Yahoo Finance Will Antitrust Be an Issue for The Fresh Market Deal?
Apollo Buys The Fresh Market in a Go-Private Transaction
Regulatory approvals
With most mergers, the rate of return is driven by the time it takes to finalize the transaction. In the case of the Apollo (APO)-The Fresh Market (TFM) merger, several conditions must be met before the transaction can close. The biggest ones are antitrust and the minimum tender of 50%.
Antitrust requirement
Professional arbitrageurs usually go to the respective companies’ 10K to get a read on antitrust and to see if the companies name each other as competitors. The grocery business is very competitive. The Fresh Market mentions Kroger (KR), Safeway, Walmart (WMT), and Whole Foods (WFM), among others. It doesn’t appear that Apollo owns a grocer, so the antitrust approval should be quick.
The antitrust authorities are generally pretty strict on grocery deals. The Federal Trade Commission blocked the merger of Whole Foods and Wild Oats, only to lose in court.
Best efforts
The companies agree to file their Hart-Scott-Rodino pre-merger notification within ten days of the merger agreement. They agree use reasonable best efforts to obtain antitrust approval. There aren’t any materiality tests within the reasonable best efforts clause limiting divestitures or other behavioral remedies to get the deal approved. Given that it doesn’t appear that Apollo owns any grocery chains, antitrust approval should be pro forma.
Other merger arbitrage resources
Other important merger spreads include the Cigna (CI)-Anthem (ANTM) deal. It’s slated to close in 2H16. The Apollo-ADT (ADT) merger is another important deal. 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 retail sector should look at the S&P SPDR Retail ETF (XRT).
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