a positive return by the close on Friday. The main drag on performance was the realisation that a superior offer for TPCO was unlikely following the withdrawal of Swiss billionaire Hansjoerg Wyss.
A total of four deals were completed during the week by previous constituents of the T20 Index. NIC Inc (EGOV), RealPage (RP), GenMark (GNMK) & CRH Medical (CRHM) all closed sucessfully. We are still awaiting the conclusion of the Waterford (WTRE) deal which recently posted a successful shareholder vote. More spread details about this week’s index list can be found on our Spread Tracker page.
The T20 index once again had a rather narrow week. A slight recovery inline with the broader market on Friday enabled the index to close just shy of positive territory finishing down for the period by 0.01%. The index was comprised of a complete complement of 20 merger arbitrage cash deals. As expected with a negative performance, winners outpaced the losers by a margin of 15 to 5 with 2 non-movers. The standard deviation of the individual index returns was 1.46%. This figure is above both the long term average and the medium term averages.
Merger Arbitrage Performance Review - April 25, 2021
Magnachip Semiconductor (MX)
The best performer from the index during the week was Magnachip Semiconductor (MX) which recovered strongly from last weeks decline. By the end of the week, the stock finished up $0.72 at $25.87, a rise of 2.86% against an offer price of $29. This now gives a simple spread at 12.10% and is the highest in our merger arbitrage index.
Change Healthcare (CHNG)
We continue to hold our position inChange Healthcare (CHNG). As mentioned previously however, as the spread continues to narrow, we will look to bank some profits and take some money off the table. By the end of the week, the stock finished up $0.41 at $23.22, a rise of 1.80% against an offer price of $25.75. This still leaves the simple spread at an attractive 10.90% and is the second highest in our merger arbitrage index.
Tribune Publishing (TPCO)
By the close on Friday TPCO had finished lower by $0.93, at $17.44, a fall of 5.06%. The stock declined sharply on news that a superior offer for TPCO was unlikely following the withdrawal of Swiss billionaire Hansjoerg Wyss. The market is now focussing on the original offer of $17.50. In light of this, the simple spread is now only at 0.34% despite the decline. We maintain a small positon in this stock and shall await further news.
China Customer Relations Centers (CCRC)
Following a previous drop, we initiated a small position in this stock at around the $6 level. We are happy to maintain the position for the time being. By the end of the week, the stock finished lower by $0.10 at $6.15, a fall of 1.60% against an offer price of $6.50. This leaves the simple spread at a healthy 5.69%. The deal is expected to close in 2Q, 2021.
