© Reuters. US stock M&A activity is expected to pick up Horizon (HZNP.US) and Activision Blizzard (ATVI.US) transactions are the most noteworthy
Zhitong Finance APP learned that Amgen (AMGN.US) plans to acquire Horizon Therapeutics (HZNP.US) for US$28 billion, and Microsoft (MSFT.US) acquires video game giant Activision Blizzard (ATVI.US) for US$69 billion. Both are the best options to close deals this year.
Amgen will face the U.S. Federal Trade Commission (FTC) in court next month as the regulator seeks to obtain a preliminary injunction blocking Amgen’s acquisition of Horizon. Microsoft is waiting for British antitrust regulators to approve a deal to buy Activision Blizzard.
“We think Amgen is in a much better position,” said Roy Behren, co-president and co-chief investment officer at Westchester Capital. “We believe that the FTC’s efforts to seek an injunction will likely fail and Amgen will be able to close the deal.”
Some have speculated that the two sides may reach a settlement before trial, though Behren puts the chance of a settlement at about 10%.
Behren believes the Activision-Blizzard deal is a good investment. Activision Blizzard’s current stock price is about $91 per share, while Microsoft’s proposed acquisition price is $95 per share.
“If you can make 4% off the deal in the short term, it’s a good investment and there’s a good chance the deal will close,” Behren explained.
Pfizer (PFE.US) plans to buy cancer drug maker Seagen (SGEN.US ) for $43 billion, another deal that could cross the finish line. The deal, which received another FTC request for more information last month, has a 90 percent chance of closing, Behren said.
“This deal is less likely to close than the Activision Blizzard deal, but we think Pfizer is a good buyer. The Seagen line is a great fit for Pfizer, and we think it’s mispriced in the market,” Behren said.
Behren said he was recusing himself from Kroger’s (KR.US) proposed $25 billion acquisition of Albertsons (ACI.US) as the two companies await a decision from the FTC. The deal has about a 40% chance of going through.
“In the market, I wouldn’t invest in a trade that has a lower probability than a coin flip,” Behren said.
Behren believes Broadcom’s (AVGO.US) planned acquisition of VMware (VMW.US) will close. The deal is awaiting approval from China’s antitrust authorities as well as from the U.S. FTC.
“The deal could close by the end of the year with a strong annualized return,” Behren explained. “However, there could be a 20% downside to the deal.”
According to Behren, Emerson Electric’s (EMR.US) planned takeover of National Instruments (NATI.US) is likely to go through, although the current price is “perfect.”
“If you’re wrong and the deal doesn’t close, you have a 25% downside,” Behren said.
Overall deal activity has slowed this year, at least in part because of rising interest rates, but Behren expects activity to pick up this fall.
“I think deal activity is on the rise and will continue into the end of the year,” Behren said.
