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January 24, 2023January 26, 2023

Stockwinners Portfolio returns 22.8% in 2022

S&P 500 declined 19.6% during the same period

The bear market of 2022 cost most investors dearly whereas Stockwinners readers were able to register double digit returns. Our experience in the past 24 years has taught us how to avoid pitfall of following crowds and Wall Street gurus. In fact, we stayed away from story stocks such Tesla (TSLA), Paypal Holdings (PYPL) and Meta Platform (META). We concentrated on small to medium cap stocks. These stocks typically do not have any exposure to overseas markets and are traded on their own fundamentals.

Russian invasion of Ukraine created unique trading opportunities for investors. The vicious invasion of Ukraine caused energy and commodity prices skyrocket thus offering opportunities in that space. In fact, one of our better performers on the year was EPAM System (EPAM). This software company has about 25 percent of its workforce located in the eastern European country. Those who bought the stock based on our recommendations were rewarded with a 23% return in two days.

Energy stocks were awakened with the invasion. Crude oil shot up to $106.50 from $70 per barrel. This price increase buoyed energy stocks. Amongst our better performers were shares of Par Pacific Holdings (PARR). The refiner shares gained fifteen percent following our recommendations.

Other commodity stocks that were featured in our portfolio included those involved in precious and rare minerals mining. Livent Corporation (LTHM) was one such name. The lithium miner was featured several times with solid returns. The returns were 14%, 12% and 18%. Sigma Lithium Corporation (SGML) was another name in the sector. It gained 14% following our recommendations.

Sierra Wireless, Inc. (SWIR) was another stock that came to our attention. The company provides device-to-cloud Internet of Things (IoT) solutions. Shares were featured in August with success. Stock gained 18 percents in two weeks.

We featured put options (shorting the stock) on several names. One of the names featured was Open Text Corporation (OTEX). Put option on the name returned 325% in 17 days. The put was featured at $1.50 and it was closed 17 days later at $6.40. Another name that was featured several times was Carvana (CVNA). Shares of the used car retailer have fallen from $300 to $3.55.

A strong employment market created opportunity in placement companies. Cross Country Healthcare, Inc. (CCRN) was such name. The company places medical staff. Shares were featured in August and gained 18% in less than two weeks.

Our portfolio can be downloaded here. Additionally, one may download our selections for the past 18 years in a spreadsheet format.

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This 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.

March 30, 2022

Crane to split into two companies!

Crane plans to split into two independent public companies

Crane (CR) announced that its Board of Directors has unanimously approved a plan to pursue a separation into two independent, publicly-traded companies to optimize investment and capital allocation, accelerate growth, and unlock shareholder value.

Upon completion, Crane Co.’s shareholders will benefit from ownership in two focused and simplified businesses that are both leaders in their respective industries and well-positioned for continued success:

Crane Co. will be a leading global provider of mission-critical, highly engineered products and solutions, with differentiated technology, respected brands, and leadership positions in its markets.

After the separation, Crane Co. will include the Aerospace & Electronics and Process Flow Technologies businesses.

This year, these businesses are expected to generate approximately $1.9B in annual sales with a pre-corporate Adjusted EBITDA margin of approximately 18.5%.

The company will be well-positioned to accelerate organic growth in its large and attractive end markets, benefit from favorable secular trends, and apply its proven processes to drive growth through new product development and commercial excellence.

Richard Teller Crane, Founder of Crane Co.

Crane Co. is expected to have a strong, well-capitalized balance sheet underpinning a capital deployment strategy focused on supporting the company’s organic and inorganic strategic growth objectives, while providing a dividend in-line with peers.

Crane Co. will be led by Max Mitchell, who will continue to serve as President and Chief Executive Officer, with Rich Maue continuing to serve as Chief Financial Officer.

The company intends to continue to be listed on the NYSE under its current ticker symbol, “CR”.

Crane NXT will be a premier Industrial Technology business with substantial global scale, a best-in-class margin profile, and strong free cash flow generation.

This year, the Payment and Merchandising Technologies business that will become Crane NXT is expected to achieve approximately $1.4 billion in sales with a pre-corporate Adjusted EBITDA margin of approximately 28%.

In addition to its market leading brands, Crane NXT will differentiate itself through its technology leadership, positioning it to leverage long-term secular drivers including automation, security and productivity, across several high-growth adjacent markets.

After the separation, Crane NXT will be positioned to drive earnings growth through continued investment in the business and value-enhancing bolt-on acquisitions. Its balance sheet and strong free cash flow will also allow it to support a robust and differentiated level of capital return to shareholders that is expected to include a competitive dividend.

Crane NXT’s shares are expected to be listed on the NYSE under the ticker symbol “CXT”. A process is currently underway to identify Crane NXT’s chief executive, including evaluation of both internal and external candidates.

The executives currently leading Crane’s PMT business will continue to serve in senior positions with Crane NXT.

The separation is expected to occur through a tax-free distribution of the Aerospace & Electronics and Process Flow Technologies businesses to the Company’s shareholders.

Payment & Merchandising Technologies will be renamed Crane NXT concurrent with the separation, and the Aerospace & Electronics and Process Flow Technologies businesses will retain the Crane Co. name.

Upon completion of the separation, shareholders will own 100% of the equity in both of the publicly traded companies.

The separation is expected to be completed within approximately 12 months of this announcement, subject to the satisfaction of customary conditions and final approval of the separation by Crane Co.’s Board of Directors. Shareholder approval is not required.

Crane Co. will maintain its current capital deployment policies until the separation is completed.

CR is up $2.50 to $112.63.

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January 13, 2022January 13, 2022

Mimecast receives take over offer

Mimecast discloses ‘non-binding expression of interest’ at $92.50 in go-shop

In a regulatory filing earlier, Mimecast (MIME) disclosed that it received, and rejected, a $92.50 per share proposal from a group identified in its proxy materials as “Portfolio Company A.”

The filing states: “On December 31, 2021, Portfolio Company A submitted to the Special Committee a non-binding expression of interest to acquire all outstanding ordinary shares of Mimecast at a price of $92.50 per share in cash, subject to completion of customary due diligence.

This expression of interest did not include the proposed quantum of debt and equity financing or copies of debt commitment letters or whether offers for debt commitments had been secured.

Portfolio Company A indicated that it was likely Portfolio Company A could pay a higher price following access to due diligence information… Immediately following the special joint meeting of the Special Committee and the Company Board held on January 6, 2022, representatives of Goodwin advised outside counsel to Portfolio Company A that the Company Board had determined that priority financial, legal and customer due diligence information would not be provided at such time and that consistent with the Special Committee’s position that had been conveyed on multiple occasions since November 2, 2021, Financial Sponsor A and Portfolio Company A needed to satisfy the Special Committee and its antitrust advisors that the antitrust risks for such a transaction would not subject Mimecast shareholders to substantial timing and execution risk due to expected scrutiny from antitrust regulators.

Counsel for Portfolio Company A did not share any additional information or analyses regarding the antitrust process for a transaction between Mimecast and Portfolio Company A or the timing and execution risk due to expected scrutiny from antitrust regulators.

Portfolio Company A also did not elect to submit any further or updated indication of interest or provide a markup of the antitrust-related provisions in the Permira Transaction Agreement (or clarify its position with respect thereto).

At 11:59 P.M. Eastern Time on January 6, 2021, the go-shop period set forth in the Transaction Agreement expired.”

Mimecast jumped 6% on December 7th after the cybersecurity company announced it was being acquired by private-equity firm Permira for $80 a share in cash or $5.8 billion.

That bidder, according to a report Bloomberg’s Ed Hammond, is Proofpoint, which was taken private last year by Thoma Bravo.

Mimecast Limited, a British company, provides cloud security and risk management services for corporate information and email.

This is how ProofPoint describes itself “Email, social media, and mobile devices are the tools of your trade—and for cyber criminals, the tools of attack. Proofpoint protects your people, data and brand against advanced threats and compliance risks.”

MIME is up $1.29 to $80.49.

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November 9, 2021

GE to split into three companies

General Electric to form three public companies

GE announced its plan to form three industry-leading, global public companies focused on the growth sectors of aviation, healthcare, and energy, by: Pursuing a tax-free spin-off of GE Healthcare, creating a pure-play company at the center of precision health in early 2023, in which GE expects to retain a stake of 19.9 percent; and Combining GE Renewable Energy, GE Power, and GE Digital into one business, positioned to lead the energy transition, and then pursuing a tax-free spin-off of this business in early 2024.

Following these transactions, GE will be an aviation-focused company shaping the future of flight.

As independently run companies, the businesses will be better positioned to deliver long-term growth and create value for customers, investors, and employees, with each benefitting from: Deeper operational focus, accountability, and agility to meet customer needs; Tailored capital allocation decisions in line with distinct strategies and industry-specific dynamics; Strategic and financial flexibility to pursue growth opportunities; Dedicated boards of directors with deep domain expertise; Business- and industry-oriented career opportunities and incentives for employees; and Distinct and compelling investment profiles appealing to broader, deeper investor bases.

GE Chairman and CEO H. Lawrence Culp, Jr. said, “At GE we have always taken immense pride in our purpose of building a world that works. The world demands-and deserves-we bring our best to solve the biggest challenges in flight, healthcare, and energy.

By creating three industry-leading, global public companies, each can benefit from greater focus, tailored capital allocation, and strategic flexibility to drive long-term growth and value for customers, investors, and employees. We are putting our technology expertise, leadership, and global reach to work to better serve our customers.”

Culp will serve as non-executive chairman of the GE healthcare company upon its spin-off.

He will continue to serve as chairman and CEO of GE until the second spin-off, at which point, he will lead the GE aviation-focused company going forward.

Peter Arduini will assume the role of president and CEO of GE Healthcare effective January 1, 2022.

Scott Strazik will be the CEO of the combined Renewable Energy, Power, and Digital business while John Slattery continues as CEO of Aviation.

GE intends to execute the spin-offs of Healthcare in early 2023 and of the Renewable Energy and Power business in early 2024.

The respective capital structures, brands, and leadership teams for each independent company will be determined and announced later.

Where required to do so, GE will consult with employee representatives in line with its legal obligations before any final decisions are taken.

Through the transition, GE will be able to monetize its stakes in AerCap and Baker Hughes, prioritizing further debt reduction.

Each of the three resulting independent companies will be well capitalized with investment-grade ratings.

Following the spin-off transactions, GE will retain other assets and liabilities of GE today, including run-off insurance operations.

Upon closing the Healthcare transaction, GE expects to retain a stake of 19.9 percent in the healthcare company to provide capital allocation flexibility.

GE also intends that Healthcare will issue debt securities, the proceeds of which will be used to pay down outstanding GE debt.

The transactions are not subject to bondholder consent.

The company expects to incur one-time separation, transition, and operational costs of approximately $2 billion and tax costs of less than $0.5 billion, which will depend on specifics of the transaction.

The proposed spin-offs of Healthcare and the Renewable Energy and Power business are intended to be tax-free for GE and GE shareholders for U.S. federal income tax purposes.

The transactions are subject to the satisfaction of customary conditions, including final approvals by GE’s Board of Directors, private letter rulings from the Internal Revenue Service and/or tax opinions from counsel, the filing and effectiveness of Form 10 registration statements with the U.S. Securities and Exchange Commission, and satisfactory completion of financing.

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March 29, 2021

Fly Leasing sold for $2.36B

Carlyle Aviation to acquire Fly Leasing for $17.05 per share

Fly Leasing (FLY) announced that it has entered into a definitive agreement to be acquired by an affiliate of Carlyle Aviation Partners, the commercial aviation investment and servicing arm within The Carlyle Group’s (CG) $56B Global Credit platform.

Under the terms of the Merger Agreement, FLY shareholders will receive $17.05 per share in cash, representing a total equity valuation of approximately $520M.

The total enterprise value of the transaction is approximately $2.36B.

FLY’s portfolio of 84 aircraft and seven engines is on lease to 37 airlines in 22 countries.

The per share cash consideration represents a premium of approximately 29% to FLY’s closing price on March 26, 2021 and a 43% premium to the volume-weighted average share price during the last 30 trading days.

The Board of Directors of FLY has approved the Merger Agreement, acting upon the recommendation of a special committee appointed by the Board of Directors and consisting solely of independent and disinterested directors, and has recommended that FLY shareholders vote in favor of the transaction.

The transaction is expected to close in the third quarter of 2021 and is subject to customary closing conditions, including applicable regulatory clearance and the approval of FLY’s shareholders.

Given the pending transaction, FLY will not host a first quarter earnings call.

FLY closed at $13.25.

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February 17, 2021

Palantir’s Bulls and Bears

Goldman Sachs upgrades the recent IPO while Citi says Sell

Palantir Technologies Inc. (PLTR) builds and deploys software platforms for the intelligence community in the United States to assist in counterterrorism investigations and operations.

It offers Palantir Gotham, a software platform for government operatives in the defense and intelligence sectors, which enables users to identify patterns hidden deep within datasets, ranging from signals intelligence sources to reports from confidential informants, as well as facilitates the handoff between analysts and operational users, helping operators plan and execute real-world responses to threats that have been identified within the platform.

The company also provides Palantir Foundry, a platform that transforms the ways organizations operate by creating a central operating system for their data; and allows individual users to integrate and analyze the data they need in one place.

The company took the unusual route of becoming a public company by directly listing it’s shares and bypassing the brokers. Shares came public around $9 and shot up to $45 a share before pulling back. There were a number of brokers who made comments about the shares today following the company’s earnings.

Earnings

Palantir Technologies reported 4th Quarter December 2020 earnings of $0.07 per share on revenue of $322.1 million yesterday morning. The consensus earnings estimate was $0.02 per share on revenue of $300.4 million.

The company said it expects 2021 revenue of $1.42 billion or more. The current consensus revenue estimate is $1.41 billion for the year ending December 31, 2021.

Goldman Sachs

Goldman Sachs analyst Christopher #Merwin upgraded Palantir Technologies to Buy from Neutral with a price target of $34, up from $13. Palantir reported “strong” Q4 results and its Q1 guidance called for revenue growth of 45%, while fiscal 2021 revenue guidance was for 30%-plus, Merwin tells investors in a research note. The analyst is “encouraged” to see management guide to $4B of revenue in fiscal 2025, implying a 30% annual growth from fiscal 2020. With a growing backlog of $2.8B in deal value, there is increasing visibility into the achievability of that long-term target, says Merwin.

Further, the analyst believes Palantir’s recent efforts to modularize Foundry and add channel partners like IBM “should improve product market fit” for the commercial business in the coming quarters.

Morgan Stanley

Morgan Stanley analyst Keith #Weiss raised the firm’s price target on Palantir to $19 from $17, telling investors after the company’s Q4 report that Palantir’s results in FY20 showed a big expansion of existing customers, “huge leverage” in operating margins and the seeds for future distribution capability.

However, he keeps an Underweight rating on the shares as he would like to see evidence of effective investment behind the company’s opportunity to support growth and what he views as a “lofty valuation.”

Jefferies

Jefferies analyst Brent #Thill noted that Palantir reported a top and bottom line beat in Q4 along with “robust” large deal metrics and said it is targeting $4B or more in 2025 revenues, but that the stock remains under pressure due to Thursday’s lock-up expiry and the recent run-up that saw the stock up 35% year-to-date ahead of the report.

However, he views Palantir as “a highly unique story for long-term investors” given that he thinks its growth sustainability at significant scale, and “aggressive profitability ramp,” puts the stock “in rarified air” among software companies. Thill maintains a Buy rating on the stock, which he expects to “trend to $40,” his price target on Palantir shares.

RBC Capital

RBC Capital analyst Matthew #Hedberg raised the firm’s price target on Palantir to $27 from $15 and keeps a Sector Perform rating on the shares.

The company ended 2020 with a “solid” set of Q4 results while forecasting acceleration and margin improvement in Q1, the analyst tells investors in a research note. Hedberg adds however that while he is positive on Palantir’s catalysts, he remains on the sidelines due to the stock’s “full valuation”.

Citi

Citi analyst Tyler #Radke keeps a Sell rating on Palantir Technologies with a $15 price target following the company’s Q4 results.

The results featured “solid” reported revenue upside, but came with “signs of growth drivers narrowing with new customers growth still lacking and Commercial revenue missing expectations,” Radke tells investors in a research note.

The new five-year revenue target of $4B “looks high,” but ultimately may be a non-event for the stock, says the analyst. He thinks the stock is overvalued and “could be particularly volatile” into the upcoming lockup on February 18.

Insiders

Peter Thiel, Chairman, and well connected Washington insider

Several insiders have sold shares into the lockup expiry on Thursday but Peter Thiel, Chairman of the Board, reported a 5% ownership of the stock.

PLTR last traded at $28.50.

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December 21, 2020December 20, 2020

Aerojet Rocketdyne sold for $5 billion

Lockheed Martin to acquire Aerojet Rocketdyne

Lockheed Martin (LMT) announced it has entered into a definitive agreement to acquire Aerojet Rocketdyne (AJRD) for $56 per share in cash, which is expected to be reduced to $51 per share after the payment of a pre-closing special dividend.

This represents a post-dividend equity value of $4.6B and a total transaction value of $4.4B including the assumption of net cash.

As part of approving the transaction, Aerojet Rocketdyne announced a special cash dividend, revocable at its option through the payment date, of $5 per share to its holders of record of common stock and convertible senior notes as of the close of business on March 10, 2021, and payable on March 24, 2021.

Lockheed Martin brings most of it’s rocket manufacturing to in-house with this deal

The transaction is expected to close in the second half of 2021 and is subject to the satisfaction of customary closing conditions, including regulatory approvals and approval by Aerojet Rocketdyne’s stockholders.

Aerojet Rocketdyne designs, develops, manufactures, and sells aerospace and defense products and systems in the United States.

The Aerospace and Defense segment offers aerospace and defense products and systems for the United States government, including the Department of Defense, the National Aeronautics and Space Administration, and aerospace and defense prime contractors. This segment provides liquid and solid rocket propulsion systems, air-breathing hypersonic engines, and electric power and propulsion systems for space, defense, civil, and commercial applications; and armament systems.

The Real Estate segment engages in the re-zoning, entitlement, sale, and leasing of the company’s excess real estate assets. It owns approximately 11,394 acres of land adjacent to the United States Highway 50 between Rancho Cordova and Folsom, California east of Sacramento.

AJRD closed at $42.02. LMT closed at $356.03.

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October 12, 2020

Acorn International sold for $21 per share

Acorn International enters merger agreement for going private transaction

Acorn International (ATV) announced that it has entered into a definitive agreement and plan of merger with First Ostia Port, a Cayman Islands exempted company and its wholly owned subsidiary Second Actium Coin, a Cayman Islands exempted company, pursuant to which, the merger sub will merge with and into the company thereby becoming a wholly-owned subsidiary of the controlling shareholder.

Acorn International, Inc. develops, promotes, and sells a portfolio of proprietary-branded products in the People’s Republic of China. The company operates through two segments, Direct Sales and Distribution Sales.

The company will be acquired in an all-cash transaction by the controlling shareholder.

Pursuant to the terms of the merger agreement, each ordinary share, par value 1c per share, of the company, including shares represented by American Depositary Shares, each representing twenty shares, issued and outstanding immediately prior to the effective time, other than the excluded shares shall be cancelled in exchange for the right to receive $1.05 in cash per share without interest.

As each ADS represents twenty shares, each ADS issued and outstanding immediately prior to the effective time, other than ADSs representing excluded shares, shall represent the right to receive $21.00 in cash without interest pursuant to the terms and conditions set forth in the merger agreement.

The per share merger consideration represents a premium of 44.1% over the company’s closing price of $14.57 per ADS as quoted on the New York Stock Exchange, or NYSE, on August 17, the last trading day prior to the day when the company received a non-binding “going private” proposal from the controlling shareholder.

The merger consideration also represents an increase of approximately 38.0% over the $15.22 per ADS offered by the controlling shareholder in its revised going-private proposal on August 18 and a premium of approximately 39.4% over the company’s closing price of $15.07 per ADS on October 9, the last trading day prior to issuance of this press release.

The controlling shareholder intends to fund a substantial portion of the consideration for the merger in the form of debt funding from a third-party lender and has delivered to the company duly executed copies of the loan and security agreement.

The board, acting upon the unanimous recommendation of a committee of independent directors established by the board, approved the merger agreement and the merger.

The special committee negotiated the terms of the merger agreement with the assistance of its independent financial and legal advisors.

The merger, which is currently expected to close during the last quarter of 2020, is subject to customary closing conditions, including the approval of the merger agreement by a requisite company vote of shares representing at least two-thirds of the voting power of the shares present and voting in person or by proxy at a meeting of the company’s shareholders which will be convened to consider the approval of the merger agreement and the merger.

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May 27, 2020

Boeing fires 6,770 U.S. workers

Boeing starts involuntary layoffs with 6,770 U.S. workers losing jobs

Boeing (BA) President and CEO Dave Calhoun issued a letter to employees today providing an update on workforce actions, which stated in part, “Following the reduction-in-force announcement we made last month, we have concluded our voluntary layoff program.

And now we have come to the unfortunate moment of having to start involuntary layoffs. We’re notifying the first 6,770 of our U.S. team members this week that they will be affected.

We will provide all the support we can to those of you impacted by the ILOs – including severance pay, COBRA health care coverage for U.S. employees and career transition services.

Our international locations also are working through workforce reductions that will be communicated locally on their own timelines in accordance with local laws and benefit terms.

Boeing plans to cut 10% of it’s workforce

The COVID-19 pandemic’s devastating impact on the airline industry means a deep cut in the number of commercial jets and services our customers will need over the next few years, which in turn means fewer jobs on our lines and in our offices.

We have done our very best to project the needs of our commercial airline customers over the next several years as they begin their path to recovery. I wish there were some other way.”

Green Shoots

In another announcement, Dave Calhoun stated “We are seeing some green shoots. Some of our customers are reporting that reservations are outpacing cancellations on their flights for the first time since the pandemic started. Some countries and U.S. states are starting cautiously to open their economies again.

And some parts of our business, most notably on the defense side, will continue hiring to meet customer commitments and fill critical skill positions.

The Defense, Space & Security and defense services teams have achieved a number of milestones recently, including the successful return to orbit of the reusable and autonomous X-37B Orbital Test Vehicle.

We’re moving forward with our plan to restart 737 MAX production in Renton, Washington, as our return-to-service efforts continue.

And our Global Services team is changing its organization to ensure it is lean and focused on the post-COVID needs of its customers. But these signs of eventual recovery do not mean the global health and economic crisis is over. Our industry will come back, but it will take some years to return to what it was just two months ago.”

Company executives said last month that Boeing planned to cut about 10% of its global workforce this year as it reduces jetliner production, and union officials say the initial wave of layoffs was focused on Boeing’s Seattle-area commercial airplanes operation.

BA last traded at $146.47, up 1.2%.

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April 30, 2020

Loral Space in ‘advanced talks’ to combine with Telesat

Loral Space & Communications declares $5.50 per share special dividend

Loral Space & Communications (LORL) announced that its board of directors has declared a special dividend of $5.50 per share for an aggregate dividend of approximately $170.5M.

The dividend is payable on May 28 to holders of record of Loral voting and non-voting common stock as of the close of business on May 14.

Loral declares a one time $5.50 special dividend, Stockwinners

Michael Targoff, Vice Chairman of Loral’s Board of Directors, explained that, “in an effort to maximize shareholder value, we have for some time been exploring, and are now in advanced discussions with our Canadian co-owner in Telesat, Public Sector Pension Investment Board, regarding the combination of Loral and Telesat into one public company.

Telesat to combine with Loral Space, Stockwinners

“Given the advanced state of the discussions regarding the combination transaction, it is now appropriate to pay to our shareholders a significant portion of the $243M cash distribution that we previously received from Telesat.”

“It is our intention,” Mr. Targoff continued, “to request that the Board declare an additional distribution to our shareholders in coordination with signing definitive agreements for the combination transaction.”

The company added: “Notwithstanding the advanced state of the discussions regarding the potential combination transaction, there can be no assurance as to whether or when Loral will be able to conclude the ongoing negotiations, that Loral will enter into any agreement that provides for a strategic transaction involving Telesat or Loral’s interest therein, that any strategic transaction will occur, or that any particular economic, tax, structural or other objectives or benefits with respect to any strategic transaction will be achieved.”

Loral Space & Communications Inc. offers satellite-based communications services to the broadcast, telecom, corporate, and government customers worldwide.

Telesat, formerly Telesat Canada, is a Canadian satellite communications company. The company is now the fourth-largest fixed satellite services provider in the world. It owns a fleet of satellites, with others under construction, and operates additional satellites for other entities.

LORL is up 31% to $23.10.

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February 6, 2020February 6, 2020

Unisys Federal sold for $1.2 billion

SAIC to acquire Unisys Federal for $1.2B in cash

Science Applications International Corp. (SAIC) announced that it has entered into a definitive agreement to acquire Unisys Federal (UIS), in an all-cash transaction valued at $1.2B, in a highly strategic and value creating transaction, the company said.

This represents a transaction multiple of approximately 10.5x CY2020 adjusted EBITDA, adjusted for the net present value of tax assets.

Unisys Federal, an operating unit of Unisys (UIS), is a provider of infrastructure modernization, cloud migration, managed services, and enterprise IT-as-a-service through scalable and repeatable solutions to U.S. federal civilian agencies and the Department of Defense.

SAIC expects to fund the $1.2B cash transaction through a combination of cash on hand and incremental debt.

The transaction is expected to close by the end of SAIC’s first quarter of fiscal year 2021, ending May 1, 2020, following customary closing conditions, including HSR regulatory clearance.

Unisys Federal sold to SAIC, Stockwinners

The transaction has been unanimously approved by SAIC’s Board of Directors. The businesses will continue to operate independently until the transaction closes.

“With the addition of Unisys Federal, SAIC will be a leading provider of digital transformation services and solutions to the federal government.

This exciting opportunity advances our strategy by building on our modernization capabilities, increasing customer access, accelerating growth and enhancing shareholder value,” said SAIC CEO Nazzic Keene.

“The financial benefits of acquiring Unisys Federal are compelling, including accretion of adjusted EBITDA margins, non-GAAP earnings per share, and cash generation.”

The transaction multiple of approximately 13x LTM 9/30/19 Adjusted EBITDA represents a significant premium to Unisys’ trading multiple.

Net proceeds are largely expected to be used to pay down debt and reduce pension obligations, thereby significantly improving Unisys’ balance sheet, its U.S. pension funded status and overall financial flexibility.

The transaction was unanimously approved by the Unisys board and is expected to close in the first half of 2020, subject to customary closing conditions. Unisys’ U.S. Federal business represents more than 1,900 associates, with approximately $689 million in revenue for the LTM period ended September 30, 2019.

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February 4, 2020

L3Harris Security Detection sold for $1 B

Leidos to acquire L3Harris security detection, automation businesses

Leidos (LDOS) announced that it has entered into a definitive agreement to acquire L3Harris Technologies’ (LHX) security detection and automation businesses, for $1B in cash.

The boards of both companies unanimously approved the transaction. L3Harris’ security detection and automation businesses provide airport and critical infrastructure screening products, automated tray return systems and other industrial automation products.

L3Harris sells its security division for $1B, Stockwinners

With headquarters in Tewksbury, Massachusetts and Luton, England, the combined businesses have 1,200 employees and a global sales and services operations footprint with more than 20,000 systems deployed world-wide across more than 100 countries.

The businesses serve customers in the aviation, transportation, government and critical infrastructure markets.

Leidos goes on $1B shopping spree, Stockwinners

This acquisition adds products that expand Leidos’ offerings to create a security and detection platform.

These products include checkpoint security products like checkpoint CT scanners, people scanners, comprehensive explosives trace detectors, checked baggage screeners and automated tray return systems, or ATRS.

This business expands customer penetration internationally, helping deliver on a stated objective to diversify revenue globally.

The deal will increase Leidos’ international security products revenue more than six-fold. The acquisition also enables the company to leverage technology investments across the combined portfolio to accelerate innovation and improve service efficiency for customers.

The transaction is expected to be immediately accretive to Leidos’ revenue growth, EBITDA margins, and non-GAAP diluted earnings per share upon closing.

Leidos expects to fund the $1B cash transaction through a combination of cash on hand and incremental debt.

The transaction is expected to close by the end of Q2, subject to the satisfaction of customary closing conditions, including receipt of regulatory approvals.

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January 29, 2020

Gilat Satellite Networks sold for $532M

Comtech to acquire Gilat Satellite Networks for $10.25 per share

Comtech Telecommunications Corp. (CMTL) and Gilat Satellite Networks Ltd. (GILT) jointly announced that Comtech has agreed to acquire Gilat in a cash and stock transaction for $10.25 per Gilat ordinary share of which 70% will be paid in cash and 30% in Comtech common stock, resulting in an enterprise value of approximately $532.5 million.

Founded in 1987 with its headquarters in Israel, Gilat is a worldwide leader in satellite networking technology, solutions and services with market leading positions in the satellite ground station and in-flight connectivity solutions markets and deep expertise in operating large network infrastructures.

Comtech goes shopping by buying Gilat, Stockwinners

Based on Comtech’s fiscal year 2019 actual results and Gilat’s trailing twelve-month results through June 30, 2019, on a pro-forma basis, Comtech would have reported approximately $926.1M of revenue with Adjusted EBITDA of approximately $130.2M.

The combined companies would employ approximately 3,000 people and offer best-in-class satellite technology, public safety and location technology and secure wireless solutions to commercial and government customers around the world.

Fred Kornberg, Chairman of the Board and CEO of Comtech, said,

“I am excited to have reached this agreement with Gilat and believe this combination is beneficial to the stakeholders of both companies. The acquisition better positions Comtech to take advantage of key marketplace trends, particularly the growing demand for satellite connectivity and the enormous long-term opportunity set that is emerging in the secure wireless communications market.

I believe that the combination of accelerating satellite connectivity demand and the increasing availability of low-cost satellite bandwidth, makes this a perfect time to unify Comtech and Gilat’s solutions and offer our combined customers best-in-class platform-agnostic satellite ground station technologies.

Gilat is an exceptional business that has developed extraordinary technology and has a well-respected product portfolio supported by strong research and development capabilities. I welcome Gilat’s entire talented workforce to the Comtech family.”

Dov Baharav, Chairman of the Board of Gilat, said, “The Gilat Board of Directors and management believe this highly strategic combination is compelling.

Gilat equipment allows reliable communication, Stockwinners

It is an excellent outcome for our shareholders who receive both cash and an equity interest in a strong company with a broader range of products and the benefits of combined expertise and resources that is well positioned to create future value against a highly favorable industry backdrop.

I have long admired Comtech’s commitment to technology leadership and I firmly believe that employees will have expanded opportunities for career development. No doubt, the future will be very bright for Comtech and Gilat and all of our stakeholders.”

In light of the agreement between Comtech (CMTL) and Gilat (GILT), Gilat has cancelled its fourth quarter and fiscal 2019 year-end conference call and webcast previously scheduled for February 19, 2020. Once the transaction closes, Comtech will provide combined revenue, Adjusted EBITDA and diluted earnings per share guidance in a future announcement.

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January 12, 2020

Hexcel and Woodward merge to form Woodward Hexcel

Hexcel, Woodward announce merger of equals

Woodward (WWD) and Hexcel (HXL) announced a definitive agreement to combine in an all-stock merger of equals “to create a premier integrated systems provider serving the aerospace and industrial sectors,” the companies said.

Woodward and Hexcel agree to merge, Stockwinners

Under the terms of the agreement approved by the Boards of Directors of both companies, Hexcel shareholders will receive a fixed exchange ratio of 0.625 shares of Woodward common stock for each share of Hexcel common stock, and Woodward shareholders will continue to own the same number of shares of common stock in the combined company as they do immediately prior to the closing.

Hexcel and Woodward to merge, Stockwinners

The exchange ratio is consistent with the 30-day average share prices of both companies.

Upon completion of the merger, existing Woodward shareholders will own approximately 55% and existing Hexcel shareholders will own approximately 45% of the combined company on a fully diluted basis.

In connection with the transaction, Woodward is increasing its quarterly cash dividend to 28c a share.

The merger is expected to be tax free for U.S. federal income tax purposes.

The combined company will be named Woodward Hexcel.

For each company’s respective fiscal year 2019 on a pro forma basis, the combined company is expected to generate net revenues of approximately $5.3B and EBITDA of $1.1B, or a 21% EBITDA margin.

The transaction is subject to the approval of the shareholders of both Woodward and Hexcel, as well as other customary closing conditions, including required regulatory approvals.

The parties expect the merger to close in the third calendar quarter of 2020, subject to satisfaction of these conditions.

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August 9, 2019

Wesco Aircraft sold for $1.9 billion

Wesco Aircraft to be acquired by Platinum Equity affiliate for $1.9B

Wesco Aircraft sold to Carlyle Group affiliate, Stockwinners

Wesco Aircraft Holdings (WAIR) announced that it has entered into a definitive merger agreement to be acquired by an affiliate of Platinum Equity in a transaction valued at approximately $1.9B.

Upon closing, Wesco will be combined with Platinum Equity portfolio company Pattonair, a provider of supply chain management services for the aerospace and defense industries based in the United Kingdom.

Under the agreement, which has been unanimously approved by Wesco’s Board of Directors, Wesco shareholders would receive $11.05 per share in cash.

The cash purchase price represents a premium of approximately 27.5 percent to the 90-day volume weighted average share price for the period ended May 24, 2019, the last trading day prior to media speculation regarding a potential transaction involving Wesco Aircraft.

Wesco’s three largest shareholders, affiliates of The Carlyle Group (CG) and Makaira Partners, as well as the Snyder Family Trusts, support the transaction and have entered into voting and support agreements to vote their shares in favor of the transaction.

The transaction will be financed through a combination of committed equity financing provided by affiliates of Platinum Equity Capital Partners IV, L.P., as well as debt financing that has been committed to by Bank of America Merrill Lynch.

The transaction is expected to be completed by the end of calendar 2019 and is subject to Wesco shareholder approval, regulatory clearances and other customary closing conditions.

Upon the completion of the transaction, Wesco will become a privately held company, and shares of its common stock no longer will be listed on any public market.

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