Post Properties and Mid-America: Exceptions in the MAE Clause
Pretty much anything that has a material adverse effect on a company will be considered an MAE, although there are exceptions to that rule.
We’ll look at the MAE clause of the Post Properties and Mid-America Apartment merger agreement. We’ll see how Mid-America could walk away from the deal.
In the merger deal between Post Properties and Mid-America, the MAE clause lays out the circumstances under which Mid-America can terminate the merger.
Most arbitrageurs don’t have a lot of exposure to deals in the financial sector, so Post Properties and Mid-America will probably attract some capital.
Post Properties was trading at ~$62 per share before the deal with Mid-America was announced. If the deal breaks, it could return to those levels.
The initial termination fee for Post Properties is only 1.3% of the consideration. This is very low and wouldn’t really deter any hostile bidder.
For Post Properties (PPS) and Mid-America Apartment Communities (MAA), the gating item should be the SEC approval of the joint proxy statement.
Mid-America Apartment Communities (MAA) and Post Properties (PPS) are merging in a stock transaction. The companies are guiding to close in 4Q16.
Mid-America Apartment is buying Post Properties (PPS) in a $4.5 billion stock transaction to create the largest publicly traded apartment REIT.
Post Properties and Mid-America Apartment announced a merger. Mid-America will purchase Post Properties for ~$4.5 billion in stock and assumed debt.
MAE clauses follow a uniform format. Almost anything that has a material adverse effect on a company will be considered an MAE, but there are exceptions.
We’ll look at the MAE (material adverse effect) clause of the Everbank (EVER)-TIAA merger agreement and see how TIAA could walk away from the deal.
In the merger deal between TIAA and Everbank (EVER), the MAE clause lays out the circumstances under which TIAA can terminate its merger with Everbank.
A 4.1% annualized return is tough to get excited about. There’s always the possibility of a competing bid for Everbank (EVER), but the likelihood is small.
Everbank was trading at ~$18.63 per share before the deal was announced. If the deal breaks, does the stock price return to those levels? Probably not.
Competitive deals can make your quarter if you’re a merger arbitrage professional. A 1% gross spread can easily become a 10% gross spread.
The companies will have to get the SEC to approve the proxy statement. Depending on how many deals TIAA has done before, this could take a while.
TIAA is already in the banking business, but there are some regulatory approvals that often take some time. This accounts for the extended timeline.
Everbank is a major player in the mortgage origination space. TIAA is looking to take some of that mortgage origination and put it on its balance sheet.
On August 8, 2016, TIAA and Everbank (EVER) announced a merger in which TIAA will purchase Everbank for $19.50 per share in cash, or ~$2.5 billion.