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

Walgreens dumps Rite Aid, See Stockwinners Market Radar for more

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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