CSX shares downgraded following CEO’s death

CSX CEO death raises questions about strategy, M&A potential

CSX CEO passes away
Shares of CSX (CSX) are off their worst levels of the session and trading fractionally higher following the death of the company’s CEO over the weekend.

 

While the news prompted a stock downgrade to Hold at TD Securities, JPMorgan analyst Brian Ossenbeck argued that Hunter #Harrison’s legacy will continue at CSX and that he sees downside in the stock being limited.
Meanwhile, Cti analyst Christian #Wetherbee pointed out that the death of the company CEO may increase the likelihood of a merger with Canadian Pacific (CP).

 

MOVING TO THE SIDELINES:

Following the unexpected medical leave of absence and subsequent death of CEO Hunter Harrison, TD Securities downgraded CSX to Hold from Buy and lowered its price target on the shares to $54 from $63. The firm argued that senior management now lacks a member with an operating background.

 

LIMITED DOWNSIDE:

Meanwhile, JPMorgan’s #Ossenbeck told investors that he believes Hunter Harrison’s legacy will continue at CSX, reiterating an Overweight rating and $63 price target on the shares. The analyst said he estimates downside in the stock to be limited to $45-$48 based on his below consensus forecasts, with U.S. tax reform and a “tighter truck market” providing positive near-term catalysts.

 

Nonetheless, Ossenbeck acknowledged that the lack of a defined management succession plan remains a near-term hurdle for CSX, and will not likely be addressed until the investor day in first quarter of 2018.

 

Voicing a similar opinion, Baird analyst Benjamin #Hartford said he believes the shares should find support in the $48-$50 level, which is where shares traded during previous periods of transition for the company.

 

While Hunter Harrison’s passing “undoubtedly” introduces incremental risk and uncertainty to the trajectory of CSX’s operating ratio improvement, and it is even more so a “show-me” story given the absence of his leadership, Hartford noted that the PSR model has been put into place, the company employs the talent needed to execute the plan, and there is no reason to diminish CSX’s expectations regarding the pace and magnitude of future progress. He reiterated an Outperform rating and $58 price target on the shares.

 

MERGER WITH CANADIAN PACIFIC

In a research note of his own, Citi’s Wetherbee told investors that he believes the death of Harrison may increase the likelihood of CSX attempting to merge with Canadian Pacific. However, the analyst noted that he is not sure a deal could be accomplished due to elevated regulatory risk.

 

Canadian Pacific and CSX may merge. Stockwinners.com
Canadian Pacific and CSX may merge.
A “large portion of the heavy lifting” related to the start of CSX’s turnaround occurred in 2017, allowing 2018 to be a year focused on executing, he contended, adding that he still believes in the company’s long-term potential. Wetherbee also pointed out that he sees Jim Foote as capable of executing Hunter’s vision, while noting that CSX’s board could move to add seasoned executives in the coming months. The analyst reiterated a Buy rating and $58 price target on the shares.

 

PRICE ACTION

In Monday afternoon trading, shares of CSX are fractionally lower to about $53 per share.


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Rosetta Genomics sold for $10 million

Rosetta Genomics to be acquired by Genoptix for $10M in cash

Rosetta Genomics sold for $10M. Stockwinners.com
Rosetta Genomics sold for $10M.

Genoptix and Rosetta Genomics (ROSG) jointly announced on Friday that they have entered into a definitive merger agreement under which Genoptix will acquire all of the outstanding shares of Rosetta Genomics for a total gross purchase price of $10M.

After deducting expected payments for outstanding debt, convertible debentures, warrant termination payments, professional fees, expenses and other items, this purchase price equates to an amount that is preliminarily estimated to be 60c, in cash, for each ordinary share of Rosetta Genomics outstanding at closing.

Genoptix is a portfolio company of Ampersand Capital Partners and 1315 Capital.

Barrington analyst Michael Petusky downgraded Rosetta Genomics to Market Perform after the company announced that it has agreed to be acquired by Genoptix.


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Snyder’s-Lance sold for $4.87 billion

Campbell Soup to buy Snyder’s for $50 per share in cash

Campbell Soup to buy Snyder's for $50 per share in cash. Stockwinners.com
Campbell Soup to buy Snyder’s for $50 per share

Campbell Soup Co (CPB) to buy Pretzels and Cape Cod chips maker Snyder’s-Lance Inc (LNCE) for $4.87 billion or $50 per share in cash.

The offer represents a 27 percent premium to Snyder’s close on Wednesday, a day before CNBC first reported that the company had hired an investment bank to weigh a potential sale following an approach from Campbell.

Snyder’s-Lance’s brands include Snyder’s of Hanover pretzels, KETTLE chips, Cape Cod and Pop Secret. Snyder’s-Lance shares had soared 19% over the past two sessions amid reports that Campbell was in advanced talks to buy the company.

Campbell  plans to finance the deal with debt, and said it would suspend share buybacks to pay the debt down.

Campbell said the deal, which is expected to close early in the second quarter of 2018, should add to adjusted earnings per share in fiscal 2019.

CPB closed at $49.59. LNCE closed at $46.79.


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Amplify Snack Brands sold for $1.6 billion

Hershey agrees to acquire Amplify Snack Brands for $12 per share in cash

Amplify Snacks sold for $1.6 billion. Stockwinners.com
Amplify Snacks sold for $1.6 billion

Hershey (HSY) and Amplify Snack Brands (BETR) announced that they have entered into a definitive agreement under which Hershey will acquire all outstanding shares of Amplify for $12.00 per share in cash.

This strategic acquisition is expected to be accretive to Hershey’s financial targets given the growth trajectory and margin structure of Amplify’s key products.

Amplify’s brands compete in many attractive food categories that are capitalizing on fast-growing trends in snacking with a focus on better-for-you products that deliver clean, simple and transparent ingredients as well as unique flavors and forms.

Additionally, this combination brings customers a known brand building partner that invests in category management solutions to drive higher levels of conversion and velocity at retail.

Under the terms of the agreement between Hershey and Amplify, Hershey has agreed to acquire all of the outstanding shares of Amplify Snack Brands, Inc. for $12.00 per share, in a transaction structured as a tender offer followed by a merger, valued at approximately $1.6B, including net debt and including a make-whole payment of $76M related to the Tax Receivable Agreement, or TRA.

Based on previously announced guidance, this represents a multiple of approximately 14.8-times 2017 Adjusted EBITDA including identified annual run-rate synergies of approximately $20M expected to be generated over the next two years from cost savings and portfolio optimization.

The transaction will be funded with cash on hand and new debt and is not expected to impact Hershey’s current ratings.

Hershey expects the transaction to be accretive to adjusted earnings per share-diluted, including transaction related non-cash amortization, in the first-year post closing with accretion increasing in year two.

Adjusted earnings per share-diluted accretion in both years is substantially higher when excluding transaction related amortization. The acquisition is not expected to affect the previously announced full year 2017 outlooks provided in Hershey’s and Amplify’s Q3 earnings release and conference calls.

The agreement has been approved by the Boards of Directors of both companies.

Affiliates of TA Associates, Amplify’s largest stockholder, and key Amplify insiders, who collectively represent approximately 57% of the outstanding shares, have agreed to tender their shares in the transaction.

The transaction is subject to Amplify’s stockholders tendering a majority of Amplify’s outstanding shares on a fully diluted basis prior to the expiration of the tender offer, certain regulatory approvals and other customary conditions, and is expected to close in the first quarter of 2018.

BETR closed at $7.00. It last traded at $12.00.


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Pinnacle Entertainment sold for $2.8 billion

Pinnacle Entertainment sold for $32.47 per share

 Penn National to acquire Pinnacle Entertainment in deal valued at $2.8B. Stockwinners
Penn National to acquire Pinnacle Entertainment in deal valued at $2.8B

Penn National Gaming (PENN) and Pinnacle Entertainment (PNK) announced that they have entered into a definitive agreement under which Penn National will acquire Pinnacle in a cash and stock transaction valued at approximately $2.8B.

Under the terms of the agreement, Pinnacle shareholders will receive $20.00 in cash and 0.42 shares of Penn National common stock for each Pinnacle share, which implies a total purchase price of $32.47 per Pinnacle share based on Penn National’s closing price on December 15, 2017.

The transaction reflects a 36% premium for Pinnacle shareholders based on Pinnacle’s closing price of $21.86 and Penn National’s closing price of $22.91 on October 4, 2017.

The transaction has been approved by the boards of directors of both companies and is expected to close in the second half of 2018.

Pinnacle owns and operates 16 gaming and entertainment facilities in 11 jurisdictions across the United States.

Following the acquisition of Pinnacle and the planned divestiture of four of its properties to Boyd Gaming (BYD) , Penn National will have significantly greater operational and geographic diversity and operate a combined 41 properties in 20 jurisdictions throughout North America.

The transaction is expected to generate $100M in annual run-rate cost synergies following integration and is anticipated to be immediately accretive to free cash flow in the first year. Pro forma for the divestitures and synergies, the acquisition reflects a multiple of 6.6x LTM EBITDA.

Gaming and Leisure Properties (GLPI), the landlord for Penn National and Pinnacle under their respective master lease agreements, has entered into an agreement to amend the terms of the Pinnacle master lease to permit the divestitures.

In connection with the transaction, Penn National, GLPI and Boyd have agreed to the following:

Penn National and GLPI will enter into a sale and leaseback of the real estate associated with Belterra Park and Plainridge Park Casino for approximately $315M.

An amendment to the terms of the Pinnacle master lease following closing of the merger to reflect an annual fixed rent payment of $25M for Plainridge Park Casino and $13.9M in incremental annual rent to adjust to market conditions.

At closing, GLPI and Boyd will enter into a master lease agreement for the divestitures pursuant to which Boyd will lease the divested real property from GLPI.

Penn National will assume the existing master lease and Pinnacle’s existing lease for the Meadows Casino and Racetrack in Pennsylvania. Penn National’s master lease with GLPI will not be affected by this transaction. The companies expect the transaction to close in the second half of 2018.

PNK closed at $30.95.  PENN closed at $29.69.


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Vipshop gets $863 million cash infusion

Vipshop receives $863M from Tencent and JD

Vips receives $863M investment. Stockwinners.com
Vips receives $863M investment.

Tencent, JD.com, Vipshop announce investment, business cooperation – Tencent Holdings (TCEHY), JD.com (JD), and Vipshop (VIPS) jointly announced that Tencent and JD.com have entered into definitive agreements with Vipshop, such that Tencent and JD.com will invest an aggregate amount of approximately $863M in cash in Vipshop at the closing of the transaction.

Pursuant to the share subscription agreement, Tencent and JD.com will subscribe for newly issued Class A ordinary shares of Vipshop in the amount of approximately $604M and approximately $259M, respectively.

The purchase price will be $65.40 per Class A ordinary share, which is equivalent to $13.08 per American Depositary Share of Vipshop, five of which represent one Class A ordinary share.

The purchase price represents a 55% premium over the closing price of the ADSs as of the last trading day on December 15.

The transaction is expected to close in the near future, subject to customary closing conditions. Upon the closing, Tencent and JD.com will beneficially own, taking into account any existing holding, approximately 7% and 5.5%, respectively, of Vipshop’s total issued shares.

The Class A ordinary shares issued to Tencent and JD.com will be subject to a two-year lock up restriction. Tencent and JD.com will have the right to appoint a director and an observer, respectively, to Vipshop’s board of directors during the two-year lockup period.

After the end of the lock-up period, for so long as Tencent and JD.com hold approximately 12% and 8%, respectively, of Vipshop’s total issued shares, or otherwise by mutual agreement with Vipshop, they will maintain director and board observer rights.

Concurrently with the entry of the share subscription agreement, Tencent and JD.com have entered into business cooperation agreements with Vipshop, effective upon closing, establishing a cooperative relationship among Tencent, JD.com and Vipshop.

Under these agreements, Tencent will grant Vipshop an entry on the interface of Weixin Wallet enabling Vipshop to utilize traffic from Tencent’s Weixin platform, and JD.com will grant Vipshop entries on both the main page of JD.com’s mobile application and the main page of its Weixin Discovery shopping entry, and will assist Vipshop in achieving certain GMV targets through JD.com’s platform.

VIPS closed at $8.44. It last traded at $12.48.


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