Avalara, Global Blood convertible notes jump on acquisitions; Southwest Airlines active

By Abigail W. Adams

Portland, Me., Aug. 8 – It was Merger Monday in the convertibles secondary space with two more convertible issuers becoming acquisition targets and holders winning big in the takeout.

Global Blood Therapeutics Inc.’s 1.875% convertible notes due 2028 and Avalara Inc.’s 0.25% convertible notes due 2026 became the latest convertible notes that will be taken out following the completion of acquisitions announced on Monday.

Both issues made outsized gains on the acquisition news and still have more room to run, sources said.

Global Blood and Avalara join a growing list of convertible issuers that have become acquisition targets with Atlas Corp., Atlas Air Worldwide Holdings Inc. and 1Life Healthcare Inc. (One Medical) all announcing deals over the past month.

Rumors continue to circulate concerning Akamai Technologies Inc. following reports in July that a private equity firm was attempting to arrange financing for a takeover bid.

The convertibles secondary space remained better to buy on Monday with the market tone firm even as the strong market rally began to falter.

Equity indexes closed Monday mixed after a strong open with inflation jitters again rearing their head following last Friday’s strong jobs report and fresh CPI data due to be released on Wednesday.

The Dow Jones industrial average closed Monday up 29 points, or 0.09%, the S&P 500 index closed down 0.12%, the Nasdaq Composite index closed down 0.10% and the Russell 2000 index closed up 1.01%.

Southwest Airlines Co.’s 1.25% convertibles due 2025 (Baa1/BBB) once again topped the volume charts with a large outright buyer in the market.

Global Blood in focus

Global Blood Therapeutics’ 1.875% convertible notes due 2028 continued to add to their gains in high-volume activity following the formal announcement that Pfizer Inc. would acquire the biopharmaceutical company in an all-cash transaction.

The 1.875% convertible notes rose another 4 points outright to a 218-handle.

They were largely unchanged dollar-neutral on Monday after skyrocketing over the past few sessions.

Global Blood’s stock traded to a low of $66.54 and a high of $66.77 before closing the day at $66.60, an increase of 4.32%.

The 1.875% convertible notes have made outsized gains on an outright and dollar-neutral basis as rumors of the pending takeout transitioned from chatter to official media reports to Monday’s formal announcement.

The 1.875% convertible notes have shot up 90 points outright over the past three sessions and gained 8 to 9 points dollar-neutral since last Thursday when chatter about the pending acquisition began.

The notes’ rally over the past two sessions has largely accounted for the majority of profits to be made in their takeout.

However, “there’s still more upside,” a source said. “They still have some runway.”

Pfizer announced on Monday that it would acquire Global Blood for $68.50 per share in cash in a deal with a total enterprise value of $5.4 billion.

The notes will be taken out in the acquisition.

Global Blood priced a $345 million issue of the 1.875% convertible notes at par in December 2021.

Avalara’s takeout

Avalara’s long-busted 0.25% convertible notes due 2026 made major gains on Monday following news Vista Equity Partners would acquire the tax software company in an all-cash transaction.

The 0.25% convertible notes jumped 14 to 15 points outright on the news.

“Guys made out handsomely on that,” a source said.

The notes were changing hands on a 96-handle in the late afternoon.

However, they were still trading wide to their par takeout due to profit-taking in the name following their rapid gain, a source said.

Avalara’s stock traded to a high of $92.40 and a low of $91.73 before closing the day at $91.86, a decrease of 4.06%.

News broke on Monday that Vista Equity Partners would acquire Avalara for $93.50 per share in an all-cash transactions in a deal with an enterprise value of $8.4 billion.

Rumors about the pending transaction had been circulating since early July.

The notes will be taken out in the transaction.

Convertible noteholders will see a better return on the transaction than equity holders, a source said.

Southwest active

Southwest’s 1.25% convertibles due 2025 returned to the top of the volume charts on Monday with a large outright buyer in the market, a source said.

The 1.25% convertible notes were up slightly on an outright basis alongside stock.

The notes were changing hands at 130.5 in the late afternoon.

There was $40 million in reported volume.

Southwest stock traded to a low of $38.93 and a high of $39.66 before closing the day at $39.08, an increase of 0.70%.

Southwest’s convertible notes have been a major driver of trading activity in the secondary space throughout June and July.

Mentioned in this article:

Akamai Technologies Inc. Nasdaq: AKAM

Avalara Inc. NYSE: AVLR

Global Blood Therapeutics Inc. Nasdaq: GBT

Southwest Airlines Co. NYSE: LUV

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