Parkway Properties Sold for $1.2 Billion

Canada Pension Plan Investment Board to acquire Parkway for $1.2B

Canada Pension Plan Investment Board to acquire Parkway for $1.2B, See Stockwinners Market Radar. Stockwinners offers winning stock research since 1998

Canada Pension Plan Investment Board and Parkway (PKY) announced that they have entered into a definitive agreement under which CPPIB will acquire 100% of Parkway, a Houston-based real estate investment trust, for$1.2B, or $23.05 per share.

The transaction is not subject to a financing condition and is expected to close in the fourth quarter of 2017, subject to customary closing conditions, including approval by Parkway’s stockholders.

The $23.05 per share consideration, which consists of $19.05 per share plus a $4.00 special dividend to be paid prior to closing, represents a premium of approximately 14.3% when compared to Parkway’s 30-day volume weighted average price ended June 29, 2017 and a premium of approximately 13.1% when compared to the prior closing price.

Parkway, Inc. operates as a real estate investment trust in the United States. It engages in the ownership, acquisition, development, and leasing of office assets in Houston, Texas submarkets. The company qualifies as a real estate investment trust for federal income tax purposes. It generally would not be subject to federal corporate income taxes if it distributes at least 90% of its taxable income to its stockholders. #REIT

Canada Pension Plan Investment Board is a professional investment management organization that invests the funds of the Canada Pension Plan on behalf of its 20 million Canadian contributors and beneficiaries.  The #CPPIB emerged out of the realization in the 1990s that the CPP fund was unsustainable primarily because changing demographics were leading to fewer workers supporting a growing number of retirees. Federal and provincial finance ministers created the CPP Investment Board.

Parkway’s board of directors unanimously approved the agreement. TPG Capital and its affiliates, which collectively own approximately 9.8% of the outstanding common stock of Parkway, have agreed to vote in favor of the transaction.

Parkway will pay its previously announced second quarter dividend on June 30, 2017, but will suspend all future quarterly dividend payments through the expected close of the transaction.

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West Marine Sold for $338 Million

West Marine to be acquired by Monomoy Capital for $12.97 per share

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West Marine (WMAR) and Monomoy Capital Partners announced that they have executed a definitive merger agreement under which a wholly owned affiliate of Monomoy will acquire all of the outstanding shares of common stock of West Marine at $12.97 per share in cash, which represents a total equity value of $338M.

This price represents a premium of 32% over the 30-day average performance of West Marine’s stock price reported on NASDAQ.

Company founder and board member, Randy Repass, has entered into a voting agreement whereby he and his affiliated entities over which he has sole or shared voting have agreed to vote shares representing approximately 20% of the company’s voting power in favor of the transaction.

Following the close of the transaction, West Marine will be privately held and continue to be operated independently by the company’s management team.

The transaction, which has been unanimously approved by West Marine’s Board of Directors, is expected to close in the third quarter of this year, subject to West Marine’s stockholder approval and other customary closing conditions.

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Bank of America Ups Airlines

BofA/Merrill raises Airline estimates, Delta and Southwest best positioned

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BofA/Merrill analyst Andrew Didora raised Airline estimates and price target to reflect lower fuel pricing and remains positive on the industry said to remain selective into second-half 2017.

The analyst believes Buy rated Delta Air Lines (DAL) and Southwest (LUV) are best positioned for sequential unit revenue improvement in the second half due to decelerating and easing comps and raised their price targets to $71 and $75 from $64 and $62, respectively.

The analyst expects capacity to increase modestly in 2018 to +3.4% from +2.8% in 2017 and expects Delta to accelerate capacity growth to +1.9% and Southwest to +5%.

As part of the sector note, Didora raised Buy rated United Continental’s (UAL) price target to $105 from $85, Alaska Air’s (ALK) to $120 from $115, Spirit Airlines’ (SAVE) down to $68 from $75, and raised Underperform rated American Airlines’ (AAL) to $42 from $40 and lowered Hawaiian Holdings’ (AAL) to $43 from $47.

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ScanSource to Buy POS Portal for $145 Million

ScanSource announces agreement to acquire POS Portal for $144.9M

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ScanSource (SCSC) announced a definitive agreement to acquire POS Portal, a distributor of payment devices and services primarily to the SMB market segment.

“ScanSource and POS Portal will create the industry’s largest payments channel, ensuring customers have access to the solutions, services and support that can help them be successful,” the company said.

The two companies sell through complementary solution delivery channels with little customer overlap. ScanSource primarily serves the enterprise and mid-market merchant segments, with thousands of POS value-added resellers and system integrators as customers.

POS Portal reaches the SMB merchant segment via strong relationships with the leading payment processors, independent sales organizations and many of the leading tablet-based POS software developers.

For the first full year after closing, POS Portal net sales are estimated to total approximately $110M with an estimated EBITDA margin in the low teens.

Under the agreement, the all-cash transaction includes an initial purchase price of approximately $144.9M, plus an earn-out payment up to $13.2M to be made on November 30.

The earn-out payment is based on earnings before interest expense, taxes, depreciation and amortization for the trailing twelve months ending September 30.

The acquisition is expected to be accretive to earnings per share in the first year after acquisition, excluding one-time acquisition costs.

POS Portal CEO Buzz Stryker and Scott Agatep, Chief Operating Officer, along with the POS Portal team, will join ScanSource and provide the leadership and direction in further developing the ScanSource payments business.

Upon completion of the transaction, POS Portal will become part of the Worldwide Barcode, Networking and Security segment of ScanSource.

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Walgreen Dumps Rite Aid, Buys 2186 Stores Instead

Rite Aid, Walgreens terminate prior deal, Rite Aid agrees to sell stores instead

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Rite Aid (RAD) announced that it has entered into an asset purchase agreement with Walgreens Boots Alliance (WBA), whereby WBA will acquire 2,186 stores, related distribution assets and inventory from Rite Aid for an all-cash purchase price of $5.175B, on a cash-free, debt-free basis.

Under the terms of the agreement, Rite Aid has the option to purchase generic drugs that are sourced through an affiliate of WBA at cost, substantially equivalent to Walgreens for a period of 10 years.

The 2,186 stores included in the agreement are primarily located in the Northeast, Mid-Atlantic and Southeastern regions of the United States. The three distribution centers included in the agreement are located in Dayville, Conn., Philadelphia and Spartanburg, S.C.

Under the terms of the agreement, Rite Aid will provide certain transition services to WBA for up to three years after the closing of the transaction.

The transaction, which is expected to close within six months, has been approved by the Boards of Directors of Rite Aid and WBA and is subject to antitrust clearance under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, and other customary closing conditions.

Approval of this transaction does not require a shareholder vote. Rite Aid expects to use a substantial majority of the net proceeds from the transaction to repay existing indebtedness, significantly reducing Rite Aid’s leverage levels.

Rite Aid also expects that the federal tax gain on the sale of the assets will be largely offset by its net operating loss carryforwards, resulting in a minimal cash tax payment on this transaction.

Following the completion of the transaction, Rite Aid will continue to operate EnvisionRx, its pharmacy benefit manager, RediClinic and Health Dialog and leverage the capabilities of these subsidiaries to deliver a higher level of care in the communities it serves.

The company also announced the immediate termination of the merger agreement, which was announced on October 27, 2015 and amended on January 29, 2017, under which WBA would have acquired all outstanding shares of Rite Aid. The decision to terminate the merger agreement follows feedback received from the Federal Trade Commission that led the company to believe that the parties would not have obtained FTC clearance to consummate the merger.

In connection with the termination, WBA has agreed to pay Rite Aid a termination fee in the amount of $325M in cash.

In light of the termination of the merger agreement, the divestiture agreement with Fred’s (FRED) was also terminated, effective today.

Price Action:

RAD closed at $3.93. Shares last traded at $3.05 in pre-market. FRED closed at $12.32, last traded at $9.85. WBA closed at $77.09, last traded at $81.00.

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Staples Sold for $10.25 a Share

Staples to be acquired by Sycamore Partners for roughly $6.9B

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Staples and Sycamore Partners announced that they have entered into a merger agreement in which investment funds managed by Sycamore Partners will acquire the company in a transaction that values Staples at an equity value of approximately $6.9B.

Under the terms of the merger agreement, all Staples’ stockholders will receive $10.25 per share in cash for each share of common stock they own, which represents a premium of approximately 20% to the 10-day volume weighted average stock price for Staples shares for the period ended April 3, 2017, the last trading day prior to widespread media speculation about a potential transaction.

Staples’ Board of Directors has unanimously approved the merger agreement and recommends that all Staples stockholders vote in favor of the transaction.

The transaction is subject to customary closing conditions, including the receipt of regulatory and stockholder approval, and is expected to close no later than December, 2017. The closing is not subject to a financing condition.

See our earlier post regarding Staples.

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Cara Therapeutics’ Rise Could Continue

Watch Cara Therapeutics into osteoarthritis pain results

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Cara Therapeutics (CARA) has soared this month amid the wider biotech rally, but research firm Janney argues the stock could continue higher on a pending release of data from a study of its potential treatment for osteoarthritis pain.

BACKGROUND

Cara Therapeutics is a clinical-stage researcher focused on treating pain and pruritus, or itching, by targeting the body’s so-called “kappa” #opioid receptors.

The company’s pipeline includes #CR845 and #CR701, the former of which is in advanced studies for both oral and intravenous forms.

In its most recent earnings report on May 4, Cara said it expects top-line data from the Phase 2b trial of oral CR845 for osteoarthritis-related pain in Q2, and the company confirmed on its conference call that the trial is “now fully enrolled at 480 patients and on track for a data readout later in Q2.” Cara’s second quarter ends June 30.

JANNEY SEES BIG POTENTIAL MOVE

Janney’s Ken #Trbovich said Wednesday he expects “significant volatility” in Cara Therapeutics as investors await the Phase 2 osteoarthritis data.

Highlighting the stock’s all-time highs on the back of the biotech rally and Friday’s announcement of “breakthrough therapy” designation, the analyst nevertheless says positive osteoarthritis data can “easily justify” a move into the $31-$36 range, though he warns that negative results could take the stock to $10-$15.

The long-term potential of oral #CR845 in chronic pain is “tantalizing” for a company whose market cap remains below $1B — with Trbovich offering Nektar’s (NKTR) 42% surge on the back of Phase 3 opioid data as an example — but the analyst cautions that the pending results are only mid-stage and that “a portion” of the potential upside has already been priced in.

Modeling the company on a discounted cash flow basis while factoring any potential dilution necessary to fund and launch oral CR845, Trbovich ends up at $31-$34 per share assuming peak sales of just over $1B.

On the other hand, he expects a retrace to $15 if data is negative, or even as low as $10-$12 if results are particularly bad and investors apply the news to Cara’s pain program for intravenous CR845.

POSITIVE HINT FROM UNRELATED TRIAL

H.C. #Wainwright analyst Corey Davis wrote June 22 that the osteoarthritis data is “expected any day.” #Davis added that Cara’s announcement that week of continuing its Phase 3 trial of I.V.

#CR845 in postoperative pain after an interim analysis — while largely unconnected from the osteoarthritis trial — is “still a slight positive indicator” given the lack of futility or safety signals.

PRICE ACTION:

CARA last traded at $27.72.

See our recent post on CARA.

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Nutanix Higher on Google Deal

Nutanix jumps after announcement of Google cloud partnership

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Shares of Nutanix (NTNX) are rising in pre-market trading after the company and Google parent Alphabet (GOOG) announced a partnership via which Nutanix customers will be able to easily move application workloads to Google’s cloud, according to CNBC.

Nan Boden, Google’s head of global alliances, told CNBC that in terms of the public cloud, “you have to meet them where they are — that’s becoming increasingly clear.”

Nutanix intends to support application deployment on Amazon’s (AMZN) AWS and Microsoft’s (MSFT) Azure, although at this point it’s working most closely with at Google, CNBC added.

The first integration resulting from the partnership, which will enable applications to move from on-premise data centers to Google’s, will become available in the first quarter of 2018. Pricing details aren’t available, CNBC noted.

The deal is another indication that Nutanix, which held its IPO last year, is now embracing the public cloud as a viable infrastructure choice. Simultaneously it reflects how Google is becoming more receptive to the needs of enterprises.

NTNX closed at $18.64. The issue has a 52-weeks trading range of $14.38 – $46.78.

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Spectranetics Sold for $2.1 Billion

Philips to acquire Spectranetics for $38.50 per share in cash

Stocks to Buy Now

Royal Philips (PHG) and Spectranetics (SPNC) announced that they have entered into a definitive merger agreement. Pursuant to the agreement, Philips will commence a tender offer to acquire all of the issued and outstanding shares of Spectranetics for $38.50 per share, to be paid in cash upon completion. This represents a 27% premium to Spectranetics closing price on June 27.

The implied enterprise value is approximately EUR 1.9B, inclusive of Spectranetics’ cash and debt.

The board of directors of Spectranetics has approved the transaction and recommends the offer to its shareholders.

The transaction is expected to close in Q3. Spectranetics is currently growing double digits and projects 2017 sales to be in the range of $293M-$306M. Upon completion of the transaction, Spectranetics and its more than 900 employees will become part of the Image-Guided Therapy Business Group within Philips.

Spectranetics’ standalone revenue growth is expected to be double-digit and adjusted EBITA to be positive by 2018. Philips sees sustained high sales growth through new product introductions across a highly synergistic therapy device portfolio.

Moreover, the transaction will enhance the geographical expansion of Spectranetics’ products and commercialization opportunities in new, adjacent segments.

As part of Philips, the Spectranetics business will benefit immediately from Philips’ platform enabling cost and working capital synergies. As a result, the combined Spectranetics and Philips Image Guided Therapy Devices business, within the Image-Guided Therapy Business Group, is expected to grow to approximately EUR 1B by 2020.

For the overall Image-Guided Therapy Business Group, Philips targets a high single-digit comparable sales growth and high-teens adjusted EBITA margin for the medium-term. In 2016, this business group reported sales of approximately EUR 1.9B of which approximately 20% was attributable to device sales.

The transaction is expected to be accretive to Philips’ revenue growth, adjusted EBITA margins and adjusted EPS by 2018.

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First Potomac Sold for $1.4 Billion

First Potomac shareholders will receive $11.15 in cash per share

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First Potomac Realty Trust (FPO) announced that it has entered into a definitive merger agreement with Government Properties Income Trust (GOV) under which GOV will acquire all of the outstanding shares of First Potomac.

The transaction, which is valued at $1.4B, including the assumption of debt, is expected to close prior to year end 2017.

Under the terms of the agreement, First Potomac shareholders will receive $11.15 in cash per share at the close of the transaction. This represents a premium of approximately 9.3% to First Potomac’s 30-trading day Volume Weighted Average Price ended April 24, the last trading day before media speculation regarding a potential sale of First Potomac.

The transaction is subject to customary closing conditions, including approval by First Potomac shareholders at a special meeting. The Board of Trustees of First Potomac has unanimously approved the merger agreement and has recommended approval of the merger by First Potomac’s shareholders.

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Apple Annual Net Revenue to Reach $292 Billion by 2022, says Munster

Munster lays out five-year Apple model, sees ‘Apple Glasses’ wearable in 2020

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Gene #Munster, a longtime analyst at #Piper Jaffray who recently departed to found #Loup Ventures, this week published the venture capital firm’s five year model for Apple.

Munster wrote: “We are publishing our Apple model with forecasts out to 2022 including Apple Glasses, an AR wearable, starting in 2020.

By year end of 2022, we see net revenue of $292B and EPS of $13.20, up from $221B and $8.74 in FY17…

Gross margin stays close to constant as Apple Services’ higher margin offsets declining iPhone hardware gross margin.

The auto opportunity is not in our model.” Among the key takeaways from his report, Munster said he expects iPhone growth to peak in FY19 before “slowly” declining as Apple Glasses emerge, with the iconic mobile phone eventually comprising a “much smaller part” of the company’s business.

How Will Apple Go to Market in Auto?

There are three ways Munster sees Apple potentially bringing its car technology to market. The first option would be to partner with a manufacturer to bring an Apple-branded car to market. The second option would be to focus on developing software and implementing it across as many car platforms as possible. Lastly, but unlikely, the could enter as a fleet service.

Services: Steady, Growing, Profitable.

Munster expects steady growth from Services over the next 5 years. In Mar-17, Services accounted for 13% of revenue and grew at 18% y/y. He believes that in 2022 Services will account for 21% of revenue and grow at 14% y/y. His confidence is supported by the predictability of Services over the past two years, along with the belief that AR apps will be a catalyst for consumer spending on apps over the next 5 years. This segment should remain about 2x more profitable than Apple’s hardware business with a ~60% gross margin, with gains in margin from Services offsetting the loss of margin in hardware.


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Sprint Rises on Charter, Comcast Talk

The two-month exclusivity agreement puts any merger talks between Sprint and T-Mobile “on hold”

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Shares of Sprint (S) jumped Tuesday after the Wall Street Journal said the company is in exclusive talks with Charter (CHTR) and Comcast (CMCSA) on several possible transactions, putting its oft-rumored merger talks with T-Mobile (TMUS) on hold.

WSJ REVEALS CABLE TALKS

The Wall Street Journal reported late Monday that Sprint has entered exclusive talks with Charter and Comcast as the cable giants explore a deal to potentially boost their wireless offerings, according to its sources.

The two-month exclusivity agreement puts any merger talks between Sprint and T-Mobile “on hold,” the sources told the Journal.

Under one of the contemplated plans, the cable operators would invest in Sprint’s network in exchange for favorable terms for offering wireless service on its network, the sources said, adding that such a deal could involve an equity stake in Sprint.

The negotiations also include the possibility of the companies jointly acquiring Sprint, according to the Journal’s sources, though that idea was “thought to be the much less likely scenario.”

Any wireless resale deal wouldn’t preclude a merger between Sprint and T-Mobile, some of the publication’s sources said. The report also noted that John Malone, whose Liberty Broadband is the largest investor in Charter, has been trying to persuade Comcast CEO Brian Roberts over the past year that the companies should jointly acquire a carrier such as Sprint, though Roberts — more interested in a resale deal — has been reluctant as of yet, according to sources.

CNBC DOWNPLAYS STAKE POSSIBILITY

Following the Wall Street Journal report, CNBC’s David Faber added that his sources indicated the talks are focused on a resale, or MVNO, deal and that an equity investment from either company is unlikely.

PREVIOUS M&A REMARKS

Speculation of a merger between Sprint and T-Mobile have swirled over the past several months, with company executives going as far as openly cheering the concept at recent investor events.

On June 8, T-Mobile CFO Braxton Carter spoke about the “significant” synergy potential of a Sprint deal, which built on similar comments on May 18.

Meanwhile, Germany’s Handelsblatt reported as recently as June 20 that T-Mobile owner Deutsche Telekom (DTEGY) was preparing to merge the company with Sprint.

JEFFERIES SEES T-MOBILE HURDLES

Jefferies analyst Mike McCormack writes that the Journal’s report is “not surprising” given the interest from cable companies in securing better resale terms, though an equity stake or outright acquisition of Sprint is “less likely” but not impossible in his view. Notably, the news “likely suggests major hurdles” in any talks between Sprint and T-Mobile, potentially reigniting speculation around a Dish (DISH)-T-Mobile tie-up should those negotiations collapse.

NOMURA SEES NEGATIVE FOR T-MOBILE

Nomura Instinet analyst Anthony DiClemente views a potential deal as positive for Charter and Comcast, and a negative for T-Mobile given investor anticipation of a synergy-rich merger with Sprint.

Joint ownership of a wireless carrier “has appeal” for the cable operators, but DiClemente believes Comcast currently prefers the resale approach for the inexpensive experimentation it allows.

Turning to T-Mobile, the analyst argues that a merger of the two carriers would offer more synergies than the cable companies, though he considers regulatory barriers “high” and says the probability of a deal “has likely declined.”

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Bank of America Ups Homebuilders

Homebuilders advance after Bank of America raises estimates, targets

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Bank of America Merrill Lynch increased its estimates for single-family housing starts and new home sales in 2018 and 2019.

As a result, the firm raised its estimates and price targets for multiple homebuilders while calling out D.R. Horton (DHI) and PulteGroup (PHM) as its favorite names in the sector.

ESTIMATES INCREASED:

Bank of America analyst John #Lovallo now expects single family housing starts and new home sales to rise 9% year-over-year in 2018, up from his previous forecast for 6% increases for both metrics. In 2019, he predicts that the metrics will increase about 8%, versus his previous forecast for 5% gains.

DEMAND/SUPPLY DRIVERS:

Homebuilders have said that demand has accelerated over the past six months, partly due to increased consumer confidence, an improved labor market, and the “return of the first-time home buyer,” according to Lovallo. Supply constraints should weaken “over the next few years” because builders are more confident and consequently more willing to build further from city centers, the analyst stated. Additionally, there are signs that the sector’s labor shortage is beginning to ease, while the potential reform of banking regulations could stimulate lending, Lovallo wrote. Finally, the analyst believes that “easing land entitlement burdens could reduce builder cost and increase available lot supply.”

TOP PICKS:

D.R. Horton could be a “primary beneficiary” of labor market easing, given its “high volume and even-flow production strategy,” Lovallo wrote. Additionally, its consistent execution and solid exposure to entry-level buyers are positive, the analyst stated. Pulte’s valuation is below the average of large homebuilders, while its “solid return on equity and balanced capital” are positive, the analyst stated. Pulte’s orders could accelerate next year as it increases the number of communities that it builds, the analyst added.

TARGET INCREASES

Lovallo increased his price target on D.R. Horton to $42 from $41, on Pulte to $30 from $29, on Toll Brothers (TOL) to $46 from $43, on Meritage Homes (MTH) to $38 from $36, on KB Home (KBH) to $19 from $17, and on M.D.C. Holdings (MDC) to $27 from $24.

 

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Goldcorp to Buy Exeter Resource

Exeter Resource, Goldcorp enter agreement to proceed with acquisition

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Exeter Resource (XRA) has entered into an arrangement agreement with Goldcorp (GG) pursuant to which Goldcorp has agreed to acquire all common shares of Exeter not already owned by Goldcorp by way of a plan of arrangement.

The arrangement, which is subject to the approval of the holders of Exeter, will constitute the subsequent acquisition transaction proposed by Goldcorp in order to acquire all Exeter shares it did not acquire under its offer to purchase dated April 20.

Goldcorp currently owns a total of roughly 78M Exeter Shares, representing approximately 83.16% of issued and outstanding Exeter shares.

A special meeting of Exeter shareholders has been called for July 31 to consider, and if thought advisable, pass a special resolution in relation to the arrangement.

The consideration payable under the arrangement is the same as the consideration received by Exeter shareholders under the offer. Exeter shareholders will be entitled to receive 0.12 of a Goldcorp share for each Exeter share.

Closing of the arrangement is expected to take place on or about August 2. At that time, Exeter will become a wholly-owned subsidiary of Goldcorp, the Exeter shares will be delisted, and Exeter will apply to cease to be a reporting issuer.

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Ameresco Selected by Chicago to Update City Lights

Amerseco selected by Chicago for Smart Street Lighting Project

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Ameresco receives contract from Chicago

Ameresco (AMRC) announced it has contracted with the City of Chicago for the city’s comprehensive Smart Street Lighting Project to modernize its infrastructure.

Working with Silver Spring Networks (SSNI), a networking platform and solutions provider for the Internet of Important Things, the project is believed to be the largest city-led wireless smart street light program in the U.S., and will connect more than 250,000 street light fixtures across Chicago.

The four-year modernization project is expected to transform Chicago’s street light system by replacing approximately 85% of the city’s existing street lights with smart LEDs.

The multi-phase project will commence this summer.

The new smart LED street lights will be owned and operated by the City of Chicago, supported by Silver Spring Networks’ managed services and its Streetlight.Vision Control and Management System software.

The new LED street lights are expected to consume between 50 and 75% less electricity than the city’s existing lighting infrastructure.

Silver Spring’s IPv6 platform will enable the City to remotely dim or brighten street lights as needed, as well as to remotely monitor street lights for proactive maintenance and faster repairs if failures do occur.

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