Correvio Pharma (CORV) – Merger Arbitrage – 30% Upside

Current Price: $0.32

Offer Price: $0.42

Upside: 30%

Expected Closing Date: Q2 2020

Press Release

The idea was shared by Brian.

 

This is a fresh (announced on the 16th of March) nano cap merger in pharma industry. Correvio Pharma (listed in TSX and Nasdaq) is being acquired by Advanz Pharma for $0.42/share in cash (total amount is $76m including debt). Upside currently stands at 30%, which is likely a result of the size and low coverage of the transaction (as well as the current market situation). The transaction requires approval of CORV shareholders and the company intends to hold a meeting of its securityholders by no later than May 20, 2020. Closing is expected in Q2, so a considerable IRR could be realized if the merger goes through. Management holds about 3% of CORV.

The buyer intends to finance the acquisition with cash on hand ($243m as of Sep'19).

 

Companies

Correvio develops, acquires and commercializes brands for the in-hospital, acute care market segment. Currently it has 4 drugs that are currently marketed and 1 potential candidate. In Dec'19 share price of CORV has fallen dramatically as FDA has declined to approve one of the company's drugs Brinavess (for rapid conversion of recent onset atrial fibrillation) due to the inadequate benefit-risk ratio (although the drug has already been approved in 40 countries including EU). Right after that, the company has announced a review of strategic options, which has resulted in this current takeover. Interestingly, for a few weeks before the merger announcement (since about 20th of Feb'20) CORV saw a significant increase in share price and volatility despite no news being out. On the 2nd of March, Correvio has even issued an update stating that "it is not aware of any material, undisclosed information related to the Company that would account for the recent increase in the market price and level of trading volume of its common shares".

Correvio used to have a fairly concentrated shareholder ownership, but most of them have sold their stakes completely this year. Currently 4.9% is held by investment advisor Tamarack Advisers and 6.4% by Summer Road.

Advanz Pharma is a global pharmaceutical company with a diversified portfolio of more than 200 branded and unbranded products, and product sales in 90 countries. The acquisition of CORV will expand its presence in Europe, particularly in France, Germany, Spain, Italy and the Benelux region.

 

 

6 COMMENTS

    1. Zulu Investor

      I think its just fluctuations due to the small volume and tiny market cap. Nano caps like this with less than $1mil traded every day on average I think you can imagine will create a lot of spreads related to bid and asking prices alone.

      I didn’t see any significant news either.

  1. Ilja

    Shareholders have approved the merger on the 15th of May and approval from the court was received yesterday. Transaction is expected to close on the 27th of May.
    The idea is closed with 30% profit in a bit over 2 months.

    1. dt

      Should happen shortly – the acquirer has already paid the funds so it is a matter of getting these distributed to individual shareholders through brokers. I am not able to tell specific date, but IB might know.

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