jebmo’s posthaven

Welcome to the Toasted issue of M&A Daily

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Reynolds

British American (NYSEMKT:BTI) proposed a merger with Reynolds (NYSE:RAI). RAI holders would get $24.13 per share in cash and .5502 British American shares per share of RAI. Their shares have returned over 60% since we disclosed the idea in Reynolds' Cigarettes Are Good For You(r Portfolio). They benefited from the asset sale to Japan Tobacco (OTCPK:JAPAF) and will further benefit from consolidation into British American.

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Reynolds had few problems acquiring Lorillard, which we owned before the deal, and should have no regulatory problems with getting bought by British American. There are so many things to love about the tobacco industry. Two of the biggest are that 1) it does not compete with Amazon (NASDAQ:AMZN) and 2) customers tend to keep coming back for more…

Time Warner

AT&T (NYSE:T) plans to buy Time Warner (NYSE:TWX). The target should negotiate a hefty breakup fee.

Infoblox

Infoblox (NYSE:BLOX) and Vista secured approval from the German Federal Cartel Office for their deal.

Coach

Coach (NYSE:COH) is working with an advisor on a deal with Burberry (OTCPK:BURBY).

Envision

The definitive proxy has been filed for the Amsurg (NASDAQ:AMSG) acquisition of Envision (NYSE:EVHC).

Alere

Alere (NYSE:ALR) shareholders approved the acquisition by Abbott (NYSE:ABT). The $11.89 arb spread offers a 60% IRR if the deal closes by April.

Wells Fargo

As a public service announcement to Wells Fargo (NYSE:WFC) employees: please do not drink the hand sanitizer. Also, don't commit fraud, but mostly: don't drink hand sanitizer. Ever. Just don't.

Virgin America

On his conference call, the Alaska Air (NYSE:ALK) CEO spoke about his Virgin America (NASDAQ:VA) acquisition, saying,

Many of you have asked questions about the timing of the merger and about our ongoing discussions with the Justice Department. As the timing, we were hoping to get this done a couple of weeks ago and we are obviously not there quite yet. The scope of issues that remain with the Justice Department is manageable, but there are important matters and we want to take the time that's necessary to work through that. It's hard to predict the exact timing for when we'll ramp up, since there are two parties involved. There is a process at play and we're working through that process and we're respectful of that process. Our hope is that we'll have answers for our clearance soon.

All that said, we continue to be very confident that the deal will get done and get done in a way that benefits all of our stakeholders, most importantly our customers. This is a pro-consumer merger of two smaller airlines that will bring new low payer competition, industry leading service and innovative product offerings for the customers we serve. And unfortunately, when I have just shared the extent of the comments that we're going to be able to make this morning about the review process.

As we prepared for the merger, there are two things our leadership team is really focused on. First, bring in together these two teams, so everyone has aligned, motivated and working on the same things, a pulling together in other words. In doing this well lays the groundwork for number two, which is achieving the synergies of the deal, which based on everything we have seen to-date, we feel confident about doing.

Ben Minicucci and his team have been working hard on the integration planning and Ben and others will be happy to share details of the planning work during the Q&A. And as a reminder, this combination ultimately positions us as the fifth largest airline in the country and airline with the national footprint and an unmatched stability to serve West Coast travelers.

Yahoo!

The Verizon (NYSE:VZ) CFO discussed their Yahoo! (NASDAQ:YHOO) deal on the company's conference call:

Craig Moffett

Hi, good morning everyone and Fran let me add my thanks and congratulations as well and to you too, Matt. I want to ask about the Yahoo transaction and first if you could just comment on press reports about the finding of a material adverse condition or a change and if you have any update to offer there? But then more broadly with respect to Yahoo and AOL, can you talk about how the proposed rulemaking at the SEC whereby their ISP would likely be held to an opt in standard for adjustability does that change your expectations of how you can monetize either the AOL or the Yahoo asset?

Francis J. Shammo

All right, thanks Craig. So on yahoo, look Lowell and Craig have both commented on this recently. So let me just reiterate what they have said. We are still evaluating what it means for this transaction. This was an extremely large breach that has received a lot of attention from a lot of different people. So we have to assume they will have a material impact on Yahoo. Lawyers had their first call yesterday with Yahoo to provide us information but as I understand that's going to be a long process. So unless Yahoo comes up with different process it's going to take some time to evaluate this. So until then we haven't reached any final conclusions around this issue.

Rite Aid

The FTC wants Walgreens (NASDAQ:WBA) to divest 650 stores in return for approval for their Rite Aid (NYSE:RAD) deal. Specifically, the FTC staff wants buyers willing to do certain things, including keep unprofitable stores open. It is difficult to find such buyers. The $1.88 arb spread offers a 92% IRR if they pull this one off by February. The Walgreens CEO discussed the deal on his conference call:

Ricky Goldwasser

First question is on Rite Aid, obviously divesting the Rite Aid storage has been taking longer than expected. You actually did include divided accretion in your guidance. So, what gives you confidence in an early 2017 close?

Stefano Pessina

I'd say that yes. I agree with you that it is taking more than we expected, but I have to tell you that as you have seen from our presentation and from the fact that we have included some part of Rite Aid potential profit in our guidance, from this you can really understand that we are confident, as confident as we were before about this deal. Nothing has changed. We have just a delay in the execution of the deal. This is our perception. We have always been optimistic because we have never seen an attitude from the FTC which was absolutely negative. Of course, they were requiring, they were asking a lot of questions, sometimes they were taking time to respond. But at the end of the day, I believe we have had a good collaboration; we are having a good collaboration. We try to respond to the all of their needs. This takes time. But at the end, we are still confident.

Of course I know that we read on the paper very different news. No idea about the sources of this news but for sure if we could talk and of course you know that we cannot, our view will be different. For what we see today, we see just a long administrative process but we don't see substantial differences from what we were expecting. Yes, probably more stores, a little more stores here and there. But at the end of the day, as far as I can see today, as far as we can see today, we are absolutely confident that we can create, that we can do the deal and we can create the value. Just these values will be a little postponed on time because if and when we will do the deal, of course for the first month, we will not be able to start immediately the synergies; it will take some time. And we were hoping to do the deal at the beginning of this fiscal year for us. In this case, we would have had time to develop some of the synergies. Of course, if we could close the deal relatively late in our fiscal year, the synergies will be small but we will find all of them next year.

General Electric

General Electric (NYSE:GE) wants to own SLM Solutions (OTC:SLGRF), but Elliott is standing in its way. GE says that they will not extend or bump the offer. More to come in future editions of M&A Daily…

Done deal.

• EQT completed its acquisition of Press Ganey (NYSE:PGND).

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Sifting the World

Disclosure: I am/we are long RAI, TWX, RAD, ALR, YHOO.

I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

Additional disclosure: Chris DeMuth Jr and Andrew Walker are portfolio managers at Rangeley Capital. We invest with a margin of safety by buying securities at discounts to their intrinsic value and unlocking that value through corporate events. To maximize returns for our investors, we reserve the right to make investment decisions regarding any security without notification except where notification is required by law. This post may contain affiliate links, consistent with the disclosure in such links. We manage diversified portfolios with a multi-year time horizon. Positions disclosed in articles may vary in sizing, hedges, and place within the capital structure. Disclosed ideas are related to a specific price, value, and time. If any of these attributes change, then the position might change (and probably will).

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