Mohawk shares tumble on investors lawsuit

Mississippi Retirement System sues the carpet maker

In January, the Public Employees’ Retirement System of Mississippi filed a lawsuit claiming accounting fraud at Mohawk (MHK). The suit did not get a lot of attention at the time, but new filings submitted in late June add significant details about the allegations.

According to analysts, the filing includes testimony from a former Mohawk employee who claims the company has used fictitious sales to artificially boost revenue since 2017.

JPMorgan

JPMorgan analyst Michael Rehaut noted earlier that the Public Employees’ Retirement System of Mississippi, as part of a consolidated class action complaint filing dated June 29, gave “significant incremental details” regarding claims that Mohawk engaged in channel stuffing at the end of the quarter and intentionally overproduced product.

MPERS sues Mohawk Industries

While “the veracity of these accusations will likely not be determined until after an extended legal process” of several months if not longer, Rehaut sees the lawsuit as likely to remain an overhang on the stock until this matter concludes.

He also sees the “fairly granular level of detail across the allegations” and quotes from interviews with several former employees creating a higher level of risk for the company from this lawsuit, added the analyst, who keeps a Neutral rating on Mohawk shares.

SunTrust

A shareholder lawsuit filed earlier this year has recently added new court filings that allege multiple issues inside Mohawk Industries, the most damaging allegation being its revenue recognition practices which included shipping goods on the last day of the quarter and then having those as returns in the following quarter, SunTrust analyst Keith Hughes tells investors in a research note.

The allegations being made during the company’s quiet period “have hamstrung any response,” says Hughes, who admits “it is hard to say as an outsider whether these have merit at this point.” However, given the size of Mohawk, it would need “widespread practices to boost revenues via the method” alleged, adds the analyst, who keeps a Buy rating on Mohawk with a $119 price target.

Wells Fargo

Wells Fargo analyst Truman Patterson notes that the Public Employees’ Retirement System of Mississippi has filed a Class Action Complaint against Mohawk and CEO Jeff Lorberbaum, claiming the company engaged in a “fraudulent scheme to fabricate revenues through fictitious ‘sales’ of products that were not delivered to customers and to conceal from investors the true reasons for the company’s ballooning inventory,” damaging shareholders between April 2017 and July 2019.

While Mohawk stakeholders have known about the lawsuit since early January, filings have only recently become publicly available, which the analyst believes drove shares down on Wednesday. Patterson expresses no opinion on the validity of the allegations against the company, but acknowledges that they would clearly be a negative if proven to be true, likely damaging shareholder confidence in management. The analyst has an Underweight rating and an $80 price target on the stock.

The stock is down 19% to $74.10. The question now shifts to whether the allegations will result in a full SEC investigation.

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Boeing 737-Max Recertification Flight is set for later this month

Boeing 737-Max Recertification Flight is scheduled for later this month

Boeing (BA) is targeting late June for a recertification flight on the grounded 737 Max, Bloomberg’s Alan Levin and Julie Johnsson report.

Boeing 737-Max recertification flight set for late June

The company separately is notifying airlines of an important fix to the grounded jetliner’s wiring, said two people familiar with the planning who asked not to be named discussing sensitive matters.

A draft of revised pilot training for the plane, which has been parked around the world since March 2019 as a result of two fatal crashes that killed 346 people, is also being shared with airlines, the people said.

Grounded 737-Max planes

The moves were strong indications that Boeing is finally nearing the end of the jet’s 15-month grounding and controversy that has engulfed the company after the two fatal crashes.

The flight by Federal Aviation Administration pilots to certify that the plane meets safety regulations is one of the critical remaining milestones. However, the people cautioned that the date hasn’t been finalized and has shifted repeatedly as Boeing completed its final work for regulators.

Boeing’s goal has been to return the 737 Max, a critical source of revenue, to commercial service in the third quarter. The company restarted manufacturing the single-aisle jet late last month, ending a five-month halt to work in its 737 factory in the Seattle suburb of Renton, Washington.

The company is revising a software system implicated in the two crashes that repeatedly drove down the noses of the jets due to a malfunction. Reviews of the plane’s safety following its March 13, 2019, grounding also discovered additional flaws that needed upgrading, including its flight-control computer, how electrical wires were bundled and software issues.

The FAA on Wednesday said it won’t approve the plane for passenger service until it is satisfied that all safety-related issues have been addressed.

BA is down 5% to $206.00

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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.

Boeing beings involuntary layoffs

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.

Covid19 related layoffs are adding up

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.

Boeing CEO Dave Calhoun

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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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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Willis Towers Watson sold for $30B in stock

Aon plc to combine with Willis Towers Watson in all-stock transaction

Aon plc (AON) and Willis Towers Watson (WLTW) announced a definitive agreement to combine in an all-stock transaction with an implied combined equity value of approximately $80B.

The combined company, to be named Aon, will be “the premier, technology-enabled global professional services firm focused on the areas of risk, retirement and health,” the companies stated.

Willis Tower Watson merges with AON, Stockwinners

Aon will maintain operating headquarters in London, United Kingdom. John Haley will take on the role of Executive Chairman with a focus on growth and innovation strategy.

The combined firm will be led by Greg Case and Aon Chief Financial Officer Christa Davies.

AON merges with Willis Tower Watson

Under the terms of the agreement unanimously approved by the Boards of Directors of both companies, each Willis Towers Watson shareholder will receive 1.08 Aon ordinary shares for each Willis Towers Watson ordinary share, and Aon shareholders will continue to own the same number of ordinary shares in the combined company as they do immediately prior to the closing.

Upon completion of the combination, existing Aon shareholders will own approximately 63% and existing Willis Towers Watson shareholders will own approximately 37% of the combined company on a fully diluted basis.

Aon anticipates that the transaction will provide annual pre-tax synergies and other cost reductions of $800M by the third full year of combination, thereby allowing the firm to continue significant investment in innovation and growth. Potential revenue synergies due to complementary capabilities are expected but not included in the synergy estimates.

The transaction is expected to be accretive to Aon adjusted EPS in the first full year of the combination with peak adjusted EPS accretion in the high teens after full realization of $800M of pre-tax synergies.

Willis Towers Watson and Aon anticipate savings of $267M in the first full year of the combination, reaching $600M in the second full year, with the full $800M achieved in the third full year.

Free cash flow accretion is expected to breakeven in the second full year of the combination with free cash flow accretion of more than 10% after full realization of synergies.

The transaction is expected to generate over $10B of shareholder value creation from the capitalized value of the expected pre-tax synergies, based on the blended 2020 price to earnings ratio of Willis Towers Watson and Aon UK on 6 March 2020, net of $2.0B in one-time transaction, retention and integration costs.

WTLW last traded at $193.13. AON last traded at $192.15.

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AVX sold for about $3.7B

AVX to be acquired by Kyocera for $21.75 per share in cash

AVX Corp. (AVX) announced that Kyocera and AVX have entered into a definitive merger agreement providing for the acquisition by Kyocera of all the outstanding shares of common stock of AVX not owned by Kyocera pursuant to an all-cash tender offer for $21.75 per share, followed by a squeeze-out merger in which all of the outstanding shares of AVX common stock not tendered in the Tender Offer will be converted into the right to receive $21.75 per share of common stock, in cash.

Kyocera currently owns approximately 72% of the outstanding shares of AVX common stock.

Following completion of the Transaction, AVX will become a wholly owned subsidiary of Kyocera.

Kyocera buys the rest of AVX shares that it did not own, Stockwinners

The $21.75 offer price represents a 44.6% premium over AVX’s closing price on November 26, 2019 and a 42.1%, 42.4%, and 34.9% premium over AVX’s 1-, 3- and 12- month average closing share price, respectively.

As previously announced, following receipt of a proposal from Kyocera to acquire all of the outstanding shares of AVX common stock that Kyocera does not own for a price of $19.50 in cash, the AVX board of directors appointed a special committee consisting of three independent directors of AVX for purposes of evaluating and negotiating a potential transaction with Kyocera.

AVX Corp. sold to Kyocera, Stockwinners

Following the formation of the Special Committee, Kyocera and the Special Committee have been in discussions and negotiations regarding Kyocera’s proposal to acquire all of the outstanding shares of common stock of AVX not owned by Kyocera.

The board of AVX, acting on the recommendation of the Special Committee, has approved the Transaction and determined to recommend that the AVX stockholders tender their shares in the Tender Offer.

The Transaction is subject to customary closing conditions and is not subject to any financing condition. Kyocera has announced that it currently expects the Transaction to close in the fourth quarter of Kyocera’s fiscal year ending March 2020.

The Tender Offer will be subject to customary conditions and will not be subject to any minimum condition.

AVX is a leading worldwide manufacturer, supplier, and reseller of a broad line of electronic components, interconnect, sensing and control devices, and related products. Electronic components and connector, sensing and control products manufactured or resold by AVX are used in many types of end use products, including those in telecommunications, automotive, transportation, energy harvesting, consumer electronics, military/aerospace, medical, computer, and industrial markets. 

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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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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.

Gilat sold for $522M, Stockwinners

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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Anixter sold for $4.5 billion

Wesco to acquire Anixter in cash, stock deal valued at $4.5B

WESCO (WCC) and Anixter (AXE) announced that their boards of directors have unanimously approved a definitive merger agreement under which WESCO will acquire Anixter in a transaction valued at approximately $4.5 billion.

Anixter’s prior agreement to be acquired by Clayton, Dubilier & Rice, has been terminated, following CD&R’s waiver of its matching rights under the agreement.

Under the terms of the agreement, each share of Anixter common stock will be converted into the right to receive $70.00 in cash, 0.2397 shares of WESCO common stock and preferred stock consideration valued at $15.89, based on the value of its liquidation preference.

Based on the closing price of WESCO’s common stock on January 10 and the liquidation preference of the WESCO preferred stock consideration, the total consideration represents approximately $100 per Anixter share, giving effect to the downside protection described below.

Based on transaction structure and the number of shares of WESCO and Anixter common stock currently outstanding, it is anticipated that WESCO stockholders will own 84%, and Anixter stockholders 16%, of the combined company.

The combined company will have pro forma 2019 revenues of approximately $17 billion.

With an extensive global reach and increased international exposure, approximately 12% of revenues will be generated outside of North America.

Anixter sold to Wesco, Stockwinners

The increased scale will enable the combined company to accelerate digitization strategies and provide a platform for growth in attractive emerging markets.

WESCO expects to realize annualized run-rate cost synergies of over $200 million by the end of year three through efficiencies in corporate and regional overhead, including duplicative public company costs, branch and distribution center optimization, and productivity in procurement, field operations, and supply chain. In addition, WESCO expects incremental sales growth opportunities to result by cross-selling the companies’ complementary product and services offerings to an expanded customer base and capitalizing on the enhanced capabilities across both networks.

The combination is expected to be accretive to WESCO’s earnings in the first full year of ownership and, with the realization of synergies, substantially accretive thereafter.

WESCO also expects the transaction to generate significant margin expansion and EPS growth.

The combined company will have strong free cash flow generation, supporting continued investments in the business and enabling a return of capital to stockholders in the future.

Wesco to buy Anixter, Stockwinners

At closing, WESCO estimates that its pro forma leverage on a net debt to EBITDA basis will be approximately 4.5x.

WESCO intends to utilize the strength of the combined company’s cash flows, including significant synergies, to reduce its leverage quickly and ultimately intends to be within its long-term target leverage range of 2.0x to 3.5x within 24 months post-close.

Under the terms of the agreement, each share of Anixter common stock will be converted into the right to receive $70.00 in cash, 0.2397 shares of WESCO common stock, and preferred stock consideration consisting of 0.6356 depositary shares, each whole share representing a fractional interest in a newly created series of WESCO perpetual preferred stock.

The common stock consideration is subject to downside protection, such that if the average market value of WESCO common stock prior to closing is between $47.10 per share and $58.88 per share, then the cash consideration paid at closing will be increased commensurately by up to $2.82 per share, such that the reduction in value of the WESCO common stock is offset by an increase in the cash consideration within that range. $2.82 per share will also be paid if the value of WESCO stock is below $47.10.

The preferred stock consideration consists of 0.6356 depositary shares, with each whole depositary share representing a 1/1,000th interest in a share of WESCO Series A cumulative perpetual preferred stock, with a liquidation preference of $25,000 per preferred share and a fixed dividend rate calculated based on a spread of 325 basis points over the prevailing unsecured notes to be issued to effect the transaction.

The fixed dividend rate will be subject to reset and the Series A preferred stock will have a five year non-call feature.

WESCO has agreed to list the depositary shares representing the newly created series of preferred stock on the NYSE, and the security is expected to receive equity treatment from the rating agencies.

The 0.6356 depositary share to be issued in the merger per share of Anixter common stock is valued at $15.89 based on the liquidation preference of the underlying interest in the Series A preferred stock represented thereby.

Under the terms of the merger agreement, WESCO may elect to substitute additional cash consideration to reduce the amount of the preferred stock consideration on a dollar-for-dollar basis based on the value of the liquidation preference of the preferred stock consideration. WESCO and Anixter currently anticipate completing the transaction during the second or third quarter of 2020.

WESCO International, Inc. distributes electrical, industrial, and communications maintenance, repair and operating (MRO) and original equipment manufacturers products and construction materials in North America and internationally. 

Anixter International Inc. distributes enterprise cabling and security solutions, electrical and electronic wire and cable solutions, and utility power solutions worldwide. 

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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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PolyOne buys Claiant’s color business for $1.45B

PolyOne acquires Clariant color and additive masterbatch business for $1.45B

PolyOne (POL) announced that it has entered into an agreement with Switzerland’s Clariant to purchase its global color and additive masterbatch business.

In addition, PolyOne has entered into an agreement with Clariant Chemicals India Ltd. to purchase its color and additive masterbatch business.

The combined net purchase price is $1.45B, representing an 11.1x multiple of last twelve months adjusted EBITDA, or 7.6x including anticipated synergies.

Polyone buys paint business of Clariant, Stockwinners

“This will be a truly transformational acquisition for both PolyOne and Clariant customers and employees around the world. Together, we will benefit from the combined ingenuity, passion and expertise of two global leaders in color design, additive technologies and sustainable solutions,” said Robert M. Patterson, Chairman, President and Chief Executive Officer, PolyOne Corporation.

Clariant’s color and additive masterbatch business, which had sales of $1.15 billion for the last twelve months, includes specialty technologies and solutions for high-growth global end markets, such as consumer, packaging, and healthcare.

Polyone buys Clariant’s color biz for $1.45B, Stockwinners

The Clariant business includes 46 manufacturing operations and technology centers in 29 countries and approximately 3,600 employees, who will join PolyOne’s Color, Additives and Inks segment.

PolyOne Corporation provides specialized polymer materials, services, and solutions in the United States, Canada, Mexico, Europe, South America, and Asia. It operates in four segments: Color, Additives and Inks; Specialty Engineered Materials; Performance Products and Solutions; and Distribution. 

POL is up 0.89 to $36.86.

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Truck sales decline in November

Classes 5-8 truck orders soften in November amid trade and tariff worries

Truck sales downturn could be canary in the coal mine

There are eight classes of commercial motor vehicles in the United States, and they’re divided into three, more general categories: light-duty, medium-duty, and heavy-duty. Commercial motor vehicles or trucks that operate on U.S. highways can be classified based on their gross vehicle weight rating (GVWR).

ACT Research said in an earlier report:

“Preliminary November data show that Classes 5-8 net order volumes were uniformly soft. Combined NA Classes 5-8 intake fell 15% m/m and 38% y/y in November on a nominal basis. Preliminary North America Class 8 net order data show the industry booked 17,500 units in November, down 20% from October, while Classes 5-7 orders fell 8% m/m, to 15,300 units.

Complete industry data for November, including final order numbers, will be published by ACT Research in mid-December.

Various Classes of Vehicles, Stockwinners

ACT’s State of the Industry:

Classes 5-8 report provides a monthly look at the current production, sales, and general state of the on-road heavy and medium duty commercial vehicle markets in North America. It differentiates market indicators by Class 5, Classes 6-7 chassis and Class 8 trucks and tractors, detailing measures such as backlog, build, inventory, new orders, cancellations, net orders, and retail sales.

Additionally, Class 5 and Classes 6-7 are segmented by trucks, buses, RVs, and step van configurations, while Class 8 is segmented by trucks and tractors with and without sleeper cabs.

This report includes a six-month industry build plan, backlog timing analysis, historical data from 1996 to the present in spreadsheet format, and a ready-to-use graph package.

A first-look at preliminary net orders is also published in conjunction with this report.

“Preliminary November data show that Class 8 net orders failed to sustain October’s encouraging start to the order season,” said Tim Denoyer, ACT’s Vice President and Senior Analyst.

He continued, “The freight market downturn worsened in the past month and uncertainty surrounding trade and tariffs continue to weigh on truck buyers’ psyches. With rising pressure on carrier profits from the combined impact of lower rates and the recent, rather sudden jump in insurance premia, recent events have not developed in the industry’s favor.” Denoyer concluded,

“While private fleets continue to add capacity on the retail end, the market is increasingly heeding for-hire price signals and the stage is being set to right-size the fleet, bringing it closer to equilibrium with the work to be done.”

Historically, Dow Jones Transports have sold off prior to the rest of the market. The .djt has turned bearish as is shown above.

Publicly traded companies in the space include ArcBest (ARCB), J.B. Hunt (JBHT), Knight-Swift (KNX), Old Dominion (ODFL), Swift Transportation (SWFT), Werner (WERN), Paccar (PCAR), Navistar (NAV)and Cummins (CMI).

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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.

CG to buy Wesco Aircraft, Stockwinners

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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Exotic Metals sold for $1.725B

Parker-Hannifin to acquire Exotic Metals for $1.725B in cash

Exotic Metals sold to Parker Hannifin, Stockwinners

Parker Hannifin Corporation (PH) announced that it has entered into a definitive agreement to acquire Exotic Metals Forming Company LLC for $1.725B in cash. When adjusted for approximately $170M of expected tax benefits, the net transaction value is approximately $1.56B.

Parker enters exotic metals business, Stockwinners

The transaction has been approved by the Board of Directors of each company and is subject to customary closing conditions, including receipt of applicable regulatory approvals.

Exotic Metals, headquartered in Kent, Washington, is a privately held company founded in 1966 that designs and manufactures innovative and technically demanding, high temperature, high pressure air and exhaust management solutions for aircraft and engines.

Exotic Metals has expected annual sales of approximately $450M and employs 1,600 team members across three locations in the United States.

Exotic Metals has long-term agreements in place across high growth aerospace programs.

Exotic Metals makes the exhaust cone for GE engines, Stockwinners

Parker also expects growth synergies through cross-selling opportunities and leveraging Parker’s strong aftermarket position.

Parker expects to realize approximately $13M in pre-tax run-rate synergies by fiscal year 2023 by combining supplier networks and implementing Win Strategy initiatives. The cumulative cost to achieve these synergies is expected to be approximately $5M.

The transaction is expected to be accretive to Parker’s organic growth, EBITDA margins, EPS and cash flow, after adjusting for one-time costs, and to achieve high single-digit ROIC in year five with continued expansion.

Upon the closing of this transaction, Parker plans to have Exotic Metals operate as a standalone division within Parker’s Aerospace Group, which is led by Roger Sherrard, Vice President and President Aerospace Group.

Exotic Metals manufactures the intake blades for GE engines, Stockwinners

Parker plans to finance the transaction using new debt.

Following the completion of the transaction, Parker expects to maintain a high investment grade credit profile.

The transaction is not expected to impact Parker’s dividend payout target of approximately 30-35% average percent of net income over a five-year period, while maintaining its record of annual dividend increases.

The transaction is expected to be completed within the next two to three months and is subject to customary closing conditions, including receipt of applicable regulatory approvals.

PH last traded at $172.46, down $2.45.

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Carrizo Oil & Gas sold for $3.2 billion

Callon Petroleum to acquire Carrizo Oil & Gas in all-stock deal valued at $3.2B

Carrizo sold for $3.2 billion, Stockwinners

Callon Petroleum (CPE) and Carrizo Oil & Gas (CRZO) announced that their Boards of Directors have unanimously approved a definitive agreement under which Callon will acquire Carrizo in an all-stock transaction valued at $3.2B.

This highly complementary combination will create a leading oil and gas company with scaled development operations across a portfolio of core oil-weighted assets in both the Permian Basin and Eagle Ford Shale.

Callon Petroleum buys Carrizo for $3.2B, Stockwinners

Under the terms of the agreement, Carrizo shareholders will receive a fixed exchange ratio of 2.05 Callon shares for each share of Carrizo common stock they own.

This represents $13.12 per Carrizo share based on Callon’s closing common stock price on July 12 and a premium of 18% to Carrizo’s trailing 60-day volume weighted average price.

Following the close of the transaction, Callon shareholders will own approximately 54% of the combined company, and Carrizo shareholders will own approximately 46%, on a fully diluted basis.

The all-stock transaction is intended to be tax-free to Carrizo shareholders.

The transaction has been unanimously approved by the Boards of Directors at both Callon and Carrizo.

In addition, each of the Carrizo directors has committed to vote his or her shares in favor of the transaction.

Upon closing, the Board of Directors of the combined company will consist of 11 members, including Callon’s eight current Board members and three to be appointed from the Board of Carrizo.

The combined company will be led by Callon’s executive management team and will remain headquartered in Houston, Texas.

The transaction, which is expected to close during the fourth quarter, is subject to customary closing conditions and regulatory approvals, including the approval of shareholders of both companies.

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