Luminex increases bid for Nanosphere to $1.70/share

Today Luminex announced that it has increased its bid for Nanosphere with 26% from $1.35/share to $1.70/share as a result of an unsolicited third party offer at $1.50/share. When you enter the merger arbitrage game you don’t expect to make huge gains, but the fact that there is a small probability of a very favorable outcome like this acts nicely as a partial balance for the fact that there is also a small probability of a very negative outcome when the deal fails. Pre-market the stock is up to $1.67 which means that the spread also has narrowed to just 1.8%. But maybe some market participants are now hoping for a bidding war, although with the increase in the breakup fee that’s probably not very likely:

In response to the events described under Item 7.01 of this Current Report on Form 8-K, on May 22, 2016, the Company, Merger Subsidiary and Nanosphere entered into a First Amendment to the Merger Agreement (the “Amendment”) that (A) corrected scrivener’s errors such that the Offer would expire at 12:01 a.m. Eastern Daylight time on the 21st Business Day after commencement; (B) increased the per share Offer Price to $1.70 per Share; and (C) increased the Break-up Fee to $3,000,000.

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Disclosure

Author is long Nanosphere

9 thoughts on “Luminex increases bid for Nanosphere to $1.70/share

      1. Vincent

        Maybe less complicated thank ALXA in terms of contingent value right. The key is the revenue projection. Management guidance is $12-13m, which seems very aggressive.

        Reply
          1. Vincent

            You are right. The way I read it is that they may need cash to keep operating. Q1 CFO was -$4.15. Cash balance was $10.8 as of 3/31, so worst case they will need another $6m until deal close while Management seems to be confident that cash will be sufficient until 2017. However, they were wrong regarding revenue projection last year. The positive was new single cell system launch and European market. Q2 will give us better indication.

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