Toronto’s WSP Global buys Ecology & Environment

Ecology & Environment to be acquired by WSP Global for $65.1M

Ecology and Environment announced that it has entered into a definitive merger agreement with WSP Global, pursuant to which WSP will acquire E & E for cash.

EEI sold for $65.1M, Stockwinners

E & E has approximately 775 employees, predominantly in offices across the United States, with an additional presence in Latin America. With its US operations representing approximately 80% of its 2018 $US 73.5 million in net revenues, E & E’s portfolio includes work on the New York State Offshore Wind Master Plan, Climate Change Adaptation Planning in San Mateo County, California, and work on large federal programs with agencies including the US Environmental Protection Agency, the US Army Corps of Engineers, and the US Navy.

Under the terms of the agreement, E & E’s shareholders will receive $15.00 in cash, and a special dividend of up to 50c, for each share of Class A and Class B common stock they own. The special dividend is conditioned on and will be paid following the completion of the transaction and is subject to downward adjustment in certain circumstances.

WSP buys EEI for $65.1 M.

Under the terms of the Agreement, the merger consideration is approximately $US65.1 million in the aggregate, including a special dividend of approximately $US 2.2 million.

The merger agreement and the transaction have been unanimously approved by E & E’s Board of Directors.

In addition, E & E’s founders Frank Silvestro, Ronald Frank and Gerald Strobel, a trust affiliated with E & E’s late founder Gerhard Neumaier, each member of E & E’s Board of Directors and affiliates of Mill Road Capital have all signed voting agreements in support of the transaction.

The merger consideration, together with the special dividend of up to 50c, represents a premium of approximately 52.9% over E & E’s closing share price of $10.14 on August 27, 2019.

The merger agreement provides for a “go-shop” period of 30 days, during which E & E – with the assistance of Robert W. Baird & Co. Incorporated – will contact and potentially enter into negotiations with, and provide due diligence access to, third parties that offer potentially superior proposals to the proposed transaction with WSP.

E & E will have the right to terminate the merger agreement to enter into a superior proposal subject to the conditions and procedures specified in the merger agreement.

There can be no assurance this process will result in a superior proposal. E & E does not intend to disclose developments about this process unless and until the Board has made a decision with respect to any potential superior proposal.

The closing of the transaction is subject to customary closing conditions, including the approval of E & E’s shareholders and applicable regulatory approvals.

The parties are targeting a closing in the fourth quarter of calendar year 2019, subject to receipt of applicable regulatory approvals.

Alexandre L’Heureux, President and Chief Executive Officer of WSP, said, “We are pleased by the opportunity to have E & E join WSP, as we share a similar culture and strategy, centered around employees and clients. This Acquisition, which is in line with our 2019-2021 Global Strategic Plan, will enable us to increase both our Strategic Advisory Services offering and our presence in the United States, most particularly the US governmental sector. E & E, which is recognized for its expertise in environment, has built experience in sectors and services that WSP had targeted for growth, including environmental impact assessment, emergency planning and management, as well as site restoration.”

EEI is up $5.05 to $15.05.

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Fiat Chrysler propose to merge with Renault

Fiat Chrysler proposes to 50/50 merger agreement with Renault

Chinese automakers weigh bids for FCA. See Stockwinners.com Market Radar for details
Fiat Chrysler propose to merge with Renault, Stockwinners

Fiat Chrysler Automobiles N.V. (FCAU) announced that it has delivered a non-binding letter to the board of Renault (RNLSY) proposing a combination of their respective businesses as a 50/50 merger.

The FCA proposal follows initial operational discussions between the two companies to identify products and geographies where they could collaborate.

Fiat Chrysler propose to merge with Renault, Stockwinners

Fiat said, “These discussions made clear that broader collaboration through a combination would substantially improve capital efficiency and the speed of product development. The case for combination is also strengthened by the need to take bold decisions to capture at scale the opportunities created by the transformation of the auto industry in areas like connectivity, electrification and autonomous driving…The combined business would sell approximately 8.7 million vehicles annually, would be a world leader in EV technologies, premium brands, SUVs, pickup trucks and light commercial vehicles and would have a broader and more balanced global presence than either company on a standalone basis.”

Under the terms of the proposal, shareholders in each company would receive an equivalent equity stake in the combined company.

The combination would be carried out as a merger transaction under a Dutch parent company.

The board of the combined entity would initially be composed of 11 members, with the majority being independent and with equal representation of four members each for both FCA and Groupe Renault, as well as one nominee from Nissan.

Further, there would be no carryover of existing double voting rights.

However, all shareholders would have the opportunity to earn loyalty voting rights from the completion of the transaction under a loyalty voting program.

The parent company would be listed on the Borsa Italiana, Euronext and the New York Stock Exchange. Before the transaction is closed, to mitigate the disparity in equity market values, Fiat said its shareholders would also receive a dividend of EUR $2.5B.

In addition, prior to closing, there would be a distribution of Comau’s shares to Fiat’s shareholders or an incremental EUR $250M dividend if the Comau spin-off does not occur.

The combination is expected to deliver in excess of EUR $5B of annual run rate synergies, incremental to existing Alliance synergies.

Renault’s Response

Renault announced that its board met today to examine the proposal received from Fiat Chrysler Automobiles (FCAU) regarding a potential 50/50 merger between Renault S.A. and Fiat.

Renault said, “After careful review of the terms of FCA’s friendly proposal, the Board of Directors decided to study with interest the opportunity of such a business combination, comforting Groupe Renault’s manufacturing footprint and creating additional value for the Alliance.

A further communication will be issued in due course to inform the market of the results of these discussions, in accordance with applicable laws and regulations.”

FCAU closed at $12.85. RNLSY closed at $11.18.

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Advanced Disposal sold for $4.9 billion

Waste Management to acquire Advanced Disposal Services for $33.15 per share

Advanced Disposal sold for $4.9B, Stockwinners

Waste Management (WM) and Advanced Disposal Services (ADSW) announced that they have entered into a definitive agreement under which a subsidiary of Waste Management will acquire all outstanding shares of Advanced Disposal for $33.15 per share in cash, representing a total enterprise value of $4.9B when including approximately $1.9B of Advanced Disposal’s net debt.

The per share price represents a premium of 22.1% to Advanced Disposal’s closing share price as of April 12, the last trading day prior to today’s announcement, and a premium of 20.9% to Advanced Disposal’s 30-day volume weighted average price as of the same date.


Transaction to close by the first quarter of 2020, Stockwinners

The transaction is not subject to a financing condition. Waste Management intends to finance the transaction using a combination of bank debt and senior notes.

Advanced Disposal Services provides non-hazardous solid waste collection, transfer, recycling, and disposal services. The company is involved in the curbside collection of residential refuse from small carts or containers into collection vehicles for transport to a disposal/recycling site. The company serves approximately 2.8 million residential customers; 200,000 commercial and industrial customers; and 800 municipalities in the Southeast, Midwest, and Eastern regions of the United States, as well as the Commonwealth of the Bahamas.

Following completion of the transaction, Waste Management expects to maintain a strong balance sheet and solid investment grade credit profile with a pro forma leverage ratio within the company’s long-term targeted net debt-to-EBITDA range of 2.75x to 3.0x.

The transaction, which was unanimously approved by the boards of directors of both companies, is expected to close by the first quarter of 2020, subject to the satisfaction of customary closing conditions, including regulatory approvals and approval by a majority of the holders of Advanced Disposal’s outstanding common shares.

In connection with the definitive agreement, Canada Pension Plan Investment Board, which owns approximately 19% of Advanced Disposal’s outstanding shares, has, under the terms of a voting agreement, agreed to vote its shares in favor of the transaction.

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Rig counts declined by three

  • Baker Hughes reports U.S. rig count down 3 to 1,022 rigs last week
  • The U.S. Rig Count is up 14 rigs from last year’s count of 1,008
Oil Rigs, See Stockwinners.com Market Radar to read the latest on oil and rig count
Rig counts declined by three, See Stockwinners.com

Baker Hughes (BHGE) reports that the U.S. rig count is down 3 rigs from last week to 1,022, with oil rigs up 2 to 833, gas rigs down 5 to 189, and miscellaneous rigs unchanged at 0.

The U.S. Rig Count is up 14 rigs from last year’s count of 1,008, with oil rigs up 18 to 833, gas rigs down 3 to 189, and miscellaneous rigs down 1.

The U.S. Offshore Rig Count is up 1 rig to 23 and up 7 rigs year-over-year.

The Canada Rig Count is down 2 rigs from last week to 66, with oil rigs down 4 to 18 and gas rigs up 2 to 48.

The Canada Rig Count is down 36 rigs from last year’s count of 102, with oil rigs down 23 and gas rigs down 13.

Crude oil (WTI) is up 66 cents to $64.25 per barrel. Brent crude is up 95 cents to $64.27 per barrel.

The international offshore rig count for April 2018 was 194. Stockwinners
Oil is higher on the new, Stockwinners

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FDA to hold hearing on cannabis products

FDA to hold hearing on potential regulatory pathways for cannabis products

FDA to evaluate cannabis use, Stockwinners

The FDA issued a statement from outgoing Commissioner Scott Gottlieb on new steps to advance the agency’s continued evaluation of potential regulatory pathways for cannabis-containing and cannabis-derived products, in which he stated in part:

“In recent years, we’ve seen a growing interest in the development of therapies and other FDA-regulated consumer products derived from cannabis and its components, including cannabidiol, or CBD…We also recognize that stakeholders are looking to the FDA for clarity on how our authorities apply to such products, what pathways are available to market such products lawfully under these authorities, and how the FDA is carrying out its responsibility to protect public health and safety with respect to such products.”

The FDA is announcing a number of new steps and actions to advance its consideration of a framework for the lawful marketing of appropriate cannabis and cannabis-derived products under its existing authorities, Gottlieb said.

These new steps include:

A public hearing on May 31, as well as a broader opportunity for written public comment, for stakeholders to share their experiences and challenges with these products, including information and views related to product safety;

The formation of a high-level internal agency working group to explore potential pathways for dietary supplements and/or conventional foods containing CBD to be lawfully marketed; including a consideration of what statutory or regulatory changes might be needed and what the impact of such marketing would be on the public health;

Updates to its webpage with answers to frequently asked questions on this topic to help members of the public understand how the FDA’s requirements apply to these products;

and the issuance of multiple warning letters to companies marketing CBD products with “egregious and unfounded claims that are aimed at vulnerable populations.”

Publicly traded companies in the cannabis space include Aphria (APHA), Aurora Cannabis (ACB), CV Sciences (CVSI), CannTrust Holdings (CNTTF), Canopy Growth (CGC), Cronos Group (CRON), General Cannabis (CANN), India Globalization Capital (IGC), MediPharm Labs (MLCPF) and Tilray (TLRY).

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Cannabis stocks rise amid interest by Coca-Cola

Cannabis stocks rise amid interest by Coca-Cola, opportunities for Shopify

Cannabis stocks rise amid interest by Coca-Cola, Stockwinners
Cannabis stocks rise amid interest by Coca-Cola, Stockwinners

Shares of cannabis stocks are in focus following a report that Coca-Cola (KO) is in talks with Aurora Cannabis (ACBFF) as it eyes the cannabis industry and an analyst note from Keybanc which said Shopify (SHOP) has cannabis potential.

COCA-COLA EYES CANNABIS

Coca-Cola is monitoring the nascent cannabis drinks industry and is in talks with Canadian marijuana producer Aurora Cannabis to develop the drinks, Bloomberg reported Monday.

“We are closely watching the growth of non-psychoactive CBD as an ingredient in functional wellness beverages around the world,” Coca-Cola spokesman Kent Landers said. “The space is evolving quickly. No decisions have been made at this time” Landers added.

The move comes as beverage makers are looking towards cannabis as soda consumption and traditional business slows.

Constellation Brands (STZ, STZ.B) previously announced it will spend $3.8B to increase its stake in Canadian marijuana producer Canopy Growth (CGC) and Molson Coors Brewing (TAP) is starting a joint venture with Quebec’s Hydropothecary to develop cannabis drinks.

In addition, Diageo (DEO) has been holding talks with at least three Canadian cannabis producers regarding a potential deal and Heineken’s (HEINY) Lagunitas label has launched a brand focused on non-alcoholic drinks infused with THC.

SHOPIFY MAY BENEFIT FROM CANNABIS SALES

KeyBanc analyst Monika Garb told investors in a research note on Monday that she is a buyer of Shopify, as the company has “ample” growth opportunities ahead.

She sees potential upside to her above-consensus estimates and expects that recreational sales of cannabis in Canada could be a general merchandise volume and revenue driver further benefiting Shopify’s business momentum.

The analyst said the company has been selected by several Canadian provinces to run their e-commerce sites and in-store point of sale solutions and has also signed deals with private cannabis producers and distributors, including Canopy Growth and Aurora.

Additionally, Garb says Shopify is the best positioned to benefit from growth in emerging brands, citing brands like Rebecca Minkoff and Kyle Cosmetics that already use Shopify. Garb maintained an Overweight rating and $182 price target on shares.

CANNABIS STOCKS

Publicly-traded companies in the space include Cronos Group (CRON), Canopy Growth, Tilray (TLRY), Cannabis Science (CBIS), Innovative Industrial Properties (IIPR) and Aurora Cannabis.

PRICE ACTION:

Aurora Cannabis gained over 16% in Monday’s trading, while Tilray gained 7.3%.


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Shopify little changed after Q2 results

Analysts diverge on Shopify after quarterly results

Shopify little changed after Q2 results, Stockwinners
Shopify little changed after Q2 results, Stockwinners

Following the company’s second quarter results, Piper Jaffray analyst Michael Olson downgraded Shopify (SHOP) to Neutral saying the quarter was “not good enough” and the stock’s valuation fairly reflects current business trends.

Meanwhile, his peers at Baird and Canaccord both reiterated buy-equivalent ratings and raised their price targets on the shares following what they view as a “solid” quarter.

RESULTS

Shopify reported second quarter adjusted earnings per share of 2c and revenue of $245M, above consensus of (3c) and $234.64M, respectively.

GMV for the second quarter was $9.1B, an increase of 56% over the second quarter of 2017, and Gross Payments Volume, or “GPV,” grew to $3.6B.

The company said it sees third quarter revenues between $253M-$257M, third quarter GAAP operating loss in the range of $40M-$42M and adjusted operating loss in the range of $9M-$11M.

Additionally, Shopify said it expects FY18 revenues between $1.015B-$1.025B, FY18 GAAP operating loss in the range of $105M-$110M and adjusted operating profit in the range of $0-$5M.

PIPER MOVING TO THE SIDELINES

In a research note to investors, Piper Jaffray’s Olson downgraded Shopify to Neutral from Overweight and lowered his price target to $145 from $155 as he believes the stock’s current valuation adequately reflects the long-term growth story.

The analyst argued that the company’s second quarter was “good, but not good enough,” with monthly recurring revenue below investor expectations with a deceleration from 57% to 49% year-over-year growth between Q1 and Q2.

While Olson acknowledged that Shopify is performing well, the analyst told investors he believes this performance is mostly reflected in the shares’ valuation.

‘SOLID  QUARTER’

Still bullish on the name, Canaccord Genuity analyst David Hynes told investors to not let yesterday’s post-earnings selloff in shares of Shopify confuse them on the fundamentals.

The analyst believes this was another “solid” quarter for Shopify as the company grew its nearly $1B revenue run-rate at 62% in the quarter.

Further, Hynes pointed out that he does not believe Shopify’s growth is decelerating faster than expected or that merchant churn is “going to sneak up and bite” the company.

He continues to believe that Shopify is one of the best-positioned growth stories in application software, and is confident that this business will ultimately scale to material profits. Hynes reiterated a Buy rating on the shares, while raising his price target on the stock to $165 from $160.

Meanwhile, Baird analyst Colin Sebastian also raised his price target for Shopify to $165 from $150 and reiterated an Outperform rating on the shares. While acknowledging that slowing monthly recurring revenue growth, a new shelf filing and its third quarter loss guidance weighed on the shares, the analyst said that this was another “solid” quarter for the company.

Ramping Plus adoption, international expansion, and new Merchant Solutions features should continue to drive significant growth, he contended. Sebastian told investors that he continues to like Shopify based on the significant e-commerce growth opportunity and defensible market leadership position he sees being demonstrated in the second quarter results.

PRICE ACTION

In Wednesday morning trading, shares of Shopify were fractionally down to $137.60.


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SoftBank to invest $2.25B in GM

SoftBank Vision Fund to invest $2.25B in GM Cruise 

 

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SoftBank Vision Fund to invest $2.25B in GM Cruise 

General Motors (GM) announced that the SoftBank Vision Fund will invest $2.25B in GM Cruise Holdings, further strengthening the company’s plans to commercialize AV technology at large scale.

GM will also invest $1.1B in GM Cruise upon closing of the transaction.

“Our Cruise and GM teams together have made tremendous progress over the last two years,” said GM Chairman and CEO Mary Barra.

“Teaming up with SoftBank adds an additional strong partner as we pursue our vision of zero crashes, zero emissions and zero congestion.”

“GM has made significant progress toward realizing the dream of completely automated driving to dramatically reduce fatalities, emissions and congestion,” said Michael Ronen, managing partner, SoftBank Investment Advisers.

“The GM Cruise approach of a fully integrated hardware and software stack gives it a unique competitive advantage. We are very impressed by the advances made by the Cruise and GM teams, and are thrilled to help them lead a historic transformation of the automobile industry.”

The SoftBank Vision Fund investment will be made in two tranches.

At the closing of the transaction, the Vision Fund will invest the first tranche of $900M. At the time that Cruise AVs are ready for commercial deployment, the Vision Fund will complete the second tranche of $1.35B, subject to regulatory approval.

Together, this will result in the SoftBank Vision Fund owning a 19.6-percent equity stake in GM Cruise and will afford GM increased flexibility with respect to capital allocation.

The GM and SoftBank Vision Fund investments are expected to provide the capital necessary to reach commercialization at scale beginning in 2019.

GM (GM) Chairman and CEO Mary Barra confirmed the automaker’s plans to launch an autonomous ride-hailing vehicle in 2019.

President Dan Ammann noted that talks with SoftBank occurred over the course of several months. He said GM wasn’t looking for a partner, but found one that was “uniquely aligned” with it.

Ammann added that the Cruise team has grown to over 800 since the acquisition two years ago. He said the decision to report GM Cruise as a standalone segment is intended to enhance transparency around this part of the business.

ANALYST COMMENTS

Evercore ISI analyst George Galliers upgraded General Motors (GM) to Outperform from In Line after SoftBank’s (SFTBF) Vision Fund agreed to invest in the company’s Cruise autonomous driving unit in a deal that values the unit at $11.5B.

Galliers said he had been assigning no value to the Cruise assets before the announcement.

Under his new sum-of-the-parts valuation, Galliers applies a 6.0x multiple on GM’s core, attributes a value of about $8 per share for the Cruise assets and about 60c per share for GM’s stake in Lyft before applying a 25% discount to both of the latter. He raised his price target on GM shares to $50 from $47.


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Student Transportation sold for $7.50 a share

Student Transportation to be acquired by investors led by CDPQ

Student Transportation sold for $7.50 a share. Stockwinners.com
Student Transportation sold for $7.50 a share.

Student Transportation (STB) announced that it entered into a definitive agreement with a company sponsored by Caisse de depot et placement du Quebec and Ullico Inc. pursuant to which the Purchaser Group will acquire all of the company’s outstanding common shares by way of a plan of arrangement under the Business Corporations Act.

Student Transportation Inc. (STB) provides school bus transportation and management services to public and private schools in North America. The company offers contracted, managed, special needs transportation, direct-to-parent, and charter services. It operates approximately 290 contracts with a fleet of 13,000 vehicles.

Shareholders of STI will receive $7.50 per common share in cash, representing a 27% premium to the 20-day volume weighted average price per common share on the Toronto Stock Exchange for the period ending February 27, 2018, based on an exchange rate of $1.2776 Canadian dollars per U.S. dollars as of February 27, 2018.

Holders of STI’s 6.25% Convertible Unsecured Subordinated Debentures will receive the product of $7.50 and the number of Common Shares that the holders would be entitled to receive upon the conversion of their 2013 Debentures in accordance with their terms immediately following the closing date of the Arrangement, including those issuable upon a “Cash Change of Control”, plus the sum of accrued and unpaid interest on such debentures up to but excluding the Closing Date and the interest that would have otherwise accrued from and including the Closing Date to but excluding 32 days thereafter.

Holders of STI’s 5.25% Convertible Unsecured Subordinated Debentures will receive the product of $7.50 and the number of Common Shares that the holders would be entitled to receive upon the conversion of their 2016 Debentures in accordance with their terms immediately following the Closing Date, including those issuable upon a “Cash Change of Control”, plus the sum of accrued and unpaid interest on such debentures up to but excluding the Closing Date and the interest that would have otherwise accrued from and including the Closing Date to but excluding 32 days thereafter.


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Ply Gem sold for $2.4B

Ply Gem to be acquired by Clayton, Dubilier & Rice in deal valued at $2.4B

Ply Gem to be acquired by Clayton, Dubilier & Rice in deal valued at $2.4B. Stockwinners.com
Ply Gem sold for $2.4B

Ply Gem Holdings (PGEM) and Clayton, Dubilier & Rice announced a definitive agreement under which CD&R funds will acquire all of the outstanding shares of Ply Gem common stock in a go-private transaction valued at approximately $2.4B.

Ply Gem’s board of directors unanimously approved the agreement, which provides for the payment of $21.64 per share in cash to all holders of Ply Gem common stock.

The cash purchase price represents a premium of approximately 20% over Ply Gem’s closing stock price on January 30, 2018.

Promptly following entry into the agreement, stockholders holding greater than 50% of the outstanding shares of Ply Gem common stock executed a written consent to approve the transaction, thereby providing the required stockholder approval.

CD&R has also entered into a definitive agreement to acquire Atrium Windows & Doors and combine the company with Ply Gem to create an exterior building products company with total revenue of more than $2.4B in 2017.

The transactions are expected to close simultaneously in the second quarter of 2018 and are subject to the receipt of customary closing conditions, including regulatory approvals.

Closing of the acquisition of Ply Gem is not subject to the closing of the acquisition of Atrium.

However, assuming both transactions close simultaneously, CD&R funds will own approximately 70% of the new privately-held company, and Atrium shareholders, which include funds managed by Golden Gate Capital, will hold approximately 30%.

The new Ply Gem will continue to be headquartered in Cary, NC, and Gary E. Robinette, currently Chairman and CEO of Ply Gem, will continue as Chairman and CEO. John Krenicki, a CD&R Operating Partner and former Vice Chairman of General Electric Company, will become Lead Director of the Board.

Ply Gem Holdings, Inc. manufactures and sells residential and commercial building products primarily in the United States and Canada.


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Boeing reports tomorrow

What to watch in Boeing’s earnings report 

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Boeing reports tomorrow

Boeing (BA) is scheduled to report results of its fiscal fourth quarter before the market opens on Wednesday, January 30, with a conference call scheduled for 10:30 am ET.

What to watch for:

1. GUIDANCE:

When Boeing reported its fiscal third quarter results on October 25, 2017, the company increased its fiscal 2017 adjusted earnings per share view to $9.90-$10.10 from $9.80-$10.00, against consensus estimates of $10.04 at that time, and reaffirmed its FY17 revenue expectations of $90.5B-$92.5B, against analyst estimates of $92.15B.

Current consensus estimates sit at $10.21 and $92.55B, respectively. The company also backed its FY17 commercial airplane deliveries view of 760-765.

2. CAPITAL RETURNS:

On December 11, 2017, Boeing announced a new $18B share repurchase program and a 20% increase to its quarterly dividend. The board declared the dividend will increase 20% to $1.71 per share.

The board also replaced the existing share repurchase program with a new $18B authorization. The new dividend will be payable March 2, 2018, to shareholders of record as of February 9, 2018.

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Defense spending increase should help Boeing

The company this year has repurchased $9.2B worth of its shares from the $14B authorization approved in December 2016. The new repurchase program replaces the existing one, bringing the total authorization to $18B.

3. ANTI-DUMPING:

On December 20, 2017, U.S. Secretary of Commerce Wilbur Ross announced the affirmative final determinations in the antidumping duty and countervailing duty investigations of 100-seat to 150-seat large civil aircraft from Canada.

“This decision is based on a full and unbiased review of the facts in an open and transparent process.” said Secretary Ross.

“The United States is committed to a free, fair, and reciprocal trade and will always stand up for American workers and companies being harmed by unfair imports.”

Commerce determined that exporters from Canada sold 100- to 150-seat large civil aircraft in the United States at 79.82% less than fair value.

Commerce also determined that Canada is providing unfair subsidies to its producers of 100- to 150-seat large civil aircraft at a rate of 212.39%. Commerce will instruct U.S. Customs and Border Protection to collect cash deposits from importers of 100- to 150-seat large civil aircraft based on the final rates.

Bombardier (BDRBF), the Government of Canada, and Petitioners agreed that the proposed transaction between Bombardier and Airbus (EADSY) does not impact these investigations.

4. EMBRAER

Boeing confirmed takeover talks with Embraer (ERJ) during the quarter. The Brazilian government, which owns a golden share in Embraer, represents a potential hurdle in the deal.

Investors should look for more guidance on this topic when Boeing reports. BA last traded at $337.10.


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HSBC to pay more than $100M to resolve fraud charges

HSBC agrees to pay more than $100M to resolve fraud charges 

HSBC to pay more than $100M to resolve fraud charges. Stockwinners.com
HSBC to pay more than $100M to resolve fraud charges

HSBC Holdings (HSBC) has entered into a deferred prosecution agreement and agreed to pay a $63.1M criminal penalty and $38.4M in disgorgement and restitution to resolve charges that it engaged in a scheme to defraud two bank clients through a multi-million dollar scheme commonly referred to as “front-running,” the DOJ confirmed.

The DPA, which was filed in connection with a two-count criminal information charging wire fraud in the United States District Court for the Eastern District of New York, is pending review by the Court.

According to HSBC’s admissions, on two separate occasions in 2010 and 2011, traders on its foreign exchange desk misused confidential information provided to them by clients that hired HSBC to execute multi-billion dollar foreign exchange transactions involving the British Pound Sterling.

After executing confidentiality agreements with its clients that required the bank to keep the details of their planned transactions confidential, traders on HSBC’s foreign exchange desk transacted in the Pound Sterling for the traders and HSBC’s own benefit in their HSBC “proprietary” accounts.

In total, HSBC admitted to making profits of approximately $38.4M on the first transaction in March 2010, and approximately $8M on the Cairn Energy transaction in December 2011.

HSBC did not receive credit for voluntarily disclosing the misconduct.

HSBC received substantial cooperation credit because, although as detailed in the DPA, the bank’s initial cooperation with the government’s investigation was deficient in certain respects, after being notified of the Department’s concerns, HSBC changed course and its cooperation improved substantially.


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Amazon names 20 finalists in race for second headquarters

Amazon names 20 finalists in race for second headquarters

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Amazon names 20 finalists in race for second headquarters

Shares of Amazon.com (AMZN) are in focus in morning trading after the company shortlisted 20 metropolitan areas for its new headquarters.

Among the candidates are New York City, Boston, Toronto, and Atlanta.

AMAZON NARROWS CHOICES FOR NEW HQ

Amazon on Thursday announced a narrowed down list of 20 metropolitan cities for its planned second headquarters.

The finalists, whittled down from 283 places that applied in October, include New York City, Boston, Atlanta and Chicago, which all have access to airports and mass transportation.

Other candidates include Dallas, Columbus, Denver, Newark, Philadelphia, Miami, Washington D.C., Toronto, Chicago, Los Angeles, Nashville and Indianapolis.

Amazon said it expects to create as many as 50,000 jobs that will be “high-paying” and generate more than $5B in investments over the next 10-15 years.

In addition to Amazon’s direct hiring and investment, construction and ongoing operation of Amazon HQ2 is expected to create tens of thousands of additional jobs and tens of billions of dollars in additional investment in the surrounding community, Amazon said.

In a statement, Holly Sullivan of Amazon Public Policy, said that “getting from 238 to 20 was very tough — all the proposals showed tremendous enthusiasm and creativity. Through this process we learned about many new communities across North America that we will consider as locations for future infrastructure investment and job creation.”

WHAT’S NOTABLE

Amazon solicited proposals in September for its second corporate headquarters.

In its request for proposals, Amazon said it was looking for a metro area with at least 1M residents, proximity to an international airport, mass transit and amenities that give it the “potential to attract and retain strong technical talent.”

The company plans to make a decision this year and will continue discussions with the 20 finalists, it said.

Amazon is also planning to grow in Seattle. In an interview with The Wall Street Journal in late 2017, Jeff Wilke, Amazon’s CEO of Worldwide Consumer, said the company planned to add 2M square feet and 6,000 people over 12 months to the Seattle headquarters.

RECENT TRUMP COMMENTS

President Donald Trump tweeted critically about the company on December 29, calling on the U.S. Postal Service to charge the online retailing giant “much more” for shipping.

Trump tweeted, “Why is the United States Post Office, which is losing many billions of dollars a year, while charging Amazon and others so little to deliver their packages, making Amazon richer and the Post Office dumber and poorer? Should be charging MUCH MORE!”

Stockwinners.com believers Toronto will be the winning city, given Trump’s hostile immigration policy. Amazon hires a large number of technical staff from other countries and an immigration-friendly policy of Canada makes a lot of sense for the company. The company already has a huge presence in that city.


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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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Teva Pharmaceutical suspends its dividend

Teva to cut over 25% of workforce, suspends dividend 

14,000 people will lose their jobs

Teva suspends its dividend

Teva Pharmaceutical Industries (TEVA) announced a restructuring plan intended to “significantly reduce its cost base, unify and simplify its organization and improve business performance, profitability, cash flow generation and productivity.”

The two year restructuring plan is intended to reduce Teva’s total cost base by $3B by the end of 2019, out of an estimated cost base for 2017 of $16.1B.

More than half of the reduction is expected to be achieved by the end of 2018.

The company expects to record a restructuring charge as a result of the implementation of the plan in 2018 of at least $700M, mainly related to severance costs, with additional charges possible following decisions on closures or divestments of manufacturing plants, R&D facilities, headquarters and other office locations.

These steps are expected to result in the reduction of 14,000 positions globally – excluding the impact of any future divestments – over 25% of Teva’s total workforce – over the next two years.

The majority of the reductions are expected to occur in 2018, with most of the affected employees being notified within the next 90 days.

Restructuring efforts will be done in accordance with applicable local requirements.

Consultations with the relevant employee representatives will begin in the near term.

In addition to the restructuring plan, Teva is announcing the following measures to address the company’s financial situation: The company will immediately suspend dividends on ordinary shares and ADSs, while dividends on mandatory convertible preferred shares will be evaluated on a quarterly basis per current practice; Teva’s annual bonus for 2017 will not be paid due to the fact that the company’s financial results are significantly below our original guidance for the year; The company will continue to review the potential for additional divestment of non-core assets;

Teva will provide full guidance for 2018 in February with the annual results and will share a longer-term strategic direction for the company later in 2018.

TEVA closed at $15.70. It last traded at $17.65.


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