5 Merger Arbitrage Opportunities in 2023

In this article we present the list of 5 merger arbitrage opportunities. For a more comprehensive list please visit 15 Merger Arbitrage Opportunities in 2023.

5. Kroger Co (NYSE:KR)’s $25B Acquisition of Albertsons Companies, Inc. (NYSE:ACI)

Consideration: $34.10 a share
Spread: 53%
Main Risk: Antitrust Concerns

Kroger Co (NYSE:KR) has reached a $25 billion merger agreement with Albertsons Companies, Inc. (NYSE:ACI) to create the largest grocery store chain worth over $200 billion. The biggest winners in the deal are private equity firms and investors that have made big profits through long-term investment in Albertson. Additionally, there is a merger arbitrage opportunity.

With Albertsons Companies, Inc. (NYSE:ACI) trading for about $22.18 a share and Kroger Co (NYSE:KR) willing to pay $34.10 a share, the arbitrage spread is approximately $11.92. Consequently, it presents an opportunity to gain about 53% on the deal closing.

4. Amgen, Inc. (NASDAQ:AMGN)’s $27.8B Acquisition of Horizon Therapeutics Public Limited Company (NASDAQ:HZNP)

Consideration: $116.50 a share
Spread: 12.56%
Main Risk: Regulatory Approval

The FTC has also set sights on Amgen, Inc. (NASDAQ:AMGN)’s proposed $27.8 billion Horizon Therapeutics Public Limited Company (NASDAQ:HZNP) takeover. In its submissions, the agency insists that Amgen could end up leveraging its existing product portfolio to enable a monopolistic position of Horizons meds for thyroid eye disease and chronic gut.

Amgen, Inc. (NASDAQ:AMGN) seeks to purchase Horizon Therapeutics Public Limited Company (NASDAQ:HZNP) for $116.50 a share. With Horizon trading for about 103.50 a share, the arbitrage spread is $13 or 12.56%. What this means is that there is a prospect of gaining 12.56% on acquiring the stock at current levels.

3. Pfizer Inc. (NYSE:PFE)’s $43B Acquisition of Seagen Inc. (NASDAQ:SGEN)

Consideration: $229 a share
Spread: 16.8%
Main Risk: Regulatory Scrutiny

After amassing billions of dollars on the sale of Covid 19 vaccines, Pfizer Inc. (NYSE:PFE) has moved to strengthen its drug portfolio with a $43 billion acquisition bid for Seagen Inc. (NASDAQ:SGEN). Given that Seagen stockholders have approved the acquisition bid, it would represent Pfizer’s biggest acquisition since acquiring Wyeth for $68 billion in 2009 on closing.

With the acquisition, Pfizer Inc. (NYSE:PFE) is to gain access to vital cancer treatments. Consequently, the deal has already attracted regulatory scrutiny, which could see its closing delayed.

Pfizer’s $43 billion deal translates to $229 a share. Consequently, it represents an arbitrage spread of $33 or 16.8%, as Seagen Inc. (NASDAQ:SGEN) is trading at about $196 a share.

2. Broadcom Inc (NASDAQ:AVGO)’s $61B Acquisition of VMware, Inc. (NYSE:VMW)

Consideration: $142.50 a share
Spread: 0%
Main Risk: Regulatory Pressure

Broadcom Inc (NASDAQ:AVGO) has sought to strengthen its footprint in the burgeoning semiconductor sector with a $61 billion acquisition of VMware, Inc. (NYSE:VMW). The deal reached last year is projected to close this year as it undergoes regulatory scrutiny in various jurisdictions. The European Commission has given the deal the green light after analyzing whether a merger of the two will harm the competitive balance in various key technology areas, including fibre, adapters, network interface cards and storage adapters.

Broadcom Inc (NASDAQ:AVGO)’s $61B offer translates to $142.50 a share. Given that VMware, Inc. (NYSE:VMW) is trading for about $155 a share, the merger arbitrage opportunity only exists in betting that Broadcom’s share price will increase on closing the deal.

1. Microsoft Corp (NASDAQ:MSFT)’s $69B Acquisition of Activision Blizzard, Inc. (NASDAQ:ATVI)

Consideration: $95 a share
Spread: 5.5%
Main Risk: Regulatory approval

Microsoft Corp (NASDAQ:MSFT) has inched closer to completing its proposed $69 billion acquisition of Activision Blizzard, Inc. (NASDAQ:ATVI). Judge Jacqueline Scott Corley, at the U.S. District Court, has ruled in favour of the deal even as the FTC insists that the deal is anti-competitive. The regulator is worried that the Xbox maker might make some of Activision Blizzard’s Games, including Call of Duty, only available on its game consoles.

With Activision Blizzard, Inc. (NASDAQ:ATVI) trading for about $90 a share, there is tremendous value to unlock in arbitrage trading, given that Microsoft Corp (NASDAQ:MSFT) is offering $95 a share on its $69B deal. The $5 arbitrage spread translates to the prospect of making about 5.5% if the deal was to close at current levels.

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