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.

STOCKWINNERS

To read timely stories similar to this, along with money making trade ideas, sign up for a membership to Stockwinners.

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.

Canary in the mine, Homebuilders

Homebuilders continue tumble as Credit Suisse downgrades several in space

Visit Stockwinners for stock research
Homebuilder shares tumble; Stockwinners

Many believe that housing market is the engine of the economy. If that is the case, we should expect a slow down in the economy. Housing prices have always been one of the first indicators of a slowdown or a coming out of a recession for the economy. We should brace ourselves for lower home prices!

Shares of homebuilders continued their decline after an analyst at Credit Suisse downgraded several companies in the space, saying that she expects more tempered demand and rising affordability concerns to weigh on homebuilding sentiment and broader group valuation, offsetting any near-term earnings beats.

A different analyst at the firm downgraded home improvement retailers Home Depot (HD) and Lowe’s (LOW) this morning, due to his concern that their recent results and stock prices have disconnected from housing.

HOMEBUILDERS DOWNGRADED

Credit Suisse analyst Susan Maklari told investors in a research note this morning that although she believes housing and macro fundamentals remain “intact,” including high consumer confidence and sustained low unemployment, unit gains are likely to moderate.

She sees any near-term earnings beats to be offset by even more tempered demand and rising affordability concerns. She sees average order growth for 2019 of 8%, compared to 11% in 2018 and 12% in 2017, and sees “relative” outperformance from builders who are able to capture above-trend gains due to product mix, like D.R. Horton (DHI), and geographic positioning, like PulteGroup (PHM). Maklari downgraded Lennar (LEN) and Meritage Homes (MTH) to Neutral from Outperform and lowered her respective price targets for the shares to $45 from $55 and to $36 from $50.

The analyst sees more limited upside to Lennar looking ahead as its strategic initiatives, as well as geographic exposure, are reflected in its current valuation.

While Meritage has benefited from efforts to drive improvements in operations in its East region as well as the rollout of its entry level targeted homes, Maklari believes much of the initial gains have been captured and she expects limited upside to the current valuation as comparisons become more difficult.

The analyst also downgraded KB Home (KBH) to Underperform from Neutral and lowered her price target to $18 from $27, saying that over the last several months her channel checks and Realtor Survey have pointed to slowing demand in higher cost MSAs, including California, which accounted for about 50% of the company’s 2017 revenues.

HOME DEPOT, LOWE’S ALSO DOWNGRADED

Another analyst at Credit Suisse, Seth Sigman, this morning downgraded Home Depot and Lowe’s, both to Neutral from Outperform, citing his concern that their recent results and stock prices have disconnected from housing. In a research note of his own, Sigman said his key concern is that home prices will continue to moderate, at least temporarily, as higher rates weigh on affordability.

Overall, Sigman still sees EPS growing, but sees less upside over the next 12 months relative to current estimates.

The analyst continues to view Home Depot as best-in-class in retail, but struggles to find multiple upside from its current premium level as housing sentiment shifts and some uncertainty arises. While he continues to expect meaningful improvement in sales and operating profit at Lowe’s under new CEO Marvin Ellison, Sigman thinks consensus estimates are baking that in. The analyst cut his price target on Home Depot to $204 from $222 and on Lowe’s to $111 from $115.

PRICE ACTION

Shares of Lennar dropped 3%, while Meritage Homes dropped 6.6% and KB Home declined 4.4%. Other homebuilders were dragged lower, including D.R. Horton, PulteGroup and Toll Brothers (TOL), which are all down over 3%.

Additionally, Home Depot and Lowe’s both declined over 4%. Further, XHB, the homebuilding ETF, is down nearly 3% today and about 10% month-to-date.


STOCKWINNERS

To read timely stories similar to this, along with money making trade ideas, sign up for a membership to Stockwinners.

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.

A.V. Homes sold for $963 million

Taylor Morrison to acquire A.V. Homes for $21.50 per share

A.V. Homes sold for $963 million, Stockwinners
A.V. Homes sold for $963 million

Taylor Morrison Home (TMHC) and AV Homes (AVHI) announced that they have entered into a definitive agreement pursuant to which Taylor Morrison will acquire all of the outstanding shares of AV Homes common stock at $21.50 per share in a cash and stock transaction valued, including outstanding AV Homes debt, at approximately $963M.

The transaction has been unanimously approved by the boards of both Taylor Morrison and AV Homes and will be submitted to the stockholders of AV Homes for approval.

The transaction is expected to close late in Q3 or early in Q4 and the closing is subject to customary closing conditions. TPG Capital, the holder of approximately 40% of AV Homes common stock, has agreed to vote all of its shares of AV Homes common stock in favor of the transaction.

Under the terms of the agreement, AV Homes stockholders will have the option to receive, at their election, consideration per share equal to $21.50 in cash, 0.9793 shares of Taylor Morrison Class A common stock or the combination of $12.64 in cash and 0.4034 shares of Taylor Morrison Class A common stock, subject to an overall proration of approximately 60% cash and 40% stock.

On a pro forma basis, AV Homes stockholders are expected to own up to approximately 10% of the combined company, subject to conversion mechanics applicable to holders of AV Homes’ convertible notes.

AVHI closed at $16.50.


STOCKWINNERS

To read timely stories similar to this, along with money making trade ideas, sign up for a membership to Stockwinners.

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.

Zillow enters house flipping, shares decline

Zillow falls after announces house flipping plans, competitor Redfin declines

Zillow tumble on Amazon news. See Stockwinners.com Market Radar
Zillow enters house flipping, shares decline

Shares of Zillow (Z,ZG) dropped in Friday’s trading after the company announced plans to enter the home-flipping business just in time for the Spring selling season.

Zillow, which has focused on just the listing part of the real estate business, announced last night along with quarterly and yearly revenue, that it will expand Zillow Instant Offers to Phoenix this month.

With this expansion, Zillow said it plans to participate in the marketplace, buying and selling homes with Premier Agent partners in the Phoenix and Las Vegas markets.

Zillow began testing Instant Offers in May 2017 with Premier Agent partners in Las Vegas and Orlando, and will add Phoenix this month.

According to Zillow, the program “gives real estate agents the opportunity to acquire new listings by connecting them with motivated sellers who have taken a direct action to sell their home.

Across all testing, Zillow found the vast majority of sellers who requested an Instant Offer ended up selling their home with an agent, making Instant Offers an excellent source of seller leads for Premier Agents and brokerage partners.”

“Even in today’s hot market, many sellers are stressed and searching for a more seamless way to sell their homes,” Zillow Chief Marketing Officer Jeremy Wacksman said in a statement.

“They want help, and while most prefer to sell their home on the open market with an agent, some value convenience and time over price. This expansion of Instant Offers, and Zillow’s entrance into the marketplace, will help us better serve both types of consumers as well as provide an opportunity for Premier Agents to connect with sellers.

A “WASH” FOR SHAREHOLDERS

Craig-Hallum analyst Brad Berning downgraded Zillow to Hold from Buy after the company announced the expansion of the Instant Offers program to Phoenix in addition to Las Vegas and Orlando.

The program will require what he estimates to be about $3B of capital, which Zillow intends to fund using its balance sheet, while only creating what he estimates will be about $3B in incremental shareholder value, Berning told investors.

Thus, he sees the expansion as “a wash” for shareholder value, but one that comes at the price of potential added risk. Berning lowered his price target on Zillow to $50 from $58.

COMPETITION FOR REDFIN

Redfin (RDFN), an online real-estate brokerage, “began experimenting with buying homes a little more than a year ago,” said The Wall Street Journal, citing Redfin CEO Glenn Kelman.

Redfin falls after Zillow enters house flipping; Stockwinners
Redfin falls after Zillow enters house flipping;

PRICE ACTION

Shares of Zillow are down over 10% to $48.19 per share, while Redfin is lower by 2.5% to $22.15 in Friday’s trading.


STOCKWINNERS

To read timely stories similar to this, along with money making trade ideas, sign up for a membership to Stockwinners

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.

TopBuild to acquire United Subcontractors for $475M

TopBuild to acquire United Subcontractors for $475M in cash

TopBuild to acquire United Subcontractors. Stockwinners.com
TopBuild to acquire United Subcontractors

TopBuild (BLD) has entered into an agreement to acquire United Subcontractors in an all-cash transaction valued at $475M.

The company expects to finance the acquisition using a combination of debt financing and cash on hand.USI is a leading provider of insulation installation and distribution services to the residential and commercial construction markets, generating pro forma annual revenue of approximately $375M in 2017 and an adjusted EBITDA margin of 12.5%.

It has a diversified product and service offering including fiberglass, spray foam and window and glass installation.

Founded in 1998 and headquartered in St. Paul, Minnesota, USI has 38 locations in 14 states, including high growth regions in the Pacific Northwest, Mountain West, Southwest and Southeast.

TopBuild expects to achieve cost savings of $15M, with approximately $5M-$10M expected in the first full year after closing and the full run-rate by the end of year two after closing.

On a December 31, 2017 pro forma basis, inclusive of expected run rate synergies of $15 million, the combined company had revenue of $2.3 billion, adjusted EBITDA of $259 million, almost 10,000 employees and close to 300 installation and distribution locations.

The Company plans to fund this transaction using proceeds from a $350 million bond issuance, $100 million from a delayed draw term loan commitment currently available under its existing secured credit facility and $25 million from cash on hand or drawings under its revolving credit facility.

In the event the bond market terms are not attractive to the Company at the time of execution, the Company would expect to finance the transaction with secured bank debt.

At the close of the transaction, the Company’s net debt to pro forma adjusted EBITDA implies a multiple of 2.9 times pre-synergies, or 2.8 times post-synergies.

The transaction, which has been approved by TopBuild’s Board of Directors, is subject to customary closing conditions, including expiration or termination of the waiting period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976.

The Company expects the transaction to close in the second quarter of 2018.

TopBuild Corp. engages in the installation, distribution, and sale of insulation and other building products to the United States construction industry. The company operates in two segments, Installation and Distribution.

BLD closed at $68.00.


STOCKWINNERS

To read timely stories similar to this, along with money making trade ideas, sign up for a membership to Stockwinners

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.

Layne Christensen sold for $565M

Granite Construction to acquire Layne Christensen in $565M stock merger

Granite Construction to acquire Layne Christensen. Stockwinners.com
Granite Construction to acquire Layne Christensen 

Granite Construction Incorporated (GVA) and Layne Christensen Company (LAYN) announced that they have entered into a definitive agreement whereby Granite will acquire all of the outstanding shares of Layne in a stock-for-stock transaction valued at $565 million, including the assumption of net debt.

The transaction, which was unanimously approved by the Boards of Directors of both companies, is expected to close in the second quarter of 2018.

Granite Construction to acquire Layne Christensen. Stockwinners.com
Granite Construction to acquire Layne Christensen

Under the terms of the agreement, Layne shareholders will receive a fixed exchange ratio of 0.270 Granite shares for each share of Layne common stock they own. This represents $17.00 per Layne share, or a premium of 33%, based on the volume-weighted average prices for Granite and Layne shares over the past 90 trading days.

Following the close of the transaction, Layne shareholders will own approximately 12% of Granite shares on a fully diluted basis, and Granite’s Board will be expanded to include one additional director from Layne.

The transaction represents an enterprise value multiple of 8.2x 2018 expected EBITDA.

Granite expects to achieve approximately $20 million of annual run-rate cost savings by the third year following the close of the transaction, with approximately one-third realized in 2018.

Granite expects to incur approximately $11 million in one-time costs to achieve these savings.

The transaction is expected to be accretive to Granite’s adjusted earnings per share, and high single-digit accretive to Granite’s adjusted cash earnings per share in the first year after closing.

Granite expects to assume outstanding Layne convertible debt with principal value of $170 million and honor the terms and existing maturity date provisions of the indentures.

The transaction is not expected to trigger any change of control provisions under Layne’s indentures.

Granite also expects to fund the cash financing requirements of the transaction of approximately $70 million through a combination of existing cash on hand and availability under Granite’s revolving credit facility.

Following close, Granite will maintain an investment grade credit profile and significant financial flexibility.

The transaction, which is expected to close in the second quarter of 2018, is subject to the satisfaction of customary closing conditions, including applicable regulatory approvals and the approval of the shareholders of Layne.

Wynnefield Capital, which has an approximate 9% voting interest in Layne, has agreed to vote in favor of the transaction.

In connection with the transaction, Granite will issue approximately 5.4 million shares of Granite common stock to Layne common stockholders.

LAYN closed at $12.62. GVA closed at $60.08.


STOCKWINNERS

To read timely stories similar to this, along with money making trade ideas, sign up for a membership to Stockwinners

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.