Today - Friday, October 21, 2016
- Rockwell Automation (NYSE:ROK) rose 4.2% in today's trade on speculation that Schneider Electric (OTCPK:SBGSF) may be preparing a takeover offer that values the maker of robotics software and equipment at $18B.
- ROK is an “extremely attractive asset” that faces a tough market in the short term, Bernstein analyst Steve Winoker says, adding that Schneider has proven that it "can be very aggressive on the acquisition front when they want an asset."
- Egyptian billionaire Naguib Sawiris is considering a bid for bankrupt telecom Oi (NYSE:OIBR) by teaming with creditors to put in $1.5B, Reuters reports.
- The intent would be to take control from Oi's current shareholders, primarily Pharol SGPS (the former Portugal Telecom), and ready it for sale in the next three years.
- A preliminary plan has the consortium aiming to cut $21B in debt and attain a stake of about 85%.
- Bondholders led by Moelis & Co. had said they were working with Sawiris on a new plan earlier this month.
- HollyFrontier (NYSE:HFC) rose 4.7% in today's trade following a Reuters report that it is in advanced talks to acquire Suncor Energy's (NYSE:SU) Petro-Canada lubricants division for a little over $1B, after submitting the highest bid in an auction.
- A potential deal would allow HFC to diversify its refining business, which has been hurt by the gasoline glut that has eroded profit margins, while giving SU a cash boost to help pay down debt incurred as a result of recent acquisitions, according to the report.
- Petro-Canada produces more than 350 advanced lubricants for industries ranging from beauty to heavy manufacturing, and is the world's largest manufacturer of white mineral oil.
- AT&T (NYSE:T) has a deal in principle to buy Time Warner (NYSE:TWX) for $85B, a 16%-plus premium above today's closing market cap, Reuters is reporting.
- That blockbuster could come with full details as soon as Sunday, as Reuters was reporting earlier.
- Following on AT&T's $48B acquisition of DirecTV last year, adding Time Warner would make AT&T a central media player, with control not only of its wide distribution network in satellite and wireless but some of media's most coveted assets: the Warner Bros. film studio, live sports-friendly Turner Broadcasting networks, CNN, and most especially HBO.
- Now after hours: TWX +4.3% to $93.32/share; T -0.8%.
- No sooner did an AT&T/Time Warner merger seem as close as Monday than Reuters reports the two companies have reached agreement on most terms, with hopes to announce the deal as soon as Sunday.
- Time Warner's (TWX +7.8%) on the move yet again, up 3.9% after hours. AT&T (T -3%) is down 0.6% in postmarket trading.
- Time Warner's after-hours quote puts it at $93.00. Meanwhile, as analysts started to weigh in more today, sources put the deal at "well north" of $90/share (CNBC), and the price could go to $110/share -- a 23% premium above today's close.
- Brean analyst Alan Gould said in a note that the deal could hit the $110-$125 range per share.
- Fox failed in its 2014 pursuit of Time Warner at $85/share.
- AT&T's (T -3%) interest in Time Warner (TWX +7.8%) progressed quickly from "had talks" to "advanced talks" and now a deal could be set by Monday -- which Bloomberg says is due to a sped-up timetable caused by Bloomberg's initial report.
- That's because AT&T is said to be concerned that the publicity could allow other interested suitors like Apple (AAPL -0.4%) or Alphabet (GOOG +0.3%, GOOGL +0.3%) to jump in -- and indeed Apple is said to be monitoring the deal talks, after it made its own approach to Time Warner a few months ago, The Wall Street Journal reports.
- Those talks involved execs under Apple chief Tim Cook and didn't get beyond a preliminary stage. A source tells the WSJ that Google doesn't look interested in an offer for Time Warner.
- But the story of the deal points out just how much behind-the-scenes strategic talk is going on in the media/telecom spaces, as companies vie to be among the new leaders in an upended, converged digital media climate.
- Sumner Redstone was said to be considering not only the merger of CBS (CBS +2.1%) and Viacom (VIA +2.7%, VIAB +2.8%) that he's already pushing for, but also to combine that entity with Time Warner.
- Meanwhile, Comcast (CMCSA -0.5%) could join another company to get involved, the WSJ says, though that makes more sense if Time Warner's open to being parted out.
- Unlikely to join in this time: Twenty-First Century Fox (FOX +2.2%, FOXA +2.2%), whose own pursuit of Time Warner failed in 2014 at $85/share, and Walt Disney (DIS +1.1%).
- Previously: Time Warner at 15-year highs on merger talk; media companies rise (Oct. 21 2016)
- Time Warner (TWX +12.4%) is still climbing and cruising to 15-year highs after the WSJ report that it's in advanced talks to be taken over by AT&T (T -3.9%), which is now at its lowest point since February.
- The deal -- which would create a media/telecom giant that would reshape the industry -- would be likely cash and stock, though talks are fluid and might not end in a deal.
- The mix of the deal is likely crucial to its outcome, with Time Warner (not to be confused with Time Warner Cable, now part of Charter Communications) now worth more than $75B -- and a year after AT&T ponied up nearly $49B to take over DirecTV.
- Other potential acquisition targets in media (is anything off the table in a rapidly consolidating sector?) are on the move: DISCA +6.4%, SNI +5.6%, AMCX +4.3%. Lions Gate (NYSE:LGF) made its own move up, +2.4%.
- Engaged in talks about their own re-merger, Viacom (VIA +2.8%, VIAB +4.1%) is up, as is erstwhile and possibly future partner CBS (CBS +2.7%).
- Time Warner (NYSE:TWX) shares have been halted again after popping another 7.8%, on news that the talks to be acquired by AT&T (NYSE:T) are in their advanced state, and a deal could come as soon as this weekend.
- As with yesterday, AT&T has taken a dive again, -2.7%.
- On reports before the closing bell yesterday that the two companies were meeting to talk about strategic moves (including a merger), Time Warner closed yesterday up 4.7%. AT&T closed down 1.9%.
- Updated 11:04 a.m.: TWX has reopened, now up 8.2%.
- Previously: Bloomberg: Time Warner's Bewkes will sell to AT&T in merger talks if price is right (Oct. 20 2016)
- Unsurprisingly, Alere (ALR +0.7%) stockholders voted overwhelmingly in favor of a merger with Abbott (ABT -1.1%) in a special meeting. Over 98% of the votes cast (representing 77% of the company's outstanding shares) backed the $56/share transaction. Yesterday's close was $44.10.
- The companies announced the deal in January but it became a bit wobbly when a rash of problems arose at Alere including dodgy billing practices, inappropriate revenue recognition and a government inquiry into its marketing and billing practices. The firms have agreed to engage a mediator to settle their differences.
- Read now: Merger Arbitrage - Alere And Abbott
9:52 AM| 9:52 AM | 44 Comments
- Analysts are already weighing in on the impact of a merger between Coach (NYSE:COH) and Burberry (OTCPK:BURBY, OTCPK:BBRYF) -- even with the deal still only in the speculative stage.
- "A merger of Coach and Burberry would primarily be a merger of problems," notes Exane BNP Paribas analyst Luca Solca.
- "M&A history in luxury has shown that mergers don't obviously help in regaining brand traction and desirability, while cost efficiency in the face of declining brand momentum are often just a way to run in order to stand still," he adds.
- Coach is believed to be working with Evercore on the Burberry deal.
- Previously: Burberry and Coach higher amid merger speculation (Oct. 21)
- Burberry is now up only 3.2% in London.
- Eaton Vance (NYSE:EV) will acquire the business assets of Calvert Investment Management, an indirect subsidiary of Ameritas Holding Company.
- Calvert has ~$12.3B of fund and separate account assets under management as of September 30, 2016. As a responsible investor, Calvert seeks to invest in companies that provide positive leadership in their business operations and overall activities that are material to improving societal outcomes.
- Because the transaction is structured as an asset purchase, liabilities in connection with Calvert's previously disclosed compliance matters and other pre-closing obligations will remain with the seller. Terms of the transaction are not being disclosed.
- "The acquisition of Calvert provides significant potential benefits to Eaton Vance shareholders, both long-term and near-term," said Laurie G. Hylton, Vice President and Chief Financial Officer of Eaton Vance. "Calvert is a leading brand in one of the most promising categories of investing, and we expect to help them achieve substantial growth over time. Reflecting the current profitability of acquired operations and anticipated cost savings, we also expect the transaction to be immediately accretive."
- Source: Press Release
- ADDvantage Technologies (NASDAQ:AEY) announces it has acquired the assets of Triton Miami, Inc., a provider of new and refurbished enterprise networking products, including desktop phones, enterprise switches and wireless routers.
- Triton, based in Miami, primarily sells products to brokers and end-users across the U.S. through a dedicated sales force and e-commerce program. Triton maintains a broad inventory of products from various manufacturers, with a majority of its sales coming from Cisco and Polycom products.
- "With a diverse customer base and broad line of product offerings, Triton has established a highly profitable business that generated approximately $2.1 million in EBITDA from $13.5 million in revenue over the past twelve months. We see many areas where our two businesses overlap or are complementary in nature, making this a highly attractive acquisition for ADDvantage," commented David Humphrey, President and CEO of ADDvantage
- Source: Press Release
- j2 Global (NASDAQ:JCOM) unit Ziff Davis announce that Ziff Davis has entered into a definitive merger agreement to acquire Everyday Health (NYSE:EVDY), a leading provider of digital health marketing and communications solutions.
- Ziff Davis will acquire Everyday Health for $10.50/share in cash, representing an enterprise value of ~$465M.
- The transaction requires that shares representing more than 50% of Everyday Health’s common shares be tendered, and is subject to regulatory approvals and other customary closing conditions.
- The per-share price is a 27% premium to EVDY's share price earlier yesterday, before shares jumped in late-day trading. The last time EVDY traded above $10 was in November 2015.
- Source: Press Release
- Altra Industrial Motion (NASDAQ:AIMC) announces that it intends to acquire the Stromag business from GKN plc (OTC:GKNCF). Stromag generated approximately 131M euros in revenue in 2015, and the acquisition is anticipated to be accretive to Altra’s earnings in 2017.
- The acquisition cost comprises the assumption of debt totaling approximately 14M euros and a cash consideration, payable at closing, of approximately 184M euros.
- “The acquisition of Stromag will provide Altra with complementary products, greater presence in key geographic regions, and penetration into new growth end markets,” said Carl Christenson, Altra’s Chairman and CEO. “Stromag possesses a very strong brand reputation and its highly engineered clutches, brakes, torsional couplings and limit switches serve as excellent product extensions for Altra. We see outstanding opportunities for our two sales forces to cross sell products into new markets and we are excited to utilize Stromag’s resources to further expand Altra’s global customer coverage.”
- “The combination also provides compelling opportunities to leverage cost synergies through Altra’s supply chain and Operational Excellence programs.”
- Stromag's core products include an array of clutches and brakes, flexible couplings, limit switches and friction discs. Stromag serves the agricultural equipment, construction, crane & hoist, marine, metal processing, renewable energy and general industrial markets. Founded in 1932, the business is headquartered in Unna, Germany and has operations in Germany, France, the U.S., the UK, Brazil, India and China.
- The closing of the transaction is expected to take place during the first quarter of 2017.
- Altra will discuss the intended acquisition of Stromag during Altra’s Q3 2016 Investor Conference Call scheduled for Friday, October 21, 2016 at 10:00 a.m. ET. 877-407-8293 or 201-689-8349. for international access and asking to participate in the ALTRA conference call.
- Source: Press Release
- Estée Lauder (NYSE:EL) announces it acquired makeup brand BECCA Cosmetics for an undisclosed amount.
- The acquisition is expected to close in November.
- The product line from BECCA Cosmetics includes primers, concealers, foundations, blushes and highlighters.
- “BECCA Cosmetics is a wonderful addition to our portfolio of prestige beauty brands,” says Estee Lauder CEO Fabrizio Freda.
- Source: Press Release
8:24 AM| 8:24 AM
- Reynolds American (NYSE:RAI) confirms it received a non-binding proposal from British American Tobacco (NYSEMKT:BTI) to buy out the ~58% of its common stock not held by the British tobacco giant.
- The company says its board of directors will evaluate the offer from British Tobacco and respond accordingly.
- RAI +19.99% premarket to $56.52 (52-week high).
- Previously: BAT bids $47B to take Reynolds American ownership to 100% (Oct. 21)
- Source: Press Release
- British American Tobacco (NYSEMKT:BTI) has offered to acquire the 58% in Reynolds American (NYSE:RAI) it doesn't own for $47B in cash and shares.
- BAT's proposal is worth $56.50 a share, or 20% above Reynold's closing price of $47.17 yesterday. BAT will pay $20B in cash and the rest in stock.
- The deal would bring together Newport, Kent and Pall Mall cigarettes under one umbrella to create the U.S. market leader. (PR)
Thursday, October 20, 2016
- Morgan Stanley (NYSE:MS) stands to collect $120M if Bayer (OTCPK:BAYRY) closes its $57B takeover deal for Monsanto (NYSE:MON), which would be the second-largest deal fee for a single bank on record.
- The big payout is a bright spot in an otherwise down year for M&A activity, as global deal volume YTD currently stands at ~$2.6T, 24% lower than the same period in 2015.
- The payments were disclosed in a MON proxy filing, which also showed the company held takeover talks with three other groups - identified by Financial Times as BASF (OTCQX:BASFY), Koch Industries and China's Sinochem - before agreeing to the pending deal with Bayer.
- Royal Dutch Shell (RDS.A, RDS.B) agrees to sell ~206K acres of non-core oil and gas properties in western Canada to Tourmaline Oil (OTCPK:TRMLF) in a cash and stock deal valued at ~$1.03B.
- Shell says the deal comprises $758M in cash and Tourmaline shares valued at $279M.
- The acreage includes 61K net acres in the Gundy area of British Columbia, and 145K net acres in the Deep Basin area of Alberta, and the assets are a combination of developed and undeveloped lands producing 24,850 boe/day of dry gas and liquids.
- The Martha's Vineyard lender was founded in 1905 and has about $171M in deposits and roughly $153M in loans. For Independent Bank's (NASDAQ:INDB) Rockland Trust, it's a natural expansion and strengthening of its Cape Cod franchise.
- Edgartown National's parent's owners will receive either 9.525 shares of INDB or $500 in cash for each share of the parent they hold, with the mix to be 80% stock, 20% cash.
- Independent sees the purchase as being $0.03-$0.04 accretive to 2018 EPS, with an IRR of about 20%, and neutral to tangible book value per share.
- Investor advisory company Glass Lewis recommends that Agrium (NYSE:AGU) and Potash Corp. (NYSE:POT) shareholders support a proposed merger, saying it would create a bigger, more diversified company.
- Last week, ISS also recommended support for the merger from investors in each company.
- AGU and POT are each holding their own shareholder meetings on Nov. 3 to vote deal, which requires two-thirds approval by shareholders of each company; POT shareholders would own 52% of the new company.
- Martin Midstream Partners (NASDAQ:MMLP) agrees to sell its 900K-barrel Corpus Christi crude oil storage terminal and related assets to NuStar Logistics (NYSE:NS) for $107M, confirming an earlier report.
- At the same time, MMLP says it is reducing its quarterly dividend to $0.50/unit, a 38.5% reduction from $0.8125/unit in Q2.
- MMLP says the asset sale is a necessary first step to ultimately returning the company to a growth trajectory, and that the two actions "should provide a sound catalyst to reducing our currently elevated cost of capital by de-levering and improving increased distribution coverage to our unitholders."
- In meetings discussing a potential AT&T (NYSE:T) merger with Time Warner (NYSE:TWX), AT&T execs have found a willing seller in Time Warner chief Jeff Bewkes, sources tell Bloomberg, so long as he sees an offer he thinks is fair. And AT&T is on the hunt for content as part of a company transformation that has included its takeover of DirecTV (for an also-whopping $48.5B).
- The two companies met in recent weeks to talk about various strategies in discussions characterized as informal and focused on building relations at the moment, Bloomberg says. Nobody's hired a financial adviser yet.
- Time Warner famously rejected a 2014 bid from Rupert Murdoch and Fox (at $85/share) that valued the company at more than $75B; it's worth about $64.5B in market cap today accounting for today's gain.
- A deal makes sense, says Albert Fried analyst Rich Tullo, with 5G mobile on the way and AT&T set to benefit from a great content catalog at Time Warner.
- The talks are probably more about skinny bundles and "VMVPD distribution," he figures, but 5G mobile and its video-transferring capabilities make a deal more worthwhile. The company's sum-of-the-parts analysis had previously figured Warner Bros. and Turner networks as worth about $30B each.
- TWX has given back some of its initial spike, closing up 4.8%; T closed down 1.9%.
- Qualcomm and NXP Semiconductors (NASDAQ:NXPI) were considered to be off by less than 10% regarding valuation two weeks ago.
- Bloomberg's now reporting a deal may be announced sometime next week.
- Qualcomm (NASDAQ:QCOM) shares higher by 2.25% on the day, 1.85% of which has been realized over the last ten minutes.
- Update: All-cash deal under consideration, disclosure before Qualcomm's November 2 earnings suggested.
- Appirio, founded in 2006, counts 1K+ employees globally and partners ranging from Stryker, Coca-Cola and Home Depot to Facebook, eBay and Sony PlayStation.
- Wipro (WIT -1.6%): "In an increasingly digital world, as consumer behaviors and expectations continue to be reshaped by experiences, companies are recognizing that they need to transform how they engage with customers and employees by leveraging the power of Cloud. Appirio and Wipro are coming together to unlock transformational synergies in the applications space and help enterprises create new business models."
Appirio: "When you combine Wipro’s global scale and deep digital focus with Appirio’s transformative worker and customer experience expertise, and best in class team, brand, and partners, you create a formidable force in the industry. Together, our aim is to dominate the market and claim the top spots in industry Net Promoter Score, market share, and best places to work."
- Existing involvements with Salesforce and Workday will continue under the Appirio brand and structure.
- Appirio PR, blog post
- Wipro + Appirio
- According to Rob Sedran and team at CIBC, TD Bank (NYSE:TD) has the necessary regulatory capital to inject about $1.5B into its minority-owned TD Ameritrade (NASDAQ:AMTD) should it pursue a purchase of rival Scottrade.
- Scottrade has reportedly put itself on the block at somewhere in the $4B range, and a report today says TD and AMTD have teamed up to put in a joint bid.
- TD owns 42% of Ameritrade, and Sedran believes the lender would want to maintain that level in the event of a Scottrade purchase.
- It would be "strategically consistent" for TD to be involved in the buy, says Sedran, noting Scottrade's banking assets could be easily absorbed the direct brokerage is a business the lender knows well and with whom it has a strong partner, and in which material synergies could be expected.
- Vivendi (OTCPK:VIVHY -0.5%) has a new "fair warning" to Mediaset (OTCPK:MDIUY) in its contentious battle to acquire the Italian company's pay TV unit, but that doesn't preclude an alternative deal still being struck, sources told Reuters.
- The TV unit, Mediaset Premium, plays a key role in Vivendi's strategy to use Southern Europe to advance its media ambitions. But Vivendi backed out of a binding deal to take full control in July, and the companies have been at legal loggerheads since (with a court date set for March).
- Vivendi now says it's no longer interested in an amicable solution after Mediaset asked a court to order seizure of a 3.5% stake in Vivendi: "Enough is enough," said a Vivendi-tied source. "We've made a lot of efforts to find a solution. This is a fair warning."
- Still, backchannel negotiations have been reported and are said to still be taking place. Vivendi is said to be working a preferred alternative where Mediaset and Vivendi would each get 40% of the Premium unit and a third party would hold the remaining 20%.
- The deal by Rosneft (OTC:RNFTF) and others to buy India's Essar Oil for $12.9B does not run afoul of U.S. sanctions on Russia, the State Department says.
- Under the deal, Rosneft is teaming with a consortium of Russian investment group United Capital Partners and global oil trader Trafigura to buy Essar.
- The transaction was carefully structured to reduce the risk of sanctions, as Rosneft will control only 49% of Essar with Trafigura and UCP jointly holding another 49%.
- A re-merger of CBS and Viacom (VIA -0.5%, VIAB -0.3%) could be set by Thanksgiving -- or so Viacom shareholders believe, the New York Post reports.
- Some of those shareholders are holding out hope for something extra beyond an at-the-market all-stock deal, the paper says -- perhaps Dalian Wanda Group with a check for Paramount Pictures (even if that's just financing help on its slate).
- “Perhaps there is a contingent consideration — maybe Viacom shareholders are given an opportunity to get a future payout if targets are met,” a source told the Post.
- With interim CEO Tom Dooley leaving next month, a leading candidate to take over Viacom is Bob Bakish, the president of Viacom International, though depending on the source, there are a number of "leading candidates."
- Previously: Bloomberg: CBS nears hiring of Goldman, JPMorgan on possible Viacom deal (Oct. 14 2016)
- Previously: Viacom confirms MS, Allen, LionTree advising on potential CBS deal (Oct. 14 2016)
- July 28: Linear Technology to sell for $60 per share in Analog Devices buyout
- Transaction expected to conclude in H1 2017.
- Linear Technology (NASDAQ:LLTC), reacting more sharply subsequent the arrangement, is up 22% since it was first disclosed, while Analog Devices (NYSE:ADI) is up around 2% on the same term.
- Glencore (OTCPK:GLCNF) has agreed to sell its Australian coal haulage business GRail to Genesee & Wyoming (NYSE:GWR) for A$1.14B ($874M).
- The deal takes Glencore's asset sales to $4.7B in 2016 and puts the mining and trading giant on course to reduce its net debt to $16.5-17.5B by the end of the year.
- For its part, Genesee & Wyoming plans to sell 49% of GRail to funds managed by Macquarie Infrastructure & Real Assets (OTC:MCQEF).
- Still, the purchase will double the size of Genesee & Wyoming's Australian operations and is expected to boost its EBITDA by A$100M in 2017.
Wednesday, October 19, 2016
- Any progress in that direction, however, stalled along the way. Though talks with Salesforce will certainly be speculated, it remains to be known which, if any parties were connected.
- Nonetheless, Tableau Software (NYSE:DATA) and those now revealed to have been in some way of interest to Salesforce, are going to be in focus whenever M&A buzz involving the latter surfaces going forward. Extra attention will also be commanded for each of the names in their own right as well whether Salesforce is considered to be on watch or not.
- Earlier: Tableau Software, Pegasystems, ServiceNow up notably following release of Salesforce M&A target presentation
- DuPont (DD +0.4%) is initiated with a Buy rating and $78 price target at Nomura, which expects strong earnings potential from the proposed combination with Dow Chemical (DOW +0.6%).
- Nomura expects the DuPont-Dow merger to generate above-trend growth in earnings and free cash flow for the next three years, which it considers "exceptional in a macro environment where growth is scarce."
- DuPont management’s integration plan through 2019, which centers on aggressive cost cuts and assets spinoffs and sales, makes the shares especially compelling, the firm says, estimating the moves should result in equity value compounding at 16% annually during 2017-19.
- US Foods (USFD +0.1%) acquires Save On Seafood for an undisclosed amount.
- The Florida-based seafood processor and distributor brings in annual sales of more than $80M.
- The company says the acquisition will help strengthen its ability to provide seafood to its customers in the Southeast.
- Source: Press Release
- Shares of Michael Kors (NYSE:KORS) are up 5.05% and were above $50 briefly after Intereconomia (Spanish language site) reports on a possible takeover offer at $55.50 per share.
- It's not the first time Michael Kors has been the subject of M&A rumors. Several times in the past, mid-day takeover pops have deflated before the final bell.
- See: WSJ gets hands on list of Salesforce M&A targets
- Recent management shifts at Tableau Software (NYSE:DATA), labeled with an "In Play" status in the obtained Salesforce target review, are speculated at Stifel to have signaled an effort by the company to remain independent amid revenue deceleration and lowered valuation, making it a more attractive target to a potential acquirer. Tableau Software shares are up by 6% today. N.B. Demandware, acquired by Salesforce in June, is also labeled "In Play" on the document.
- Pegasystems (NASDAQ:PEGA), though sharply up 5.3% subsequent inclusion in the list, stated it had not participated in any talks with Salesforce relating to an acquisition.
- ServiceNow (NYSE:NOW), up 4.4%, has offered no comment on the development.
- Other public names mentioned – Adobe, Workday NetSuite, Veeva Systems, Box, Zendesk, HubSpot
- Yahoo (NASDAQ:YHOO) is up 2.5% today, just 4.8% below last month's 52-week high, after it posted profits that beat expectations in Q3 and analysts mostly looked past them to a pending buyout by Verizon (NYSE:VZ).
- Considering the lack of comment from Yahoo management, the results are likely to be overshadowed by Verizon's commentary when it delivers earnings tomorrow, analysts agree.
- Nomura raised its price target to $45, from $39, to reflect appreciation of the company's stake in Alibaba. Analyst Anthony Di Clemente believes Verizon would be hard pressed to show material adversity for the deal, based on similar past events, and the Yahoo results aren't likely to add any pressure there.
- An implied discount on Yahoo's Alibaba stake has increased since Verizon commented on Yahoo's breach, says SunTrust Robinson Humphrey's Bob Peck, who has a Hold rating and $42 price target. But the key question tied to the Verizon deal is whether Yahoo could even open up the process again to new bidders, he says.
- Morgan Stanley (Equal-Weight, $42 price target) and Oppenheimer (Outperform, $53) agree that any risk to the deal is overshadowed by the fact that Yahoo's basically a trading vehicle for the Alibaba stake, so BABA bullishness can outweigh any M&A concerns.
- Yahoo yesterday guided to Q4 revenue (ex-TAC) of $880M-$920M, below estimates for $938M, and to adjusted EBITDA of $260M-$300M (above a consensus for $245M).
- Rite Aid (RAD -4.5%) tumbles in early trading after the NY Post reports that Kroger (KR +0.3%) may pass on buying the 650 stores that Walgreens (WBA -1.2%) and RAD would need to sell to gain regulatory approval for their planned merger.
- KR may decide not to buy because the Federal Trade Commission, now a year into its merger review, recently told the company that the stores could not be purchased and closed, with the operations moved inside the grocery stores, according to the report.
- A WBA-RAD merger would create the biggest U.S. drug chain, and the FTC could sue to block the deal without a solution to the stores, but the report quotes a source as saying that both the FTC and WAG remain motivated to find a remedy.
- Private equity firms, IBM, Cisco, Forcepoint and Akamai Technologies had all been claimed to have expressed interest in an Imperva (NYSE:IMPV) takeover.
- New reports out of Bloomberg, however, suggest valuation expectations have been raised, resulting in potential buyers holding off to observe if Imperva's performance going forward can justify a higher price.
- Though not formally on the block, the company has met with a number of Chinese buyers over their interest in a buyout in the $4B area, including debt. GNC's market cap is $1.3B, and debt outstanding foots to roughly $1.6B.
- Source: WSJ
- Among those interested are the acquisitive Fosun Group, ZZ Capital, and a number of pharmaceutical companies.
- China's vitamin and dietary supplement market could grow by more than 50% to $28.7B, according to one study, and that country's consumers are also putting more trust in Western brands after a number of local scandals involving counterfeit drugs.
- Shares +5.9% premarket
- Blackstone (NYSE:BX) is the lead bidder to acquire physician-services company Team Health (NYSE:TMH), Reuters reports.
- The agency couldn't say what Blackstone has offered, although Team Health closed +7.2% at $40.25 yesterday, giving it a market cap of $2.93B.
- Blackstone has already owned Team Health before - from 2005-2009 - and its second pursuit of the company comes amid consolidation in the sector.
- Earlier this year, Team Health was forced to make board changes following pressure from activist investors such as Jana Partners.
- Activist investor Jonathan Litt wants Taubman Centers (NYSE:TCO), one of the largest operators of shopping malls in the U.S., to cut costs and reverse its expansion or look at selling itself, the WSJ reports.
- Litt, whose Land & Buildings Investment Management firm owns around 1% in Taubman, is frustrated at the latter's poor stock price compared with other companies that Litt holds in the sector.
- The share is down 7% this year and closed at $71.17 yesterday, well below the $99.62 a share that analysts estimate is the net asset value of Taubman's properties.
- Litt reckons poor governance is to blame for the gap and is seeking changes on the board among other things.
- Taubman's market cap is $4.3B.
- Taubman wouldn't wrong to be wary - last year Litt managed to shake up the board of Taubman rival Macerich.
Tuesday, October 18, 2016
- Among a cache of Colin Powell emails released by hackers was a presentation prepared in May for the Salesforce.com (NYSE:CRM) board (on which sits Powell) titled "M&A Target Review."
- Partial presentation slides
- The 60-slide document identified 14 possible acquisition targets. Among them were Adobe Systems (NASDAQ:ADBE), whose market cap of $53.7B is above that of Salesforce, and Pegasystems (NASDAQ:PEGA), with a $2.3B valuation.
- The list also included Demandware, which Salesforce ended up buying, and LinkedIn, which the company lost in a bidding war with Microsoft.
- Others: Workday (NYSE:WDAY), ServiceNow (NYSE:NOW), NetSuite (NYSE:N), Tableau (NYSE:DATA), Veeva Systems (NYSE:VEEV), BOX, Zendesk (NYSE:ZEN), HubSpot (NYSE:HUBS).
- CEO Marc Benioff earlier this month when fending off complaints about his interest in Twitter: “We look at a lot of things and we pass on almost everything."
- Liberty Global (NASDAQ:LBTYA) is shoring up its lead in Poland, sealing a $760M cash deal to take over the cable business of Multimedia Polska.
- Multimedia Polska is the No. 3 cable provider in the country, and adding it brings the reach of Liberty's UPC Poland to more than 4M homes and businesses.
- UPC Poland had passed 3.1M homes (about 20% of households) at the end of June, while Multimedia had passed 1.6M homes. Poland made up 2.2% of Liberty Global's 2015 sales.
- The deal's expected to close in the next 12 months.
- SM Energy (SM +1.5%) surged to a 52-week high at the open before pulling back following news of its purchase of 35.7K acres in the Midland Basin in west Texas for $1.1B in cash and 13.4M shares valued at ~$500M.
- SM expects to use the proceeds from a $785M sale of property and other assets in the Williston Basin to Oasis Petroleum, also announced today, to pay for the bulk of its cash outlay for the deal.
- “Our Permian growth rate will be huge, higher than our more highly valued competitors,” SM CEO and President Jay Ottoson says without naming the competitors, but the company’s slide presentation lists Diamondback Energy (FANG -0.5%), Callon Petroleum (CPE -0.1%), Parsley Energy (PE -0.5%) and RSP Permian (RSPP -1.1%) as its top peers in the area.
- CapitalOne upgrades SM to Overweight from Equal Weight with a $50 price target, lifted from $46, as it estimates SM paid ~$42K/acre for the acreage when backing out 2.4M boe/day production from the total $1.6B purchase price.
- Williams Capital considers SM its top pick in the sector, saying the deal gives it "the scale to command an improved valuation and trade more like a Permian Basin company, especially when considering its execution of selling non-core assets."
- A heavy debt load tied to now-bankrupt Oi (NYSE:OIBR) means that Telecom Italia (TI +2.9%) isn't interested in a purchase, says CEO Flavio Cattaneo.
- Speaking to newspaper Valor Economico, Cattaneo pointed to 20B reais (about $6.2B) in fines owed by Oi, almost the same as the market value of TI's Brazilian unit TIM Participações (TSU +1.9%). "If Oi manages to split its debt from its assets ... we will be watching," Cattaneo says.
- Cattaneo took over as TI's CEO amid well-documented disputes between former chief Marco Patuano and investing shareholder Vivendi (OTCPK:VIVHY +1.4%) over the disposition of TIM. Patuano was inclined to hold on to the Brazilian unit while Vivendi actively pushed to sell the division.
- Previously: Patuano exit from Telecom Italia likely to speed pending deals (Mar. 29 2016)
- Oasis Petroleum (OAS -3.1%) is sharply lower after its $785M purchase of Williston Basin assets from SM Energy and subsequent 40M-share offering, but some analysts suggest buying the dip.
- Cowen says OAS addressed inventory concerns with the acquisition, adding 12.4K boe/day of production, 92 core net locations and 31.6M boe of proved developed producing reserves; pricing does not appear cheap, but will prove warranted if acquired locations produce close to the updated productivity numbers of Wild Basin.
- SunTrust says the deal appears positive, with its estimate of ~$3K/acre purchase price in-line with prior core asset sales in the play, but shares are underperforming today given ~25% dilution from the equity deal.
- KeyBanc is less optimistic, saying the deal lacks meaningful accretion and valuation implying ~$5.2K/acre adjusted for production, and ~$4M per core location, “appears a bit rich.”
- Before the deal was announced, Goldman Sachs had downgraded OAS to Sell from Neutral with an $8.50 price target, trimmed from $8.75.
- Needham has cut Yahoo (NASDAQ:YHOO) to Hold with talk in the air of Verizon (VZ -0.4%) potentially walking away from its deal to buy the Internet business, or getting a lower deal price.
- But valuation also plays a part as the firm reduces its rating to Hold from Buy, as does Yahoo's cancellation of its Q3 earnings call, which "also troubles us." Yahoo's up 1.5% today to $42.40, above Needham's $40 price target.
- Last week, Verizon's general counsel was quoted as saying there was a "reasonable basis" to think that the massive 500M-account data breach at Yahoo would prove material to Verizon's $4.83B deal to acquire it.
- Yesterday, Credit Suisse set a price target of $52 on Yahoo shares (implying 23% upside), and MKM Partners boosted its price target to $51 from $44.
- Yahoo reports after the bell today, but won't hold a conference call because, it says, of the pending acquisition.
- MakeMyTrip Limited (MMYT +1%) and Ibibo Group agree to consolidate their online travel businesses.
- The companies say the combination will bring together a bouquet of leading consumer travel brands -- including MakeMyTrip, goibibo, redBus, Ryde and Rightstay -- under one corporate umbrella.
- They note that the transaction is expected to unlock value for customers, supply partners and shareholders, by combining the complementary strengths of each business.
- Source: Press Release
- Sold to Fairfax Financial (OTCPK:FRFHF) are AIG's consumer insurance operations in Argentina, Chile, Colombia, Uruguay, Venezuela, and Turkey. Fairfax will also acquire renewal rights for the portfolio of local business written by AIG's operations in Bulgaria, Czech Republic, Hungary, Poland, Romania, and Slovakia.
- The deals are all-cash and total $240M.
- Alongside, Fairfax will become AIG's main strategic multinational network partner. For AIG, this continues management's goal of focusing on core operations in major economies with the best potential for profitable growth.
- Prem Watsa: "We are very excited to partner with AIG and to have the LATAM group of companies and operations in CEE and Turkey join the Fairfax family."
- Abbott (NYSE:ABT) and St. Jude Medical (NYSE:STJ) have agreed in principle to sell certain products to Terumo (OTCPK:TRUMF)(OTCPK:TRUMY) for $1.12B in cash. The transaction, contingent on the successful completion of Abbott's $25B acquisition of St. Jude, includes St. Jude's Angio-Seal and Femoseal vascular closure products and Abbott's Vado Steerable Sheath.
- Abbott will retain its vascular closure products, including the Perclose ProGlide Suture-Mediated Closure System, StarClose SE Vascular Closure System and Prostar XL Percutaneous Vascular Surgical System.
- Abbott adds that its expects to mitigate any impact on non-GAAP earnings related to the sale of the assets.
- SM Energy (NYSE:SM) agrees to acquire 35.7K net acres in West Texas' Midland Basin for ~$1.6B in cash and stock, and sell its Williston Basin assets in North Dakota for $785M to Oasis Petroleum (NYSE:OAS).
- SM says its purchase from QStar, a portfolio company of EnCap Investments and a related entity for $1.1B in cash and 13.4M common shares, will expand its footprint in the Permian Basin to 82,450 net acres.
- SM says preliminary plans for Midland Basin activity include adding a fourth rig during Q4 and increasing to six rigs in early 2017, which will raise expected aggregate 2016 capital spending before acquisitions to ~$710M.
- OAS says its purchase includes 55K net acres and 226 gross operated drilling locations in the Williston Basin, and expects the properties to produce 12.4K boe/day during Q4.
- To help fund the deal, OAS launches a 40M-share public offering, with an underwriters option to purchase up to 6M additional common shares.
- SM +6.3%, OAS -2.1% premarket.
- Disney (NYSE:DIS) decided against buying Twitter (NYSE:TWTR) partly due to concerns that the hate speech that's rampant on the social network would undermine Disney's family friendly image, Bloomberg reports.
- Another reason is that although Twitter has a market cap of almost $12B, it continues to lose money, which brought out some of Disney's largest investors in opposition to a deal.
- Other potential suitors to end their interest in Twitter were Salesforce and Google.
- Canadian online gambling company Amaya (NASDAQ:AYA) and the U.K.'s William Hill (OTC:WIMHF) have called off merger talks, saying they would be better off separate.
- The news comes after opposition from a leading shareholder in the British bookmaker to a deal with Amaya, which has a market cap of $2.24B.
- The failure of the negotiations follows William Hill's rejection of takeover approaches from online rival 888 as well as from casinos and bingo halls operator Rank Group.
- William Hill says trading has continued to be positive in H2 and it forecast that 2016 operating profit will be at the top end of a previously guided range of £260-280M ($323 million).
- William Hill's shares are +3.1% in London.
- Shell's (NYSE:RDS.A) sale of a 33% stake in Japanese refining partner Showa Shell to domestic rival Idemitsu Kosan (OTC:IDKOF) in a $1.6B deal could be held up because of a wider plan for a total merger of the Japanese companies, analysts warn.
- Any delay in the smaller deal would do no good for Shell's plans to sell $30B of assets by 2018 as it looks to slash its $75B of debt, a large chunk of which it the company took on after it bought British peer BG Group for $50B in January.
- By June, Shell had sold just $1.5B in assets.
- Dick's Sporting Goods (NYSE:DKS) is set to make an offer for the U.S. operations of bankrupt Golfsmith, Reuters reports, although it didn't say how much Dick's would bid.
- The latter faces competition for Golfsmith from Worldwide Golf Shops, although Golfsmith's lenders could enable it to restructure its debt and emerge from bankruptcy without a merger.
- Golfsmith has suffered from competition from discount retailers Wal Mart and Amazon, as well as from fading interest in golf among younger consumers.
- Leading Australian betting firms Tatts (OTCPK:TTSLF) and Tabcorp (Tabcorp) are in negotiations to create a A$9.34B ($7.1B) combined operator as they look to fend off online rivals that have eaten into their market share.
- Any deal is set to receive scrutiny from Australia's competition regulator, due to "a range of potential issues and areas of overlap."
- The talks come after the companies failed to merge in 2015.
- Tatts and Tabcorp requested that trading in their shares be suspended until tomorrow morning.
Monday, October 17, 2016
- Analysts are out defending RSP Permian's (RSPP -0.2%) $2.4B Silver Hill acquisition and its upsized 22M-share offering to help fund the deal, as several raise their stock price targets.
- Canaccord Genuity maintains its Buy rating for RSPP and raises its price target to $50 from $42, saying the deal bolsters the company's bull case going forward, despite paying what was on an acreage basis the highest price thus far in the Delaware Basin (~$45K/net acre); the firm says RSPP now enters one of the best parts of the basin accretively while maintaining a relatively clean balance sheet and improving its debt-adjusted cash flow growth trajectory.
- BMO maintains its Outperform rating and raises its target to $54, Raymond James reiterates its Strong Buy rating and hikes its price target to $53 from $50, and Wunderlich maintaines its Buy rating and ups its price target to $51 from $44.
- Tesla (NASDAQ:TSLA) has “potential short-term upside” given upcoming product announcements that may “set up a ‘yes’ vote for the SolarCity (NASDAQ:SCTY) merger, Barclays analyst Brian Johnson writes in note.
- Upside may be followed by “downward drift as investors contemplate cash needs” of the combined company.
- Barclays still expects a fund raise this year despite Elon Musk's insistence to the contrary.
- Here's a table of TSLA's upcoming events
- TSLA -1.9% today as is SCTY.
- Mentor Graphics (MENT +2.9%) further reportedly hired an advisor on strategic alternatives last week.
- Reuters provides new details beyond just the Bank of America hire, though, claiming Siemens (OTCPK:SIEGY) and Dassault Systèmes (OTCPK:DASTY), along with private equity firms may be contacted during the exploration process.
- Elliot Management increased its stake in Mentor Graphics to 8.1% late in September noting strategic opportunities existed to increase shareholder value and has reportedly pressured for a move in that direction since.
- Thinly traded micro cap Almost Family (AFAM +8.3%) heads north on modestly higher volume in response to its announcement that it has inked a deal with Community Health Systems (CYH -0.3%) for a controlling interest in CHS Home Health, comprised of 74 home health and 15 hospice branch locations in 22 states. CYH's home health and hospice businesses generate $170M and $30M, respectively, in annual revenues. The transaction increases the number of AFAM branches to 340 with an annualized revenue run rate of more than $800M. It will be accretive to EPS in 2017.
- Under the terms of the agreement, AFAM will acquire an 80% interest in CHS Home Health for $128M, subject to a working capital adjustment. The transaction should be completed this quarter.
- Constellation Brands (STZ +0.4%) announces it acquired wine labels from Charles Smith Wines for $120M.
- Th deals sees the company pick up the Kung Fu Girl Riesling, Velvet Devil Merlot, Boom Boom! Syrah, Eve Chardonnay and Chateau Smith Cabernet Sauvignon wines.
- The transaction is expected to close this month.
- Constellation Brands press release
- Previously: Constellation Brands nears sale of Canadian wine unit (Oct. 16)
- Previously: Constellation Brands confirms sale of Canadian operation (Oct. 17)
- Among the changes are the addition of two independent directors to the combined company's board, and that all board members will stand for election annually.
- NorthStar Asset Management (NYSE:NSAM) owners will now get a special, pre-closing cash dividend of $228M ($1.16 per share) vs. the previous $128M.
- Top executives have agreed to a more shareholder-friendly severance deal.
- Along with NSAM, NorthStar Realty (NYSE:NRF) and Colony (NYSE:CLNY) plan to hold special meetings before year-end in the hopes of closing the merger in January. At closing, a quarterly dividend at an annualized rate of $1.08 per share will commence.
- MSD Capital and MSA Partners - together owning 10.2% of NSAM's stock - have agreed to vote in favor of the deal. Jonathan Litt hasn't yet been heard from.
- Alon USA Energy (NYSE:ALJ) +12.4% premarket after confirming it received a buyout offer from Delek US Holdings (NYSE:DK) to acquire all ALJ's outstanding common shares at a fixed exchange ratio of 0.44 shares of DK stock for each outstanding share of ALJ.
- ALJ's Special Committee, which says it has reviewed a number of strategic alternatives, intends to consider DK's proposal and determine how to respond.
- Vail Resorts (NYSE:MTN) announces it completed its deal to acquire Whistler Blackcomb Holdings Inc. (OTC:WSBHF).
- In connection with the deal completion, Vail Resorts adds former Whistler board member Michele Romanow to its board of directors.
- With the completion of the acquisition, Whistler Blackcomb will be delisted from the Toronto Stock Exchange at the close of trading today.
- Source: Press Release
- Oceaneering (NYSE:OII) says it has acquired the assets of Blue Ocean Technologies, a privately held provider of riserless light well intervention services, for ~$30M.
- OII says the acquisition includes three RLWI systems, two of which are currently under construction, and are expected to be fully functional by mid-2017; OII says it plans to invest $10M to complete construction of the RLWI systems.
- OII says Blue Ocean's leading RLWI technology holds the current depth record for deepwater riserless intervention at 8,200 ft.
- The Ontario Teachers' Pension Plan acquires the Canadian operation of Constellation Brands (NYSE:STZ) for approximately C$1.03B ($785M).
- The transaction is expected to close before the end of the calendar year.
- "Constellation Brands Canada is an ideal addition to our Consumer Portfolio," said Jane Rowe, Senior Vice-President, Private Capital.
- The Wall Street Journal tipped off that a deal was near last night.
- Previously: Constellation Brands nears sale of Canadian wine unit (Oct. 16)
- Source: Press Release
- Dril-Quip (NYSE:DRQ) agrees to acquire TIW Corp., a provider of liner hanger systems and related equipment and services for the global oil and gas market, for ~$143M.
- TIW reached peak revenues of $140M in 2014 and is expected to trough at $60M-$70M in 2016 and increase to $80M-$100M by 2018.
- DRQ says the acquisition is the first in the company's history.
- RLJ Entertainment (NASDAQ:RLJE) and AMC Networks (NASDAQ:AMCX) announce a strategic partnership to help develop and build out streaming services.
- As part of the agreement, AMC Networks has invested $65M in the form of loans to RLJ Entertainment to bolster the company's financial profile. In addition, AMC Networks has received warrants which wil provide AMC Networks with at least 50.1% of the outstanding RLJ Entertainment common stock if exercised in full.
- RLJE +10.0% premarket to $2.20.
- Source: Press Release
- Monster Worldwide (NYSE:MWW) sets October 25 as the record date for a proposed consent solicitation from MediaNews Group (OTC:MNWG).
- MediaNews opposes Monster's agreement with Randstad North America (OTCPK:RANJF) struck in August to be acquired for $3.40 per share in cash.
- Monster recommends shareholders disregard MNG's consent solicitation and instead tender their shares into Randstad's all-cash offer.
- Source: Press Release
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