An arbitrage opportunity via the Arix-RTW deal

There is an arbitrage opportunity to exploit in the recommended all-share acquisition of Arix Bioscience (ARIX:126.75p), a venture capital company that holds a portfolio of unlisted and listed investments in early-stage biotechnology businesses.

RTW Biotechnology Opportunities (RTW:112p and RTWG:$1.395) is offering 1.4633 new RTW shares for every Arix share, valuing the shares at 160p (using RTW bid prices), or 9 per cent less than Arix’s net asset value (NAV) of 177p and a 26 per cent premium to its share price. The all-share offer was worth 131p per Arix share when RTW made its offer 10 weeks ago (‘Is RTW’s offer for Arix a good deal?’, 1 November 2023). The increase in value has been driven by a 12 per cent increase in RTW’s NAV per share to 165c during November and a more benign equity market environment.

Moreover, although RTW has agreed to purchase Acacia Research Corporation’s (US: ACTG) 25.5 per cent stake in Arix for $57mn, that offer now values Acacia’s 33mn shares at 136p each, or 15 per cent less than the all-share offer to Arix’s other shareholders. So, having included Arix’s shares at 110p in my 2023 Bargain Shares Portfolio, I would now accept the offer and aim to crystallise a potential 46 per cent paper gain when the deal is completed.

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