Uber to name Expedia’s CEO as its new Boss

Expedia shares falls on reports Khosrowshahi will be offered Uber CEO position

Uber’s new CEO, Khosrowshahi comes with $200M price tag. See Stockwinners.com Market Radar for details.
Uber’s new CEO, Dara Khosrowshahi, is an Iranian immigrant.

Shares of Expedia (EXPE) fell on Monday after reports that CEO Dara Khosrowshahi is expected to be offered the position of Uber CEO. Today, Khosrowshahi confirmed he plans to accept the top job at the ride-hailing company.  Khosrowshahi, 48, is on the threshold of becoming one of the world’s most prominent CEOs.

WHAT’S NEW

Expedia CEO Dara Khosrowshahi will be offered the CEO role at Uber, Recode reported this past weekend, citing sources. According to Kara Swisher, Khosrowshahi was the “truce” choice for Uber’s board, which has been facing infighting between ousted CEO Travis Kalanick and Benchmark, one of its major investors.

GE's Immelt May Become Uber CEO. See Stockwinners.com for more details

A COOL $200 MILLION

According to Bloomberg, Khosrowshahi, who spent 12 years as the CEO of Expedia, held unvested stock options in that company worth $184.4 million as of Friday’s close in New York. Companies (Uber) typically grant replacement awards to executives who must forfeit unvested equity when they leave before their employment terms have expired.

The ride-hailing company will likely also grant #Khosrowshahi additional compensation, such as an annual salary and stock awards that vest over several years to ensure he remains on the job. That could push his total price tag north of $200 million.

As a private company, Uber doesn’t have to divulge any pay information about its employees, but a few hints have leaked in the past months mostly due to a lawsuit with Google. Court documents show that Uber awarded 5.31 million shares, worth roughly $250 million, to Anthony Levandowski, a self-driving car engineer the company poached from Google last year.

WHAT’S NOTABLE

According to the #Recode report, former GE (GE) CEO Jeff Immelt withdrew his name from contention when it was clear he would not win the job. #Immelt said in a tweet, “I have decided not to pursue a leadership position at Uber. I have immense respect for the company & founders – Travis, Garrett and Ryan.”

The report also said HP Enterprise (HPE) CEO Meg Whitman had the upper hand in the race for Uber’s CEO role, but “also wanted a number of things — including less involvement by ousted Uber CEO Travis #Kalanick and more board control — that became too problematic for the directors.”

Whitman was again considered for the top position over the weekend, CNBC’s David #Faber reported. Last week, #Whitman reiterated her statement that she would not be Uber’s next CEO, telling The Wall Street Journal that “nothing has changed” since her July 27 tweets, when she stated “I am not going anywhere” and “Uber’s CEO will not be Meg Whitman.”

DILLER  COMMENTS

On August 28, Expedia Chairman and Senior Executive Barry #Diller circulated the following email to Expedia, Inc. employees: “As you probably know by now, Dara #Khosrowshahi has been asked to lead Uber. Nothing has been yet finalized, but having extensively discussed this with Dara I believe it is his intention to accept. I also know the struggle he has been having out of both his abiding enthusiasm for Expedia’s future as well as his loyalty to all of us. I know Dara would like to communicate now with all of you but I’ve asked him not to until this is fully resolved. If #Dara does leave us, it will be to my great regret but also my blessing – he’s devoted 12 great years to building this Company and if this is what he wants for his next adventure it will be with my best wishes. I say that because he deserves nothing less and I say that also because he will leave behind a tremendously talented corps of executives… We both will be back in touch very soon.”

[youtube https://www.youtube.com/watch?v=uGwgk8VvcAk?rel=0&controls=0&showinfo=0&w=560&h=315]

ANALYST REACTION

SunTrust analyst Naved Khan said that the departure of Khosrowshani from Expedia would be “negative” because the CEO has played a role in Expedia’s success. However, #Khan added that the impact on #Expedia’s business would be “minimal,” given what he calls the company’s “deep and seasoned executive bench,” along with the autonomy of its business units. The analyst kept a $190 price target and a Buy rating on shares.

Cowen analyst Kevin #Kopelman had similar views, calling the move a “clear win” for the executive and for Uber and a “major loss” for Expedia. While he expects Expedia shares will likely suffer a selloff on the news, he said Expedia has a strong bench and believes the company is “in good hands” with Mark Okerstrom, who has been CFO and EVP of Operations since 2011. Kopelman has a $170 price target and an Outperform rating on Expedia shares.

JPMorgan analyst Doug #Anmuth believes the potential departure of Expedia CEO Dara Khosrowshahi will weigh on the company’s shares in the very near-term. The exit would come at a critical time for Expedia with its 2016 largely being spent on integrating the Orbitz and HomeAway acquisitions, Anmuth tells investors in a research note. He believes Expedia CFO and EVP of Operations Mark Okerstrom is the most likely candidate to take over as CEO. Okerstrom has been a “strong partner” to Khosrowshahi and would likely ensure a “smooth transition,” the analyst contended.

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PRICE ACTION

Expedia closed at $143.99. Shares have a 52-week trading range of $105.62 – $161.00. Shares have formed a bearish “flag” formation with a potential target of $120.


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Kite Pharma Sold for $11.9 Billion

Gilead to acquire Kite Pharma for $11.9B, or $180 per share in cash

Gilead to acquire Kite Pharma for $11.9B. See Stockwinners.com Market Radar for details

Gilead Sciences (GILD) and Kite Pharma (KITE) announced that the companies have entered into a definitive agreement pursuant to which Gilead will acquire Kite for $180.00 per share in cash.

The transaction, which values Kite at approximately $11.9B, was unanimously approved by both the Gilead and Kite Boards of Directors and is anticipated to close in the fourth quarter of 2017.

The transaction will provide opportunities for diversification of revenues, and is expected to be neutral to earnings by year three and accretive thereafter.

Research and development as well as the commercialization operations for Kite will remain based in Santa Monica, California, with product manufacturing remaining in El Segundo, California.

Under the terms of the merger agreement, a wholly-owned subsidiary of Gilead will promptly commence a tender offer to acquire all of the outstanding shares of Kite’s common stock at a price of $180.00 per share in cash.

Following successful completion of the tender offer, Gilead will acquire all remaining shares not tendered in the offer through a second step merger at the same price as in the tender offer.

The consummation of the tender offer is subject to various conditions, including a minimum tender of at least a majority of outstanding Kite shares on a fully diluted basis, the expiration or termination of the waiting period under the Hart Scott Rodino Antitrust Improvements Act, and other customary conditions. Gilead plans to finance the transaction with a combination of cash on hand, bank debt and senior unsecured notes.

The tender offer is not subject to a financing condition. The $180.00 per share acquisition price represents a 29 percent premium to Kite’s closing on Friday, August 25, and a 50 percent premium to the company’s 30-day volume weighted average stock price.

BofA Merrill Lynch and Lazard are acting as financial advisors to Gilead. Centerview Partners is acting as exclusive financial advisor to Kite. Jefferies LLC and Cowen and Company, LLC also provided advice to Kite.

Skadden, Arps, Slate, Meagher & Flom is serving as legal counsel to Gilead and Sullivan & Cromwell LLP and Cooley LLP are serving as legal counsel to Kite.

Watch blueBird (BLUE)  and Juno Therapeutics (JUNO) as they may move higher on the news.


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Hurricane Harvey to Push Gas Prices Higher

Hurricane Harvey scheduled to make landfall tonight near Corpus Christi, Texas

Refineries have shut down ahead of the storm

Hurricane Harvey to push gas prices higher. See Stockwinners.com Market Radar to read more

Hurricane Harvey is a tropical cyclone currently threatening to make landfall in Texas as a major hurricane, which would be the first storm of such intensity to strike the United States since Wilma in 2005 and the first to hit the state since Ike in 2008. The eighth named storm and third hurricane of the 2017 Atlantic hurricane season.

Currently, Hurricane Harvey is located within 10 nautical miles of 27.1°N 96.3°W, about 85 miles (140 km) east-southeast of Corpus Christi, Texas, or about 90 miles (145 km) south of Port O’Connor, Texas.

REFINERIES and OIL PRODUCTION

Forty-five percent of total U.S. petroleum refining capacity is located along the Gulf Coast. All of these refineries will shut down for safety reasons.

Oil production operations in the Gulf began shutting down Thursday in response to Hurricane Harvey. Here is what is happening so far:

  • Anadarko (APC) has removed all personnel and temporarily shut in production at their Boomvang, Gunnison, Lucius and Nansen facilities, which are located in the western portion of the Gulf.
  • ConocoPhillips (COP) has taken precaution to evacuate all non-essential personnel from our Magnolia platform in the Gulf of Mexico and they have decided to suspend drilling and completion activities in the Eagle Ford and move non-essential personnel and equipment off the drilling rigs.
  • ExxonMobil (XOM) is in the process of evacuating all personnel from their facilities expected to be in the path of the storm, which includes the Hoover platform and Galveston 209 platform. The Hoover and Galveston 209 platforms are shut-in. Their Hadrian South subsea production system in the Gulf of Mexico is also shut-in.
  • Shell (RDS) shut down production and has secured its Perdido asset and is in the process of returning all personnel working on Perdido to shore.
  • Valero (VLO) said Friday completed the process of temporarily closing two refineries in Corpus Christi and Three Rivers.

As of Friday noon, operators had been evacuated from 39 production platforms — about 5.29 percent of the manned platforms in the Gulf — along with one rig.

As part of the evacuation procedures, operators shut the sub-surface safety valves below the surface of the ocean floor, to prevent releasing oil or gas. That means 9.56 percent of the current oil production in the Gulf has been blocked off, equating to 167,231 barrels per day. In addition, 0.04 percent of the natural gas production in the Gulf has been shut down.

Houston also marks the beginning of the Colonial Pipeline, which transports more than 100 million gallons of gasoline, heating oil and aviation fuel each day to as far as the New York harbor. Power outages during Hurricanes Katrina and Rita in 2005 forced the shutdown of parts of the Colonial Pipeline for several days.

FLOODING

Hurricane Harvey’s impact on U.S. oil production could extend beyond offshore platforms and Gulf Coast refineries. Extreme flooding threatens to bring Texas shale activity to a halt, and it may take weeks, if not months, before some shale fields can bounce back.

Texas is by far the largest oil producer in the U.S., and at least part of the oil-rich Eagle Ford shale formation lies in the projected path of the storm.

Motorists across the U.S. might see a spike in gasoline prices following disruptions to offshore rigs, refineries, pipelines and terminals. Pump prices could jump 15 to 25 cents a gallon nationwide.


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March to the End Continues

Sears announces plans to close another 28 Kmarts as SSS drop 11.5%

Sears jumps after announcing latest licensing deals for Kenmore, DieHard brands. See Stockwinners.com Market Radar for details

Shares of Sears Holdings (SHLD) gained in Thursday’s trading after the company’s results were better than analysts were expecting despite a decline in comparable store sales. Sears also announced plans to close an additional 28 Kmart stores.

EARNINGS

Before the market open, Sears reported an adjusted loss per share for the second quarter of ($1.16), which beat analysts’ ($2.48) consensus. Revenue for the quarter of $4.365B also beat estimates of $4.21B, but comparable store sales declined 11.5%.

Kmart comparable store sales decreased 9.4%, with a 6.8% decline excluding the impact of the consumer electronics and pharmacy categories, while Sears comparable store sales declined 13.2%, with a 12.1% decline excluding consumer electronics category, the company said.

Sears said in a statement that the retail environment “remained challenging” in the quarter, noting softness in store traffic and elevated price competition.

Chairman and CEO Edward Lampert said that the third quarter has historically been Sears’ most difficult quarter over the past few years, the company is “encouraged” that July was the best month of the quarter in terms of SSS performance.

COST-CUTTING  EFFORTS

#Lampert said the company is making “significant” progress in its restructuring program. Earlier this year, Sears said there was “substantial doubt” related to its ability to continue as a going concern. The company cited its cost cutting efforts, as well as debt financing actions in the filing.

In May, Sears reported a smaller than expected quarterly loss, saying that while Q1 was challenging, it was committed to returning to “solid financial footing.”

Sears has been trying to cut costs by closing stores, and said that so far this year, it has closed about 180 stores previously announced for closure and an additional 150 stores previously announced for closure are expected to be closed by the end of the third quarter.

Additionally, Sears announced plans today to close an additional 28 Kmart stores “later this year.” Sears said on its earnings call that it is “committed” to evaluating strategic options across its real estate portfolio to unlock value, including in-store partnerships and sub-division opportunities.

WHAT’S  NOTABLE

Earlier this week, Sears signed two licensing agreements intended to expand the reach of its Kenmore and DieHard brands internationally. The licensing deals followed Sears’ recent decision to launch a Kenmore dedicated brand presence on Amazon.com (AMZN).

The Kenmore appliance brand page went live on Amazon last week, marking Amazon’s first and only dedicated brand page for home appliances.

The company also announced the integration of the full line of Kenmore Smart appliances with Amazon Alexa.

RETAIL  ENVIRONMENT

Additionally, Sears and other mall-based retailers and department stores have been hurt by the increasing popularity of fast-fashion retailers like Zara, Forever 21 and H&M, as well as an increase in online shopping on sites such as Amazon.

Macy’s (M), Kohl’s (KSS) both recently reported declining quarterly comp sales, though Kohl’s EPS and revenue narrowly beat estimates.

J.C. Penney (JCP) reported a larger than expected loss for the latest quarter, with its comp sales dropping 1.3%.

Nordstrom (JWN) said in June that members of its founding family formed a group to explore the possibility of pursuing a “going private” transaction, but WWD recently said that the retailer is not in negotiations with “anybody” regarding a potential sale.

PRICE ACTION

Shares of Sears are up almost 6% to $9.05 in late morning trading. Following the merger of Kmart and Sears a few years ago, SHLD traded at $100+ per share. Since the merger, shares have drifted lower, toward zero, as Lampert is dismantling the company and selling it piece by piece. He started with selling the real estate assets and now DieHard and Kenmore are sold.


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Short Squeeze in Signet Jewelers

Signet Jewelers to acquire R2Net for $328M in cash

Signet reports Q2 EPS $1.33, consensus $1.04

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Signet Jewelers (SIG) announced that it has agreed to acquire R2Net for $328M in an all cash transaction.

R2Net is the owner of JamesAllen.com, a fast-growing online jewelry retailer, as well as Segoma Imaging Technologies, who provides R2Net machines to enable delivery of next-generation digital shopping experience for jewelry.

The acquisition will bring together Signet’s jewelry retail business with R2Net’s world-class innovation capabilities and digital technology to create an enhanced customer shopping experience and accelerate Signet’s execution of its Customer-First OmniChannel strategy while adding a fast-growing millennial online retail brand to Signet’s portfolio.

Signet anticipates the transaction to be accretive in the first full year of operations.

ENCOURAGING  RESULTS

Virginia Drosos, the new CEO of Signet Jewelers, said, “Our encouraging second quarter performance reflects Signet’s fundamental competitive strengths and the progress we are making on our strategic priorities. We delivered positive same store sales performance and managed our cost base to deliver operating margin expansion in a highly promotional environment. Further, today we announced the acquisition of JamesAllen.com to add a leading, fast-growing online jeweler to our portfolio. The acquisition will enhance our innovation and digital capabilities with R2Net’s technology to create a best-in-class OmniChannel shopping experience across our banners.

Based on this positive momentum, we are increasingly confident that Signet is well-positioned for the upcoming holiday selling season and on track to achieve our financial targets for the year. I am stepping into the CEO role at an exciting time for Signet.

Together with my leadership team, I am acutely focused on deepening our understanding of consumers, reinventing our OmniChannel shopping experience, and elevating our brand messaging and product assortment.”

Signet Jewelers raises FY18 EPS view to $7.16-$7.56 from $7.00-$7.40 – FY17 consensus $6.66. Sees FY18 SSS down low-mid single-digits.

SHORTS

Prior to the earnings report, shares of Signet Jewelers were trading near their 52-week lows. Shares have been shorted heavily into the earnings report. The short ratio, short interest ratio (SIR) or float short for a public company is the ratio of tradable shares being shorted to shares in the market, or the float. It is an indirect metric of investor sentiment.

A short squeeze is a rapid increase in the price of a stock that occurs when there is a lack of supply and an excess of demand for the stock. Short squeezes result when short sellers cover their positions on a stock, resulting in buying volume that drives the stock price up.

Short Squeeze in Signet Jewelers. See Stockwinners.com Market Radar for details

PRICE ACTION

SIG closed at $51.89. Shares last traded at $60 in pre-market trading.


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Stryker Recalls Oral Care Products

Stryker informs FDA of voluntary product recall involving Oral Care products

Stryker recalls involving Oral Care products. See Stockwinners.com Market Radar

Stryker Corporation (SYK) said that the company has informed the U.S. FDA of a voluntary product recall involving specific lots of Oral Care products sold through the company’s Sage Products business unit.

The recalled products contain Oral Care solutions manufactured for Sage by a third-party supplier and were distributed between July 2015 and August 2017.

The recall is being initiated due to a potential for cross-contamination of Oral Care solutions manufactured by the third party on equipment shared with non-pharmaceutical products, as stated in a Warning Letter from FDA dated July 17, 2017.

To date, Stryker has not been made aware of any serious adverse events associated with the Oral Care products recall.

However, there have been some reports of minor irritation and allergic reaction. Stryker has discontinued business with the third-party supplier and all Oral Care solutions are being manufactured in-house by Sage.

Stryker expects to resume shipping Oral Care products in September and anticipates a return to full supply capacity by year end. Additionally, the FDA Warning Letter sets forth concerns regarding microbiological testing methods used for all products containing solutions sold by Sage.

These include Oral Care solutions in the recalled products and solutions contained in cloth-based products manufactured by Sage.

FDA indicated that products must now be tested using a verified compendial microbiological method, a growth-based method that requires more time to complete than the one previously used at Sage.

Both methods can detect the presence of microorganisms, while the compendial method provides additional information about the type and number of microorganisms. As a result, in August, Stryker placed cloth-based products, which represents approximately 50% of Sage’s revenue, on a temporary ship hold until they are tested using this method.

Stryker anticipates it will resume shipping products manufactured by Sage and tested under the compendial method in September, and anticipates a return to full supply capacity by year end.

SYK closed at $145.51, last traded at $143 in pre-market trading.


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Bear State Financial Sold for $391 Million

Arvest Bank to acquire Bear State Financial for $10.28 per share

Bear State Financial Sold for $391 Million. See Stockwinners.com Market Radar for details.

Bear State Financial, parent company of Bear State Bank (BSF), and Arvest Bank jointly announced the signing of a definitive agreement for Arvest Bank to acquire Bear State in an all-cash transaction valued at approximately $391M, or $10.28 per share of Bear State common stock.

The agreement and plan of reorganization was unanimously approved by the boards of directors of each company.

The transaction is expected to close in Q4 or 1Q18 and is subject to customary conditions, including both regulatory approval and approval by Bear State’s shareholders.

Clients of Bear State Bank and Arvest Bank will not notice any immediate changes, and both banks will continue to conduct business as usual.

At a later date, Bear State Bank’s branding will change to Arvest Bank, with the full conversion of systems expected to occur in 2018.


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Sacramento Container Sold for $265 Million

Packaging Corp. to acquire Sacramento Container Corporation

Packaging Corp. to acquire Sacramento Container Corp. See Stockwinners.com Market Radar to read the details.

Packaging Corporation of America (PKG) announced that it has entered into a definitive agreement to acquire substantially all of the assets of Sacramento Container Corporation, and 100% of the membership interests of Northern Sheets and Central California Sheets in a cash-free, debt-free transaction for a cash purchase price of $265M.

The acquisition transaction is structured as a purchase of assets resulting in a full step-up of the assets to fair market value.

Under the terms of the agreement, PCA will acquire full-line corrugated products and sheet feeder operations in McClellan, California and Kingsburg, California.

The value of the expected synergies, the tax benefit of the step-up of assets and the operations’ EBITDA result in a purchase price multiple of approximately five times EBITDA.

The acquisition will be accretive to earnings immediately. Closing is subject to certain customary conditions and regulatory approval and is expected early in the fourth quarter of 2017. The company plans to finance the transaction with available cash on hand.

WALLULA  MILL   PLANT

Separately, Packaging Corporation of America (PKG) announced that it will discontinue production of uncoated freesheet and coated one-side grades at its Wallula, Washington mill in the second quarter of 2018 to begin the conversion of its 200,000 ton-per-year No. 3 paper machine to a 400,000 ton-per-year high-performance 100% virgin kraft linerboard machine.

The conversion of the No. 3 paper machine at the Wallula Mill is planned for the second quarter of 2018 with an initial production rate of approximately 60 percent of capacity.

Ultimately, production will increase to 1,150 tons per day once a new headbox, forming section, and shoe press are added in the fourth quarter of 2018. The capital cost of the conversion is expected to be approximately $150M.

Discontinuing paper operations at the Wallula Mill will result in pre-tax cash severance and other shutdown charges of approximately $20M-$25M and approximately $45M-$55M of pre-tax noncash asset impairment and accelerated depreciation charges. Charges of $25M-$35M are expected to be recorded in the third quarter of 2017.

The Mill’s No. 2 paper machine will continue to produce 150,000 tons-per-year of semi-chemical medium.

PCA Chairman and CEO Mark Kowlzan said, “Our strategy is to improve the overall profitability of the paper business for PCA by focusing our people and investments on increasing our competitiveness and ensuring a sustainable future in the office and printing & converting markets with our mills in International Falls, MN and Jackson, AL.

In addition, at our current containerboard integration rate of 95%, the low-cost conversion of the No. 3 paper machine at our Wallula Mill provides us with much needed linerboard capacity, allows us to integrate over 200,000 tons of containerboard to our Sacramento Container acquisition, and enables further optimization and enhancement of our current mill capacity and box plant operations. The conversion will significantly enhance the mill’s profitability and viability.”


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