Glencore offers $2.55 billion for Rio Tinto’s Coal & Allied Industries

Glencore submits proposal to acquire Rio Tinto’s Coal & Allied Industries for $2.55B

Glencore Proposal will be funded from existing cash resources and committed facilities

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Glencore (GLNCY) announced it has submitted a proposal to acquire Rio Tinto’s (RIO) 100% interest in Coal & Allied Industries for $2.55B cash plus a coal price linked royalty, with the cash comprising $2.05B cash payable on completion and $500M in aggregate deferred cash payments, payable as annual instalments of $100M over five years following completion.

Rio Tinto plc (RIO) finds, mines, processes, and markets mineral resources. The company mines and produces aluminum products, including bauxite, alumina, and aluminum; copper, gold, silver, and molybdenum, as well as nickel; diamonds, titanium dioxide feedstocks, borates, and salt, as well as high purity iron, steel billets, metal powders, zircon, and rutile; uranium; iron ore; and thermal coal, and coking or metallurgical coal.

A subsidiary of #Mitsubishi Corporation has a tag-along right to sell its 32.4% interest in the Hunter Valley Operations joint venture.

Glencore has agreed to purchase Mitsubishi’s 32.4% interest in the HVO JV and 28.898% interest in the Warkworth joint venture for $920M cash conditional on completion of Glencore’s acquisition of C&A from Rio Tinto, with $520M being payable on completion and $100M payable on the first four anniversaries of completion.

The Glencore Proposal will be funded from existing cash resources and committed facilities and is subject only to regulatory conditions. Glencore will only be bound once a binding share purchase agreement is concluded with Rio Tinto.

If a transaction is concluded, Glencore intends to mitigate its overall financial commitment via a sale / monetization of assets, prioritizing its coal portfolio, of no less than $1.5B, including exploring the option of selling down up to 50% of its interest in the C&A mines.

“In any event, as part of our overall Group financial policy, in addition to targeting maximum 2x Net debt/Adjusted EBITDA through the cycle, Glencore’s balance sheet will be managed to prevent net debt increasing above December 2016’s level of $15.5B, thereby ensuring that our leverage target is comfortably met and financial conservatism maintained,” Glencore stated.

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Stocks to Watch Ahead of this Weekend

Electronic Entertainment Expo, or E3, convention starts this weekend in Los Angeles

Activision plans to showcase “Call of Duty: WWII,” “Destiny 2,” and “Crash Bandicoot N. Sane Trilogy”

 

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Shares of video game stocks are in focus ahead of the upcoming Electronic Entertainment Expo, or E3, convention starting this weekend. Investors and analysts will be looking at major upcoming releases from big sector players as well as any new game announcements at the event.

EA ‘STAR WARS’ PUSH:

Electronic Arts (EA) will be the first major game maker to host a press conference. The company already confirmed in a blog post that it will showcase eight games at its presentation, including its usual sports titles as well as “Star Wars Battlefront II,” which EA plans to highlight through showing a live multiplayer match for the game featuring multiple YouTube “influencers.”

Ahead of the event, #Piper Jaffray analyst Michael #Olson reiterated an Overweight rating and $119 price target on the stock, saying that “Star Wars Battlefront II” is expected to be a “more fleshed out” version of its predecessor, which Olson notes was criticized for a lack of game modes.

Credit Suisse analyst Stephen Ju added that he expects the single player content for “Battlefront II” to open the door for potential upside versus his firm’s current 13.8M unit volume estimate. Ju noted that the incremental million units should add 7c to EPS for fiscal 2018. Shares of EA are up over 45% year to date.

ACTIVISION STICKS TO ITS GUNS:

After skipping the show floor at last year’s E3, Activision Blizzard’s (ATVI) Activision unit said in a blog post that it plans to showcase “Call of Duty: WWII,” “Destiny 2,” and “Crash Bandicoot N. Sane Trilogy” at E3 this year.

All three of these titles were already announced previously, and Credit Suisse’s Ju said his firm doesn’t see much in the way of surprises for Activision.

Ju noted, however, that in the case of “Destiny 2,” he will be paying closer attention to the “greater accessibility of the underlying storyline to drive gameplay as well as engagement.”

Piper’s Olson, on the other hand, expects most investors to focus on the new “Call of Duty” title, which he says will face easier comps than the last two releases in the franchise. The Piper analyst reiterated an Overweight rating and $60 price target on the stock.

Shares of Activision Blizzard have advanced over 67% year to date.

NO SURPRISES SEEN FOR TAKE-TWO:

Take-Two Interactive (TTWO) will not be hosting a press event at E3, though the company already made waves several weeks ago after it delayed the release of the highly-anticipated “Red Dead Redemption 2,” which is now expected to launch in Spring of 2018 after originally being slated for Fall of this year.

Piper’s Olson, who backed an Overweight rating and $83 price target on the stock, said that he doesn’t anticipate the company will use E3 as a venue to announce any new games and will probably use its floor space at the event for meetings.

Credit Suisse’s Ju said that, given the delay of “Red Dead 2,” he does not expect any further updates on the game of any kind and expects that the only playable games on the floor from Take-Two will be the latest iterations of “NBA 2K” and “WWE 2K.”

Shares of Take-Two are up over 61% year to date.

HARDWARE:

On the hardware side, Microsoft (MSFT) is expected to unveil the name, price, and release date for Project Scorpio during its E3 briefing this Sunday, according to media.

Project Scorpio will be “the most powerful console ever,” according to Microsoft, with 6 Teraflops of graphical processing power, “true” 4K gaming, and compatibility with Xbox One games and accessories.

Sony (SNE), whose PlayStation 4 Pro currently stands as one of the most powerful gaming consoles on the market, will hold its press conference on Monday night.

In addition, jumping off the recent success of its latest Switch console, Nintendo (NTDOY), which hasn’t done major stage shows at E3 in recent years, said it will provide a closer look at its upcoming “Super Mario Odyssey” game for the Switch as well as other games coming this year to its newest console, which launched on March 3.

OTHERS TO WATCH:

Shares of retailers GameStop (GME) and Best Buy (BBY) should be in play also.

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The article does not constitute investment advice. Each reader is encouraged to consult with his or her individual financial professional and any action a reader takes as a result of information presented here is his or her own responsibility.

DuPont Fabros Sold for $7.6 Billion

DuPont Fabros shareholders will receive of 0.545 Digital Realty shares

The combination of the two companies is expected to create annual savings of $18M

 

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Digital Realty  and DuPont Fabros announced they have entered into a definitive agreement under which DuPont Fabros will merge with Digital Realty in an all-stock transaction.

The consummation of the transaction is subject to customary closing conditions, including approval by the shareholders of Digital Realty and DuPont Fabros.

DuPont Fabros Technology, Inc. (DFT) , a real estate investment trust (REIT), engages in the ownership, acquisition, development, operation, management, and lease of large-scale data center facilities in the United States.

Digital Realty Trust, Inc.(DLR), a real estate investment trust ( #REIT ),  engages in the ownership, acquisition, development, redevelopment, and management of technology-related real estate.

Under the terms of the agreement, DuPont Fabros shareholders will receive a fixed exchange ratio of 0.545 Digital Realty shares per DuPont Fabros share, for a transaction valued at approximately $7.6B in enterprise value.

The two companies’ operating models are highly complementary, and the combined organization is expected to provide the most comprehensive product offering in the data center sector. Given the enhanced size and scale, the combined company is also expected to have the most efficient cost structure and the highest EBITDA margin of any U.S.-based publicly-traded data center REIT.

The combination of the two companies is expected to create an opportunity to realize up to $18M of annualized overhead savings, resulting from both companies’ complementary business operations.

Upon closing, the transaction is expected to be immediately accretive to financial metrics, and is expected to further improve balance sheet strength.

The fixed exchange ratio represents a total enterprise value of approximately $7.6B, including $1.6B of assumed debt and excluding transaction costs.

Digital Realty has obtained a fully committed bridge loan facility from BofA Merrill Lynch and Citigroup which will be available, if needed, to finance the transaction. The debt assumed in the transaction is expected to be permanently refinanced with a combination of investment grade corporate bonds and other financings.

The transaction has been unanimously approved by the boards of directors of both Digital Realty and DuPont Fabros. The transaction is expected to close in the second half of 2017 and is subject to the approval of DuPont Fabros and Digital Realty shareholders and other customary closing conditions.

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The article does not constitute investment advice. Each reader is encouraged to consult with his or her individual financial professional and any action a reader takes as a result of information presented here is his or her own responsibility.