Synovus to acquire FCB Financial for $2.9B

Synovus to acquire FCB Financial for $2.9B

 

Synovus to acquire FCB Financial for $2.9B, Stockwinners
Synovus to acquire FCB Financial for $2.9B, Stockwinners

Synovus Financial Corp. (SNV) and FCB Financial Holdings, Inc. (FCB) jointly announced their entry into a definitive merger agreement under which Synovus will acquire FCB Financial Holdings, Inc., owner of Florida Community Bank.

The transaction is expected to close by the first quarter of 2019.

Following the closing, FCB will merge with Synovus Bank and operate under the Synovus brand, and FCB Financial Holdings President and CEO Kent Ellert will be executive vice president of Synovus and Florida market president.

Under the terms of the merger agreement, FCB shareholders will receive a fixed ratio of 1.055 shares of Synovus common stock for each common share of FCB in an all-stock transaction.

Based on Synovus’ closing share price on July 23, 2018, the transaction is valued at $58.15 per FCB share or $2.9 billion in aggregate.

Following completion of the merger, former FCB shareholders will own approximately 30% of the combined company. In addition, based on the exchange ratio, Synovus’ most recent quarterly dividend translates to a pro forma annualized dividend of $1.06 per FCB share.

The transaction is expected to be tax free to FCB shareholders. Synovus expects approximately $40 million in pretax synergies to be fully realized by 2020.

Excluding one-time charges, Synovus expects the acquisition to be approximately 6.5% accretive to earnings per common share in 2020 and to deliver strong returns on capital.

The transaction is expected to produce tangible book value per share dilution of 3.3% with an earnback period of less than two years.

The merger agreement has been unanimously approved by both companies’ Boards of Directors.

The merger is subject to customary closing conditions, including approval by Synovus and FCB Financial Holdings shareholders and approval by state and federal bank regulators. BofA Merrill Lynch and J.P. Morgan Securities LLC served as financial advisors to Synovus on this transaction, while Simpson Thacher & Bartlett LLP and Alston & Bird LLP served as legal advisors.

Sandler O’Neill + Partners L.P., Guggenheim Securities, LLC, and Evercore Group L.L.C. served as financial advisors to FCB Financial Holdings, and Wachtell, Lipton, Rosen & Katz served as legal advisor.


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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.


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Stewart to be acquired by Fidelity National in deal valued at $1.2B

Stewart to be acquired by Fidelity National in deal valued at about $1.2B

Stewart to be acquired by Fidelity National in deal valued at about $1.2B , Stockwinners.com
Stewart to be acquired by Fidelity National in deal valued at about $1.2B ,

Stewart Information Services Corporation (STC) announced that it has entered into a definitive agreement to be acquired by Fidelity National Financial (FNF).

Under the terms of the agreement which has been unanimously approved by Stewart’s Board of Directors following a comprehensive review of strategic alternatives, Stewart shareholders will receive $25.00 in cash and 0.6425 common shares of Fidelity for each share of Stewart common stock they hold at closing, subject to the adjustment and election mechanisms described below.

“Last year, our Board initiated a review of strategic alternatives for the company, and after an extensive process, we determined that capitalizing on the Fidelity platform will best enable us to support the Stewart brand and continue providing the service our customers have come to expect,” said Thomas G. Apel, Stewart’s Chairman of the Board.

“Combining with Fidelity National Financial will create a strong portfolio of customers and business relationships, and will provide us with the ability to grow the Stewart brand.”

Based on Fidelity’s closing stock price on March 16, 2018, the merger consideration represents total value per Stewart share of $50.20, a 23% premium to Stewart’s closing stock price on March 16, 2018 and a 32% premium to Stewart’s closing stock price on November 3, 2017, the trading day prior to Stewart’s announcement that it would undertake a review of strategic alternatives.

If the combined company is required to divest assets or businesses exceeding $75 million in order to procure required regulatory approvals up to a cap of $225 million of divested revenues, the purchase price will be adjusted down from $50.20 on a pro-rata basis relative to the actual amount of revenues required to be divested between $75 and $225 million to a minimum purchase price of $45.50 per share of common stock.

As an alternative to the default mixed transaction consideration described above, each Stewart shareholder will have the ability to instead receive either $50.00 in cash or 1.285 common shares of Fidelity for each Stewart share held, subject to a customary pro ration mechanism to the extent that either the cash or the stock portion of the merger consideration is over-subscribed.

The proposed transaction is subject to approval by Stewart’s shareholders and regulatory authorities and the satisfaction of customary closing conditions.

The company will be closely working with regulators to obtain the necessary approvals as soon as possible, and the transaction is expected to close by the first or second quarter of 2019.

If the deal is not completed for failure to obtain the required regulatory approvals, Fidelity is required to pay a reverse break-up fee of $50 million to Stewart.


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United Community Bancorp sold for $26.22 per share

Civista to acquire United Community Bancorp for $26.22 per share

Civista to acquire United Community Bancorp for $26.22 per share. Stockwinners.com
Civista to acquire United Community Bancorp for $26.22 per share.

Civista Bancshares (CIVB) and United Community Bancorp (UCBA), the parent company of United Community Bank, announced the signing of a definitive merger agreement pursuant to which Civista will acquire United.

Based on financial data as of December 31, 2017, the combined company would have total assets of $2.1B, total loans of $1.5B and total deposits of $1.7B. United operates an eight branch network in southeastern Indiana, five of which are located in the Cincinnati MSA.

Under the terms of the merger agreement, which has been unanimously approved by the Boards of Directors of both companies, the consideration United shareholders will receive is equivalent to 1.027 shares of Civista common stock and $2.54 in cash per share of United common stock.

This implies a deal value per share of $26.22 or approximately $114.4M based on the 15-day average closing price of Civista’s common stock on March 9, 2018 of $23.06.

Civista and United anticipate that the transaction will qualify as a tax-free reorganization to the extent that United shareholders receive Civista common stock in the merger.

The transaction is expected to close in the third quarter of 2018, subject to each company receiving the required approval of its shareholders, receipt of all required regulatory approvals and fulfillment of other customary closing conditions.

Under terms of the agreement, the directors of Civista and the directors and executive officers of United have agreed to vote all shares that they own in their respective organizations in favor of the merger.

In addition, a total of three existing United directors will join the Civista Bank Board of Directors and two of those directors will join the Civista Bancshares, Inc. Board of Directors. E.G. McLaughlin is expected to be one of the directors to join both boards. In preparation for the merger, extensive due diligence was performed over a multi-week period.

Under the proposed merger terms, the acquisition of United is expected to be immediately accretive to Civista’s earnings in 2018 and thereafter.

In addition, any tangible book value dilution created in the transaction is expected to be earned back in approximately 3.5 years after closing.

Post-closing, Civista’s capital ratios are expected to continue to exceed “well-capitalized” regulatory standards.

“This acquisition will allow Civista to bring its enhanced commercial lending platform to United’s demographically strong markets.

United will provide Civista with low cost core deposit funding and excess liquidity,” the bank stated.


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WMIH and Nationstar to merge

WMIH, Nationstar enter definitive merger agreement

Nationstar and WMIH to merge. Stockwinners.com
Nationstar and WMIH to merge.

WMIH Corp. (WMIH) and Nationstar Mortgage Holdings (NSM) with its flagship brand Mr. Cooper announced that they have entered into a definitive merger agreement.

Under the terms of the agreement, Nationstar shareholders may elect to receive $18.00 in cash or 12.7793 shares of WMIH common stock for each share of Nationstar common stock they own, subject to an overall proration to ensure that 32% of the total outstanding Nationstar shares are exchanged for the stock consideration.

Upon completion of the transaction, Nationstar shareholders will own approximately 36% of the combined company and WMIH shareholders will own approximately 64%.

The aggregate consideration payable to Nationstar shareholders will consist of $1.2 billion in cash and WMIH shares currently anticipated to be valued at approximately $702 million.

In addition, approximately $1.9 billion of Nationstar’s existing senior unsecured notes will be refinanced at closing.

WMIH has secured $2.75 billion of financing commitments in connection with the transaction. Upon closing the Transaction, all outstanding WMIH Series B Preferred Stock and all outstanding warrants to purchase shares of WMIH common stock will be converted into common stock of WMIH.

The shares issued pursuant to these conversions are included in the pro forma ownership percentages referenced above. Holders of WMIH’s Series B 5% Convertible Preferred Stock (the “Series B Stock”) will receive approximately 444 million shares of common stock following the mandatory conversion of the Series B Stock at a fixed conversion price of $1.35 per share.

Between signing and closing of the transaction, we expect that holders of the Series B Stock will receive approximately 21 million shares of common stock in accordance with the terms of the Series B Stock.

Finally, upon closing of the transaction, holders of the Series B Stock also will receive a special distribution of approximately 11 million shares of common stock.

As a result, upon consummating the transaction, and on a pro forma basis, holders of the Series B Stock will be expected to own approximately 477 million shares of common stock or approximately 43% of the combined company.

The transaction has been unanimously approved by the Boards of Directors of both companies and is subject to approval by the shareholders of both companies, as well as regulatory approvals and other customary closing conditions.

An entity owned by investment funds managed by an affiliate of Fortress Investment Group LLC, holding approximately 68% of Nationstar’s voting shares, has contractually agreed to support the transaction and elect cash consideration for approximately 34 million shares, subject to proration.

KKR, which owns 24% of WMIH’s voting shares, has also agreed to support the transaction.

The transaction is anticipated to close in the second half of 2018.

WMIH Corp. engages in reinsurance business with respect to mortgage insurance in runoff mode.

Nationstar Mortgage Holdings Inc. provides servicing, origination, and transaction based services primarily to single-family residences in the United States.

Jay Bray, CEO and Chairman of Nationstar, said, “We expect this merger to create value for our shareholders in both the near and long-term, including immediate accretion on a cash EPS basis and a cash premium for those of our stockholders who elect to receive the cash merger consideration.

I am passionately committed to continuing and accelerating our growth and investment as a leader in our industry, leveraging our best-in-class integrated servicing and originations platform.

The Nationstar Board and management team have taken considerable steps to make homeownership simpler and more rewarding for our three million customers and we look forward to identifying additional opportunities to enhance value for the combined company’s shareholders.” The operating business will retain the Nationstar Mortgage name and Dallas Headquarters and, at least initially, be traded on the NASDAQ under the ticker symbol “WMIH”.


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Validus sold for $5.56B, or $68 per share

AIG to acquire Validus for $5.56B, or $68 per share, in cash

AIG to acquire Validus for $5.56B, or $68 per share. Stockwinners.com
AIG to acquire Validus for $5.56B, or $68 per share.

American International Group (AIG) announced it has entered into a definitive agreement to acquire all outstanding common shares of Validus Holdings (VR), a provider of reinsurance, primary insurance, and asset management services.

The transaction enhances AIG’s General Insurance business, adding a leading reinsurance platform, an insurance-linked securities asset manager, a meaningful presence at Lloyd’s and complementary capabilities in the U.S. crop and excess and surplus markets.

Holders of Validus common shares will receive cash consideration of $68.00 per share, for an aggregate transaction value of $5.56 billion, funded by cash on hand.

The transaction is expected to be immediately accretive to AIG’s earnings per share and return on equity.

Validus brings complementary, market-leading capabilities to AIG, enhancing AIG’s platform and long-term growth opportunities for both companies.

The diversification benefits of the transaction also provide significant additional capital efficiencies over time.

The transaction has been unanimously recommended by the boards of directors of AIG and Validus.

The transaction is expected to close mid-2018, subject to approval by Validus shareholders and other customary closing conditions, including regulatory approvals in relevant jurisdictions and the expiration or termination of the applicable waiting period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976.


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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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MGM Growth offers to buy VICI Properties for $19.50 per share

MGM Growth offers to buy VICI Properties for $19.50 per share

MGM Growth offers to buy VICI Properties for $19.50 per share. Stockwinners.com
MGM Growth offers to buy VICI Properties for $19.50 per share

MGM Growth Properties (MGM) announced that it sent a letter to the CEO and the Chairman of the Board of Directors of VICI Properties (VICI) proposing to acquire 100% of VICI’s outstanding common stock for $19.50 per share, and to date, VICI has elected not to engage in meaningful discussions.

MGP believes that a proposed combination is extremely attractive strategically and financially for both VICI and MGP. MGP is making its proposal public in an effort to engage and move forward quickly to consummate a transaction.

Under the terms of the proposal, the consideration would be in the form of MGP shares, with the exchange ratio fixed at signing of a definitive agreement.

If desired by VICI shareholders, MGP would be willing to offer a portion of the consideration in the form of cash. Upon completion of the proposed transaction, VICI shareholders would own approximately 43% of the combined company assuming an all-stock transaction and based on MGP’s current share price.

MGM Growth Properties has substantial financial resources to complete the transaction and its offer is not contingent on any financing condition.

Any transaction would be subject to regulatory and shareholder approvals and other customary closing conditions.

MGM Growth Properties believes that a combination with VICI would be accretive to AFFO and represents a compelling opportunity to create significant value for both companies’ respective shareholders.

The combination of the Company and VICI would create the largest triple-net lease REIT and a Top 15 public REIT in the RMZ by enterprise value.

The combined company will have a leading portfolio of premier large scale destination leisure, entertainment and hospitality assets with even greater geographic, asset and tenant diversity.

The combination would also establish a larger combined company with greater efficiencies and an enhanced financial profile that in our view will provide a better path toward maximizing the value of future growth opportunities.

In addition, the ownership in the combined company would enable VICI shareholders to participate meaningfully in the benefits of the transaction, including synergies, a potential trading multiple expansion, more efficient cost of capital and additional liquidity in a significantly larger company.

Furthermore, MGM Growth Properties strongly believes that its proposal provides VICI shareholders with clear value without the execution risk associated with VICI’s proposed public offering, particularly given the fees, discounts, dilution, lock-ups, risks and uncertainties associated with such an offering.


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Atlantic Coast Financial sold for $145 million

Ameris Bancorp to acquire Atlantic Coast Financial in $145M transaction

Atlantic Coast Bank sold for $145 million. See Stockwinners.com for details

Ameris Bancorp (ABCB) announced the signing of a definitive merger agreement under which Ameris will acquire Atlantic Coast Financial (ACFC), the parent company of Atlantic Coast Bank, Jacksonville, Florida.

Upon completion of the transaction, the combined company will have approximately $8.6B in assets, $6.9B in loans, $6.6B in deposits and a branching network across four states.

Under the terms of the definitive merger agreement, each share of Atlantic Coast common stock will be converted into the right to receive 0.17 shares of Ameris common stock and $1.39 in cash.

The transaction is valued at approximately $145M in the aggregate based on Ameris’ closing stock price of $47.30 as of November 16.

The merger agreement has been unanimously approved by the board of directors of each company.

The transaction is expected to close in the second quarter of 2018 and is subject to customary closing conditions, including the receipt of regulatory approvals and the approval of the stockholders of Atlantic Coast.


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GGP receives $23 per share offer

GGP confirms receipt of unsolicited proposal from Brookfield Property

general-growth-properties receives $23 a share offer. See Stockwinners.com for details

GGP Inc. (GGP) confirmed that on Saturday, November 11, 2017, the company’s Board of Directors received an unsolicited proposal from Brookfield Property Partners L.P. (BPY) for BPY to acquire all of the outstanding shares of common stock of GGP other than those shares currently held by BPY and its affiliates.

According to the Proposal, each GGP stockholder would be entitled to elect to receive consideration per GGP common share of either $23.00 in cash or 0.9656 of a limited partnership unit of BPY, subject in each case to pro-ration based on a maximum cash component of 50% of the aggregate offer and a maximum stock component of 50% of the aggregate offer.

General Growth Properties, Inc is an equity real estate investment trust. The firm invests in the real estate markets of the United States. It engages in owning, managing, leasing, and redeveloping high-quality regional malls.

The Board has formed a special committee of its non-executive, independent directors which, in consultation with its financial and legal advisors, will carefully review and consider the Proposal and pursue the course of action that it believes is in the best interests of the company’s stockholders.

The company’s stockholders do not need to take any action at this time.

Goldman Sachs & Co. LLC. is serving as financial advisor and Simpson Thacher & Bartlett LLP is serving as legal counsel to the Special Committee.

Citigroup Global Markets Inc. is serving as financial advisor and Sullivan & Cromwell LLP is serving as legal counsel to GGP.


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CalAtlantic sold for $51.34 per share

Lennar, CalAtlantic to merge in deal valued at about $9.3B

CalAtlantic sold for $9.1 billion. See Stockwinners.com for details

Lennar (LEN) and CalAtlantic (CAA) announced that their respective boards of directors have unanimously approved a definitive merger agreement pursuant to which each share of CalAtlantic stock will be exchanged for 0.885 shares of Lennar Class A common stock in a transaction valued at approximately $9.3B, including $3.6B of net debt assumed.

The business combination will create the nation’s largest homebuilder with the last twelve months of revenues in excess of $17B and equity market capitalization, based on current market prices, of approximately $18B.

The combined company will control approximately 240,000 homesites and will have approximately 1,300 active communities in 49 markets across 21 states, where approximately 50% of the U.S. population currently lives.

It is currently anticipated that the transaction will generate annual cost savings and synergies of approximately $250M, with approximately $75M achieved in fiscal year 2018.

These synergies are expected to be achieved through direct cost savings, reduced overhead costs and the elimination of duplicate public company expenses.

Additional savings are also expected through production efficiencies, technology initiatives, and the roll out of Lennar’s digital marketing and dynamic pricing programs. Under the terms of the merger agreement, each share of CalAtlantic stock will be converted into the right to receive 0.885 shares of Lennar Class A common stock. Based on the closing price of Lennar’s Class A common stock on the NYSE on October 27, the implied value of the stock consideration is $51.34 per share, representing a 27% premium to CalAtlantic’s closing price that same day.

CalAtlantic’s stockholders will also have the option to elect to exchange all or a portion of their shares for cash in the amount of $48.26 per share, subject to a maximum cash amount of approximately $1.2B.

CalAtlantic stockholders will receive Lennar stock unless they exercise an option to receive cash. On a pro forma basis, CalAtlantic stockholders are expected to own approximately 26% of the combined company.

The transaction is expected to close in the first calendar quarter of 2018. The transaction is subject to approval by Lennar and CalAtlantic stockholders. Stuart Miller and the Miller Family Trusts have agreed to vote their 41.4% voting interest in Lennar in favor of the merger. MP CA Homes LLC, an affiliate of MatlinPatterson Global Opportunities Partners III L.P., has agreed to vote its 25.4% voting interest in CalAtlantic in favor of the merger.

Additionally, MP CA Homes has agreed to exercise the cash election for at least the number of shares to cause the maximum cash consideration amount to be fully subscribed by electing stockholders.

Upon completion of the transaction, Stowell, CalAtlantic’s Executive Chairman, will join the Lennar board.


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Caterpillar reports on Tuesday

What to watch in Caterpillar earnings report

Caterpillar reports on Tuesday. See Stockwinners.com for details

Caterpillar (CAT) is scheduled to report results of its third fiscal quarter before the market opens on Tuesday, October 24, with a conference call scheduled for 11:00 am ET.

What to watch for

1. GUIDANCE:

On July 25, Caterpillar reported results for its fiscal second quarter and raised its forecast for fiscal 2017. The company said it expected earnings per share, excluding-costs, to be about $5.00, up from the prior view of $3.75, against analyst expectations of $4.32 at that time.

The company also raised its FY17 revenue guidance to $42B-$44B from $38B-$41B, against analyst consensus of $40.54B at that time. For FY17, Caterpillar said it expected profit per share of about $3.50 at the midpoint of the sales and revenues outlook range, or adjusted profit per share of about $5.00. The previous outlook for 2017 profit was about $2.10 per share at the midpoint of the sales and revenues outlook, or adjusted profit per share of about $3.75. The company now expects to incur about $1.2B of restructuring costs in 2017. The outlook does not include potential mark-to-market gains or losses related to pension and other post-employment benefit plans.

2. RETAIL MACHINES SALES

On August 18, Caterpillar reported retail machines sales in the three months ending in July were up 12%. For reference, retail sales of machines were up 7% in the period ending in June and up 8% in the period ending in May.

The company reported world Resources Industries sales up 8% in the July-end period, compared to a June period decline of 1%.

Construction Industries world sales were up 13% in the July-end period, better than the 10% increase in the June-end period. Total Energy & Transportation Retail Sales were down 2% in the July-end period, worse than the 1% increase seen in the June period.

On September 21, Caterpillar reported retail machines sales in the three months ending in August were up 11%. For reference, retail sales of machines were up 12% in the period ending in August and up 7% in the period ending in June.

The company reported world Resources Industries sales up 5% in the August-end period, compared to a July period increase of 8%. Construction Industries world sales were up 12% in the August-end period, a tick worse than the 13% increase in the July-end period. Total Energy & Transportation Retail Sales were down 3% in the August-end period, worse than the 2% decrease seen in the July period.

On October 23, the company reported retail machines sales in the three months ending in September were up 13%. For reference, retail sales of machines were up 11% in the period ending in the prior month and up 12% in the period ending in July.

The company reported world Resources Industries sales up 8% in the September-end period, compared to a August period increase of 5%.

Construction Industries world sales were up 15% in the September-end period, better than the 12% increase in the prior period. Total Energy & Transportation Retail Sales were up 5% in the September-end period, better than the 3% decrease seen in the prior three-month period.

3. MANAGEMENT CHANGES

On August 1, Caterpillar announced that Chief Financial Officer Brad Halverson will retire in early 2018. The company added that it will launch a global, external search to fill the CFO position and Halverson’s decision to continue working into early 2018 helps to ensure a smooth transition for the CFO position.

On August 10, the company’s board appointed former U.S. senator Kelly Ayotte to the board and will be a member of the Public Policy & Governance Committee of the board. Senator Ayotte’s appointment was effective on that date.

On August 11, the company appointed Suzette Long as the company’s general counsel and corporate secretary. The group she will lead includes Caterpillar’s Legal Services Division and Global Government & Corporate Affairs Division.


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Warranty Group sold for $2.5 billion

Assurant to acquire Warranty Group in $2.5B transaction

Warranty Group sold for $2.5 billion. See Stockwinners.com for details

Assurant (AIZ) and The Warranty Group, a leading global provider of protection plans and related programs, and a portfolio company of TPG Capital, announced that they have entered into a definitive agreement to combine operations, with Assurant shareholders retaining majority ownership of the combined company.

The transaction is valued at approximately $2.5B and is expected to close in the first half of 2018, subject to shareholder and regulatory approvals, and other customary closing conditions.

The transaction will significantly advance Assurant’s strategy in the global lifestyle market with an attractive product and client portfolio, diversified growth profile and a deeper global footprint.

With annualized revenue greater than $1B as of June 30, 2017, The Warranty Group will enhance Assurant’s scale and market presence in its vehicle protection, extended service contracts and financial services businesses across 35 countries.

The resulting geographic footprint also will provide resources to accelerate Assurant’s mobile strategy in key markets such as Asia-Pacific.

The Warranty Group’s U.S. vehicle protection business also brings new client partnerships and distribution channels including dealer networks and national accounts, and positions Assurant to capitalize on emerging trends in the auto market such as digital auto retailers.

The transaction values The Warranty Group at $1.9 billion in equity value, or $2.5 billion of enterprise value, including their existing debt.

Under the transaction agreement, Assurant, Inc. will become a wholly owned subsidiary of TWG Holdings Limited, whose name will be changed to Assurant Ltd. Assurant shareholders will own approximately 77 percent of the combined entity as existing Assurant, Inc. shares are converted into shares of Assurant Ltd. on a one-for-one basis.

TPG and its affiliates will own the remaining 23 percent, equal in value to 16 million Assurant shares, or approximately $1.5 billion at yesterday’s closing price. Assurant will also pay approximately $372 million in cash to TPG.

Upon closing, Assurant Ltd. shares will trade on the New York Stock Exchange under the ticker symbol AIZ.

The senior management team of Assurant will lead the combined organization.

Assurant intends to finance the cash consideration and repayment of approximately $591 million of The Warranty Group’s existing debt through new debt, and preferred securities expected to be issued after closing.

Assurant has entered into a commitment letter for a $1.0 billion bridge facility. The transaction is expected to be modestly accretive to Assurant’s 2018 operating earnings per share on a run-rate basis.

By the end of 2019, Assurant expects to generate $60 million of pre-tax operating synergies by optimizing global operations.


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Bank stocks to watch

What to watch in bank space earnings reports

JPMorganChase on Stockwinners.com

JPMorgan (JPM) and Citigroup (C) are scheduled to report quarterly results on October 12, while Wells Fargo (WFC) is scheduled to report on October 13.

What to watch for:

1. OUTLOOK:

During its last earnings call, JPMorgan said it sees 2017 average core loan growth of about 8%, 2017 net interest income up over $4B year over year, 2017 adjusted expense of about $58B, and 2017 net charge-offs of about $5B.

On September 12, JPMorgan’s Dimon added that trading revenue should be down about 20% in Q3.

Meanwhile, back in July, Citi said it was “on track” to increase return on capital and that it expects continued year over year revenue growth in retail banking, excluding mortgage, as well as modest organic growth in cards.

Meanwhile, mortgage should continue to be a headwind in Q3, the company noted. Later in the month, Citi CEO Michael Corbat said he sees earnings per share approaching $9.00 in 2020.

During Wells Fargo last earnings call, the bank said it is targeting $2B expense reduction by year-end 2018.

Additionally, the bank plans to close about 450 branches in 2017-2018, and expects to increase Q3 dividend to 39c per share.

Last month, Wells Fargo said it sees net interest income up low to mid-single digits in 2017, with loan growth in Q3 expected to be impacted by continued decline in auto loans, run off of the junior lien mortgage portfolio, and a slower and more competitive commercial and CRE lending environment.

2. VALUATION, LACK OF CATALYSTS:

Back in July, #Berenberg analyst James Chappell downgraded Wells Fargo to Sell saying the bank’s competitive advantages have been eroded. Wells has become “too big to differentiate itself” from wider market trends and deliver the expected growth, Chappell contended.

A few days later, BMO Capital analyst James Fotheringham cut his rating for Citi to Market Perform based on valuation and lack of catalysts.

Last month, JPMorgan also saw a rating change, with Deutsche Bank analyst Matt O’Connor downgrading the stock to Hold as he sees net interest income growth slowing and credit costs inching up as the Fed raises short rates and the yield curve flattens.

Further meaningful outperformance of JPMorgan shares will be harder amid increased competition within investment banking and trading as well as slowing loan growth, he contended. 3.

UPSIDE POTENTIAL

Late July, Andrew Bary wrote on Barron’s that Citi could rise by 50%, or hit $100, saying he sees upside ahead as it offers a low valuation and what could be the highest earnings growth rate among its peers in upcoming years.

Two weeks later, Wells Fargo analyst Mike Mayo resumed coverage of Citi with an Outperform rating, calling it his top pick in Large-Cap U.S. Banks. Mayo expects the stock to double in four-to-five years.

Meanwhile, Citi analyst Keith Horowitz argued that now is the time to buy Wells Fargo, telling investors Wells Fargo’s business improved, not broken. The company’s issue is an “aggressive sales culture encouraged the wrong behavior leading to strong account generation,” which had an immaterial impact to earnings, Horowitz added. 4.

WELLS TO REMEDIATE CUSTOMERS

On July 28, Wells Fargo announced a plan to remediate auto loan customers of Wells Fargo Dealers Services who may have been financially harmed due to issues related to auto Collateral Protection Insurance policies.

This month, the bank also announced plans to reach out to all home lending customers who paid fees for mortgage rate lock extensions requested from September 16, 2013, through February 28, 2017, and to refund customers who believe they should not have paid those fees.


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Verifone higher after CEO says shares undervalued

Veritone jumps after CEO rebuts short seller attack

Veritone higher on short squeeze. See Stokwinners.com for details

Shares of Veritone (VERI) are on the rise after the company’s CEO Chad #Steelberg told Bloomberg that the company’s shares are not worthy of shorting and in fact are undervalued. This comes a few weeks after short-seller #Citron argued that the stock is headed dramatically lower.

SHARES STILL CHEAP

Veritone is a cloud-based artificial intelligence company, whose shares have seen a 300% gain over the last couple of months. While it has drawn criticism from short sellers such as Citron Research that say the gains are overblown, its CEO Chad Steelberg believes that not only is the stock a bad short, it is still undervalued, according to a report by Bloomberg.

Further, the chief executive believes the market opportunity for Veritone’s technology is huge, the publication noted, citing their interview with the executive.

Steelberg, who envisions thousands of companies using applications on his platform, is quoted as having said: “Our general solution can be applied to so many problems. It clearly shows that our stock is undervalued given the use cases being leveraged by our partners.”

HEADING TO $20

Back on September 27, short-selling firm Citron Research tweeted, “$veri is not artificial intelligence, more like natural stupidity. Stock should trade right back to $20.” Veritone shares fell by about 30% that day.

THE ‘REAL DEAL’

Commenting on the short report, Roth Capital analyst Brian Alger said on September 29 that he is convinced Veritone is “the real deal” and is transforming businesses through the orchestration of third party ANI engines.

#Alger, who said Veritone has been clear in its intentions to utilize M&A and now has a list of over 30 potential targets, told investors that he thinks that with deal potential incorporated a $1B valuation is “not only reasonable, but could be conservative.”

The analyst raised his price target on the shares to $62 from $13.20, while reiterating a Buy rating on the stock.

PRICE ACTION

In Monday’s trading, shares of Veritone have gained 10% to $40.71. Stock has a 52-weeks trading range of  $7.76 – $74.92.


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