Basics of the Informatica Merger

Brent Nyitray, CFA, MBA
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An Arbitrageur's Take on the Informatica Transaction (Part 2 of 5)

(Continued from Part 1)

Basics of the transaction

The Informatica (INFA) merger is a private equity transaction where the target is being bought out for cash. The buyer is a consortium of private equity buyers:

  • Canada Pension Plan Investment Board

  • Pemira

Terms of the transaction

As a result of the Informatica merger, shareholders will receive $48.75 in cash per share.

Conditions precedent

The following conditions need to be satisfied in order for the deal to close:

  • Informatica shareholder vote

  • Hart-Scott-Rodino antitrust filing

  • Committee on Foreign Investment in the United States

  • US Securities and Exchange Commission approval of the proxy statement

Non-solicitation

Informatica has a non-solicitation agreement with a fiduciary out. This means that prior to shareholder approval of the transaction, Informatica could discuss another merger if approached by another suitor.

First, the Informatica board of directors would have to determine that such discussions could lead to a bona fide offer—and that such an offer would likely result in a higher bid for the company. Informatica, however, is not permitted to solicit other bids.

Breakup fee

In the event another bidder comes in and tops the consortium bid, it will owe a breakup fee of $160 million. There is a reverse termination fee of $320 million that comes into play if the consortium terminates the deal.

Financing

The consortium has delivered executed commitment letters to Life Time Fitness covering the expected debt financing, as well as the equity commitments on the part of the private equity buyers.

Merger arbitrage resources

Other important merger spreads include the deal between Baker Hughes (BHI) and Halliburton (HAL) or the merger between Pharmacyclics (PCYC) and AbbVie (ABBV). For a primer on risk arbitrage investing, read Merger arbitrage must-knows: A key guide for investors.

Investors who are interested in trading in the tech sector should look at the S&P SPDR Tech ETF (XLK).

Continue to Part 3

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