A Bidding War Between Pfizer and Novo Nordisk For GLP-1s – The Special Situations Report Episode 43

Episode Summary

Executive Summary: Episode 43 of the Special Situations Report covered four major event-driven stories: a potential sale of Globalstar after its Apple-fueled turnaround, the collapse of Core Scientific’s all-stock merger with CoreWeave, the Pfizer-Novo Nordisk bidding war for Metsera, and Novartis’s acquisition of Avidity with an embedded spin-off. The hosts also discussed Honeywell’s completed spin-off, Murphy USA’s large buyback, insider buying at railroads, Starboard’s activism at TripAdvisor, and the leadership scandal at Organon.

Main Topics: Globalstar: Apple partnership leads to potential sale (Priority: 5/5): The hosts revisited Globalstar, whose Apple-backed satellite partnership dramatically improved its outlook and share price, then discussed Bloomberg’s report that the company is exploring a sale and has held talks with SpaceX. They emphasized the deal’s strategic importance, customer concentration concerns, and Apple’s influence as both partner and significant stakeholder. Core Scientific–CoreWeave merger fails on shareholder opposition (Priority: 5/5): The all-stock acquisition of Core Scientific by CoreWeave was rejected by shareholders, highlighting how rare deal failures are and how all-stock transactions can be hard to arbitrage when the acquirer’s stock is expensive or hard to borrow. The hosts explained why investors opposed the deal and why the negative spread signaled skepticism. Metsera bidding war between Pfizer and Novo Nordisk (Priority: 5/5): Novo Nordisk entered with a materially higher offer for obesity biotech Metsera, triggering a legal challenge from Pfizer. The hosts detailed the unusual structure of Novo’s proposal, antitrust concerns, the role of the FTC, and Pfizer’s urgency given its need for an obesity-market breakthrough. Avidity acquisition includes a spin-off component (Priority: 4/5): Novartis’s $11 billion acquisition of Avidity resembles other complex special situations because it includes a carve-out of early-stage cardiology assets into a new SpinCo. The hosts compared it to Biohaven and noted both merger arbitrage and spin-off angles may create opportunity. Honeywell spin-off and related valuation complexity (Priority: 3/5): The completed Solstice Advanced Materials spin-off was briefly reviewed, with discussion of its size relative to Honeywell and the upcoming Aerospace spin-off. The segment underscored the challenge of valuing the remaining parent company after multiple separations. Murphy USA buyback and insider accumulation (Priority: 3/5): Murphy USA announced a $2 billion repurchase program equal to a large portion of market cap, while the chairman also bought shares personally. The hosts framed this as a ‘double-dipper’ signal and linked it to margin discipline and the impact of lower gas prices and EV tax credit dynamics. Insider activity, activism, and governance issues across sectors (Priority: 4/5): The episode closed with examples of insider buying at CSX and Norfolk Southern amid merger-related uncertainty, Starboard’s involvement at TripAdvisor, and Organon’s CEO departure after sales malpractice. These were used to illustrate how governance, activism, and insider behavior can reveal market signals.

Key Arguments: Apple’s deep partnership and capital commitment make Globalstar strategically important and reduce the likelihood that customer concentration alone will destroy the investment case. All-stock deals are especially risky for merger arbitrage because investors can be hit on both the target and acquirer side if the deal collapses, and borrow constraints can make hedging impossible. Shareholder opposition can and does derail announced mergers, even though most deals still close; Core Scientific and TaskUs were cited as back-to-back exceptions. Novo’s Metsera bid is unusual because it combines immediate cash, a dividend distribution, preferred shares, and a contingent value right, which Pfizer argues may be structured to sidestep antitrust risk. Pfizer is motivated to fight hard for Metsera because it urgently needs a viable obesity asset after prior failures in its own obesity pipeline. Avidity’s spin-off structure may create additional value beyond the merger spread, echoing Biohaven where the spin-off became highly valuable independently of the deal. Honeywell’s separation strategy is complex enough that the remaining company must be valued carefully on a post-spin basis rather than as a simple sum-of-parts shortcut. Large buybacks can be especially meaningful when paired with insider buying, suggesting management conviction and shareholder-friendly capital allocation. Insider purchases by executives inside companies involved in active M&A can be informative, especially when they are not contractually compelled to buy. Organon’s CEO exit and investigation show that governance and sales practices can materially affect investor confidence, especially in levered spin-offs. TripAdvisor remains cheap but faces secular pressure from AI disruption, making activist involvement potentially necessary to unlock value.

Data Points: Globalstar stock performance since model portfolio addition: +156% - The hosts said the stock rose 156% after they added it to their model portfolio. Apple investment in Globalstar expansion: $1.5 billion - Apple agreed in November 2024 to fund a new constellation for expanded satellite services. Apple funding for construction: $1.1 billion - Portion of Apple’s Globalstar commitment allocated to building the new satellite constellation. Apple equity stake in SPV: 20% - Apple received a 20% equity stake in a Globalstar special purpose entity managing the constellation. Debt repayment funding from Apple: $232 million - Apple agreed to pay Globalstar funds intended to pay down debt. Globalstar net debt: about $330 million - Net debt at the time the hosts discussed the Apple deal. Globalstar market cap: around $4 billion - Market capitalization when the Apple expansion deal was discussed. Core Scientific deal spread at one point: over 40% - The all-stock deal spread widened to more than 40% shortly after announcement. CoreWeave borrow rate: 300% - A hedge fund manager was cited as seeing extremely high borrow costs to short CoreWeave. Core Scientific negative spread: -20% - After the deal deteriorated, the spread moved into negative territory. TaskUs deal failure timing: Earlier in October - Referenced as another recent deal that failed due to shareholder opposition. Metsera Pfizer offer: $47.50 per share cash + up to $22.50 CVR - Pfizer’s original agreement valued Metsera at about $4.9 billion. Metsera Novo offer: $56.50 per share cash + up to $21.25 CVR - Novo’s competing offer was $9 per share higher in cash. Metsera takeover announcement value: about $6 billion - Novo’s offer size was described as a $6 billion bid. Novo Nordisk stock performance over the last year: -55% - Used to explain the company’s board shake-up and strategic urgency. Avidity acquisition value: $11 billion - Novartis is acquiring Avidity Biosciences for this amount. Avidity deal price: $72 per share cash - Consideration to Avidity shareholders in the Novartis deal. Avidity premium: 46% - Premium to the closing share price of Avidity on October 24th. Avidity current spread: just over 3% - The stock was trading around $69 against the $72 offer. Honeywell spin-off market cap: $7.5 billion - Solstice Advanced Materials’ size after the spin-off. Honeywell parent market cap: about $120 billion - The parent company remained far larger than the spin-off. Murphy USA buyback size: $2 billion - New repurchase authorization announced by Murphy USA. Murphy USA buyback as percent of market cap: 26% - The buyback represented a very large portion of the company’s market cap at announcement. Murphy USA prior buybacks: $1 billion (2021), $1.5 billion (2023) - Historical buyback programs that also represented large percentages of market cap. Murphy USA stock retired: nearly 25% over 4 years - The company has followed through on buybacks by reducing share count significantly. CSX insider purchase: $2 million - New CEO Stephen Angel bought shares on the open market. Norfolk Southern deal value: $85 billion - Union Pacific’s proposed acquisition of Norfolk Southern. TripAdvisor forward non-GAAP P/E: 10.76 - Used to argue the stock appears cheap despite weak earnings and AI disruption risk. Organon debt: $8.9 billion - The spun-out women’s health company continues to carry a heavy debt load. Organon net interest expense in fiscal 2024: over $500 million - Illustrates how debt burden pressures profitability. Organon dividend cut: 2 cents per share quarterly - The company slashed its dividend to a token payout in 2025.

Pivotal Quotes: "“All of that was wonderful. And I remember when we wrote about it, that piece was super exciting.”" — Asaf Surya: Reflecting on the original bullish thesis for Globalstar after Apple’s partnership and funding deal. "“This is one of these special situations, bonanzas, as I like to call them, where we see multiple event-driven strategies at play.”" — Manasuria: Describing the Avidity transaction and its embedded spin-off structure. "“All-stock deals are especially risky for merger arbitrage because investors can be hit on both the target and acquirer side if the deal collapses.”" — Asaf Surya: Explaining why the Core Scientific/CoreWeave structure was difficult to trade and why he prefers all-cash deals.

Implications: The episode highlights how event-driven returns can come from deal rumors, bid wars, spin-offs, and insider signals—but also how regulatory, shareholder, and execution risks can quickly reshape outcomes. For investors, structure matters as much as headline price.