Bass Pro Cabela’s Merger, News And Portfolio

bass pro cabela's merger

With a flurry of transactions announced over the last few weeks, I’m initiating a position  in the Bass Pro Cabela’s merger. But first, an overview of the recent news and a quick portfolio update.

Just as America is about to elect its next president, companies have rushed to announce their merger plans, in a move that departs with other election years. I will cover these first before giving some updates on the portfolio and give a few reasons why I initiated a position in the Bass Pro Cabela’s merger.
But first, the latest M&A activity.

There is of course the $85 billion purchase of Time Warner by AT&T, which as soon as announced raised concerns from both Democrats and Republicans. I wonder if this deal will go through, but even if it does I am not 100% sold on the rationale for it (this really good article from HBR explains why).

In other news, Tesla’s shareholders are due to vote on the SolarCity deal on November 17th. As I argued at the time in my article on the topic, I expect the vote to back the transaction. The spread has narrowed substantially and one of the major proxy advisory firms ISS endorsed the deal on Friday (the other major one, Glass Lewis, didn’t). However, Elon Musk isn’t really helping his cause

When it comes to the portfolio, a few changes took place recently:

  • the Coherent/Rofin-Sinar merger received EU regulatory clearance on October 26th; the share price started trading very close or at the offer price of $32.50. While the deal hasn’t closed yet, I was able to sell my shares for $32.55, 5 cents above the offer price. Perhaps some people need to cover their short positions before the close? Unclear but I’m okay with that arbitrage opportunity within the arbitrage 🙂
  • I ditched the MSFT/LinkedIn deal around mid-October, shortly after Salesforce asked for a thorough review of the transaction by the EU competition authorities; I don’t think that there is a huge chance that the deal gets blocked, but at the time the spread was closer to 2% and with the potential for delays in the event of an extended antitrust review, I decided that the upside wasn’t enough to compensate for the risk. Since then, the market as caught up with that possibility and the spread is now of ~4%.
  • I increased my position in Lexmark; even though most of the run-up happened post the approval of CFIUS, there is still a couple of percentage points for grab while the deal receives approval from SAFE. As I was explaining in the original article, the CFIUS was the main barrier, and I expect that SAFE will give the nod due to the priority established by the Chinese state to acquire North American technology assets.
  • I initiated a position in the Bass Pro Cabela’s Merger, which is a very clean deal. While the proxy is not yet out, I’m liking what I’m seeing in the merger agreement. The offer price of $65.50 is well above the unaffected price of Cabela’s, and the deal makes good business sense due to Cabela’s presence in Western US and Canada, and Bass Pro Shops’ stronghold on the East coast. Other than the shareholder vote, I don’t see much in the way for this merger to close, and it’s a welcome, sizable $5.5 billion merger at a spread of 7.3%, which I think reflects that it is still early in the merger process (it’s only been a month since announcement and the deal will probably not close before 3-4 months).

That’s all for now, good luck in your trades and keep the discussion alive in the comments section.

Disclosure: Long Cabela’s.

This article expresses an opinion and the author does not receive compensation for it and has no business relationship with any company whose stock is mentioned in this article; do your own due diligence before making investment decisions.

6 thoughts on “Bass Pro Cabela’s Merger, News And Portfolio”

  1. I like the Cabela’s deal, thanks! Spread even widened a bit. Do you have a specific time frame in mind other than more than 3-4 months?

    1. If I had to guess I’d say by end of March, seems reasonable.. but it also depends on the antitrust review; that’s something I didn’t really touch on in the article but because there is an overlap of stores in a few states, the regulators may want to take a deeper dive into the transaction. However, I believe that any concern can be addressed with remedies (store closure/sale) and the reverse termination fee of US$$230 million in Cabela’s favour gives Bass Pro an incentive to make things work. They’ve wanted Cabela’s for a while anyways, so I think they’re committed to the transaction. All in all, it looks pretty good.

    1. I did too! I think that is issue is not going to take more than 1-2 mo to resolve. I’m completely fine if this closes end of march, the spread is still good. If it closes earlier, even better. My guess is that they’ll either let it through as is or potentially agree on the combined company selling/closing down stores.

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