Traders are almost 100% certain that Amgen Inc. will complete its $28 billion takeover of Horizon Therapeutics Plc after the Federal Trade Commission paused its in-house case to block the deal.
Horizon shares jumped as much as 6.2% on Monday to $113.25 following the antitrust regulator’s late Friday order, which allows Amgen and Horizon to propose a settlement that would negate the need for further litigation. The surge leaves Horizon stock roughly $4 below Amgen’s $116.50 offer, the narrowest spread since the deal was announced in December. The gap was nearly $10 at Friday’s close.
The pricing indicates the market sees more than a 90% probability that the deal will close, up from 70% to 80% over the last several weeks, according to Brett Buckley, an event-driven strategist at WallachBeth Capital.
Although many merger-arbitrage investors expected the deal to close whether or not it went to court, “it is highly likely it will close sooner now,” Buckley added.
Read more: Amgen-Horizon Deal Challenge Paused by FTC for Settlement Talks
The FTC sued in May to block the proposed tie-up, arguing it would limit competition for the development of treatments for serious illnesses. It was the first challenge to a pharmaceutical deal in more than a decade.
The move also sends a positive signal for Seagen Inc.’s pending $43 billion acquisition by Pfizer Inc., which is currently in the crosshairs with a second FTC request underway. Seagen gained as much as 4.8% on Monday to about $209, compared with the takeover offer price of $229 per share.
Should FTC reach a settlement on the Horizon-Amgen deal, it “could improve the tone on broader M&A activity in the sector,” Gregory Renza, an analyst at RBC Capital Markets, said in a research note.
Horizon is one of the most widely held positions for merger-arbitrage traders. While the FTC’s block stunned many hedge funds and deal speculators, they continued to bet the companies would win in the dispute. In a July Bloomberg survey, 14 of 15 merger-arb market participants polled said they expected the deal to ultimately go through.
Read: Lina Khan Is Upending Wall Street’s Merger-Arbitrage Playbook