Pending Merger Arb Spreads Remain (Part 1) (ACS, URI, FDC, CCU)

There are still over 150 pending mergers out there that have not yet closed.  After the Fed’s recent actions, there are still some deals out there that are perceived to be at risk as far as the deals closing or if the deals can close at the announced buyout price. Some of these spreads have tightened in merger-arb scenarios, but there are quite wide spreads on many pending deals.  We have included most of the proposed closing prices or what discount the pending deals are to the actual price. 

We’ll be sending out a few selected deals we expect to go through without issue before Labor Day to our Special Situation Investing Newsletter subscribers.  Here is a partial list of some of the larger mergers out there that are still pending, and the total consideration pending here out of all the names we are covering today is more than $175 Billion:

The MBO of Affiliated Computer Services (NYSE:ACS) for some $8.2 Billion is also though of at risk or at least at the original terms because of the debt involved.  Chairman & founder Darwin Deason partnered with Cerberus Capital Management to offer $59.25 per share back in March, and shares at $49.90 are only 10% above 52-week lows and are roughly at a 16% discount to the acquisition price.

The buyout of United Rentals (NYSE:URI) by Cerberus at $34.50/share is seeing shares trade at $30.60 mid-morning, has a merger-arb spread of roughly 11%.  United Rentals is a municipal infrastructure player that is viewed to still have value on its own, and shares traded close to $40.00 on their own back in early 2006.

This $26 Billion buyout of First Data (NYSE:FDC) from KKR has been one of the cornerstone mergers that the skeptics are watching to see how strong deals can remain. The huge size of the deal makes it an esy one to target for being at risk, even though shareholders have already approved the buyout.  The $34.00 buyout price was looking at risk last week when shares dipped to under $30.50, but now shares are at $31.85.  That is still north of a 6% premium today.

Clear Channel (CCU) is one of those long-term at risk mergers that hasbeen ongoing.  The buyout price led by Bain Capital and Thomas H. Lee Partners LP for $39.20 is still well above today’s $35.40price.  Its shareholder vote is scheduled for September 25.

Jon C. Ogg
August 20, 2007

Jon Ogg can be reached at [email protected]; he does not own securities in the companies he covers.