Concho Resources sold for $49 per share

ConocoPhillips, Concho Resources to combine in all-stock transaction

ConocoPhillips (COP) and Concho Resources (CXO) announced that they have entered into a definitive agreement to combine companies in an all-stock transaction.

ConocoPhillips buys Concho Resources

Under the terms of the transaction, which has been unanimously approved by the board of directors of each company, each share of Concho Resources common stock will be exchanged for a fixed ratio of 1.46 shares of ConocoPhillips common stock, representing a 15% premium to closing share prices on October 13.

The transaction will create a company with an approximately $60B enterprise value.

The combined company will hold approximately 23B barrels of oil equivalent, or BBOE resources with an average cost of supply of below $30 per barrel WTI. The transaction brings together acreage positions across the Delaware and Midland basins that also includes leading positions in the Eagle Ford and Bakken in the Lower 48 and the Montney in Canada.

The companies announced that together they expect to capture $500M of annual cost and capital savings by 2022.

The identified savings will come from lower general and administrative costs and a reduction in ConocoPhillips’ future global new ventures exploration program. This de-emphasis of ConocoPhillips’ organic resource addition program is driven by the addition of Concho’s large, low-cost resource base.

Additional supply chain, commercial and drilling and completion capital efficiency savings are not yet included in these cost-reduction estimates. ConocoPhillips will offer a compelling ordinary dividend supplemented by additional distributions as needed to meet its target distribution of greater than 30% of cash from operations.

Low oil prices and soft demand forces Concho to sell

The company seeks to maintain a strong investment-grade credit rating across price cycles. On a pro forma basis, the combined company net debt is approximately $12B as of June 30, representing an attractive leverage ratio of 1.3 at 2021 consensus commodity prices.

Upon closing, Concho’s chairman and CEO Tim Leach will join ConocoPhillips’ board of directors and executive leadership team as executive vice president and president, Lower 48. This transaction will enhance the company’s competitive position in Midland.

The transaction is subject to the approval of both ConocoPhillips and Concho stockholders, regulatory clearance and other customary closing conditions. The transaction is expected to close in the first quarter of 2021.

In the meantime, an integration planning team consisting of representatives from both companies will be formed to ensure required business processes and programs are implemented seamlessly post-closing.

In light of the pending merger, ConocoPhillips has suspended share repurchases until after the transaction closes.

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BioMed Realty sold for $14.6 billion

Blackstone says BioMed Realty to be sold for $14.6B to investor group

Blackstone (BX) announced that Blackstone Real Estate Partners VIII L.P. and co-investors have agreed to sell BioMed Realty for $14.6B to a group led by existing BioMed investors.

This is part of a new long-term, perpetual capital, core+ return strategy managed by Blackstone.

BioMed is the largest private owner of life science office buildings

BioMed is the largest private owner of life science office buildings in the United States with an 11.3 million square foot portfolio concentrated in the leading innovation markets including Boston/Cambridge, San Francisco, San Diego, Seattle and Cambridge U.K.

Blackstone bought BioMed Realty for about $8B in 2016

In connection with the recapitalization, existing BioMed investors were offered the option to exit for cash or reinvest their proceeds from the sale.

The investment will generate $6.5 billion of cumulative profits for BREP VIII and BioMed co-investors. BREP VIII, an opportunistic Real Estate investment fund, and co-investors acquired BioMed in January 2016.

The recapitalization is expected to close within five business days of the conclusion of the “go-shop” process.

The Blackstone Group Inc. is an alternative asset management firm specializing in real estate, private equity, hedge fund solutions, credit, secondary funds of funds, public debt and equity and multi-asset class strategies.

The firm typically invests in early-stage companies. It also provide capital markets services. The real estate segment specializes in opportunistic, core+ investments as well as debt investment opportunities collateralized by commercial real estate, and stabilized income-oriented commercial real estate across North America, Europe and Asia.

BX closed at $55.40.

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Eaton Vance sold for $7B

Morgan Stanley to acquire Eaton Vance for $7B in cash, stock transaction

Morgan Stanley (MS) and Eaton Vance (EV) have entered into a definitive agreement under which Morgan Stanley will acquire Eaton Vance for an equity value of approximately $7B.

Eaton Vance sold to Morgan Stanley

Morgan Stanley Investment Management, or MSIM, will be an asset manager with approximately $1.2T of AUM and over $5B of combined revenues.

The company said MSIM and Eaton Vance are highly complementary with limited overlap in investment and distribution capabilities.

Morgan Stanley buys Eaton Vance for $7B

The combination will also bring Eaton Vance’s U.S. retail distribution together with MSIM’s international distribution.

The combination will position Morgan Stanley to generate financial returns through increased scale, improved distribution, cost savings of $150M and revenue opportunities.

By financing the transaction with 50% cash, Morgan Stanley will utilize approximately 100bps of excess capital, and the firm’s common equity tier 1 ratio is expected to remain approximately 300bps above the firm’s stress capital buffer requirement of 13.2%.

Eaton Vance Corp., through its subsidiaries, engages in the creation, marketing, and management of investment funds in the United States. It also provides investment management and counseling services to institutions and individuals. 

The transaction is expected to be breakeven to earnings per share immediately and marginally accretive thereafter, with fully phased-in cost synergies, and add approximately 100bps to return on tangible common equity.

Under the terms of the merger agreement, Eaton Vance shareholders will receive $28.25 per share in cash and 0.5833x of Morgan Stanley common stock, representing a total consideration of approximately $56.50 per share.

Based on the $56.50 per share, the aggregate consideration paid to holders of Eaton Vance’s common stock will consist of approximately 50% cash and 50% Morgan Stanley common stock.

The merger agreement also contains an election procedure allowing each Eaton Vance shareholder to seek all cash or all stock, subject to a proration and adjustment mechanism.

In addition, Eaton Vance common shareholders will receive a one-time special cash dividend of $4.25 per share to be paid pre-closing by Eaton Vance to Eaton Vance common shareholders from existing balance sheet resources.

It is anticipated that the transaction will not be taxable to Eaton Vance shareholders to the extent that they receive Morgan Stanley common stock as consideration.

The transaction has been approved by the voting trust that holds all of the voting common stock of Eaton Vance. The acquisition is subject to customary closing conditions, and is expected to close in Q2 of 2021.

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Arm Holdings sold for $40 billion

Nvidia to buy Arm Holdings from Softbank

Nvidia (NVDA) confirmed that it intends to buy chip design giant Arm Holdings for a total of up to $40 billion from existing owner SoftBank (SFTBY), which bought the company for $32 billion in 2016.

Arm Holdings chips power smart phones

SoftBank  will immediately receive $2 billion in cash for signing the deal. Then, it will receive another $10 billion in cash and $21.5 billion of stock in Nvidia at closing. That stake will be likely just a bit shy of 10% of the company.

Softbank bought Arm in 2016 for $32 billion

In addition, SoftBank is slated to earn $5 billion in a mix of cash and stock as a performance-based earn-out. Conditions or timing for that earn-out were not disclosed.

Nvidia buys Arm Holdings for $40 billion

Analysts’ Comments

Should Nvidia’s (NVDA) acquisition of SoftBank’s (SFTBY) ARM be allowed to proceed, it would create a “landscape-changing entity” that would combine two leading GPU and CPU architectures into a “single powerful ecosystem,” Deutsche Bank analyst Ross Seymore tells investors in a research note.

However, it this point that is likely to create the pushback from competitors and customers, says the analyst. Seymore questions whether ARM licensees would support an Nvidia acquisition saying “there could be a myriad of conflict of interest issues” whereby Nvidia could have access to competitor strategies and technologies in a variety of Nvidia-targeted markets. Seymore keeps a Hold rating on Nvidia shares.

Jefferies analyst Mark Lipacis raised the firm’s price target on Nvidia (NVDA) to $680 from $570 and keeps a Buy rating on the shares after the company announced an agreement to acquire ARM Holdings, subject to regulatory approvals. He views the deal as one that is “transformative” as it should position Nvidia to capture 80% of the ecosystem value in the data center and also unify the compute ecosystem between the edge and data center, Lipacis tells investors. Assuming the deal with Softbank (SFTBY) goes through, he thinks the merged company has a five-year EPS power of $50, said Lipacis, who also raised his “bull-case” target on Nvidia shares to $1,000.

RBC Capital analyst Mitch Steves keeps his Outperform rating on Nvidia (NVDA) after the company confirmed its acquisition of ARM Holdings last night, saying the transaction would be a positive if it can close amid the likely regulatory challenges to its completion. Steves adds that if the transaction closes, it would also be a “notable negative” for Intel (INTC), stating that Nvidia’s research and development funding would compete against Intel’s currently dominant x86 market share.

Wedbush analyst Matt Bryson made no change to his Outperform rating or $525 price target for Nvidia (NVDA) after the company and SoftBank (SFTBY) finalized an agreement whereby Nvidia will purchase ARM Holdings. While Bryson views the deal terms and expected synergies as favorable for Nvidia, the analyst believes it most likely will never be consummated unless the U.S./China relationship dynamic shifts considerably.

NVDA is up 5.8% to $514 while SFTBY is up 8.7% to $29.87.

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Virtusa sold for $2 billion

Virtusa to be acquired by BPEA for $51.35 per share in cash deal valued at $2B

Baring Private Equity Asia, or BPEA, and Virtusa (VRTU) announced the companies have entered into a definitive merger agreement under which funds affiliated with BPEA will acquire all outstanding shares of common stock of Virtusa for $51.35 per share in an all-cash transaction valued at approximately $2B.

Virtusa Corporation provides digital engineering and information technology (IT) outsourcing services primarily in North America, Europe, and Asia.

Virtusa sold for $2B

The companies said in a release, “The price per share to be paid in the transaction, which was unanimously approved by the Virtusa Board of Directors, represents a premium of approximately 27 percent to the closing price of Virtusa common stock on September 9, 2020, the last trading day prior to the transaction announcement, and premiums of approximately 29 percent and 46 percent to Virtusa’s volume-weighted average prices, or VWAP, for the last 30 and 60 trading days, respectively.

In addition, the price paid implies a valuation of 16.2x Firm Value / Last Twelve Months EBITDA as of June 30, 2020. On July 20, 2020, the Virtusa Board of Directors received an unsolicited proposal from an interested party to acquire Virtusa.

BPEA buys Virtusa for $2 billion

Following receipt of the offer, consistent with the Board’s fiduciary duties to maximize shareholder value, the Board authorized the Company and its financial advisors to engage with other potential strategic buyers and financial sponsors regarding a potential acquisition of Virtusa.

As part of this process, the Company signed non-disclosure agreements with five parties and engaged with two others.

After an independent review of the alternatives available, including the value creation opportunity through continued execution of the Company’s strategic plan, the Virtusa Board unanimously determined that the all-cash premium transaction with BPEA for $51.35 per share in cash maximizes value for Virtusa’s shareholders.

The transaction, which is expected to close in the first half of 2021, is subject to the approval of Virtusa’s shareholders, customary regulatory requirements, including approval from The Committee on Foreign Investment in the United States, or CFIUS, and customary closing conditions.

The transaction is not subject to a financing condition.

The Orogen Group, which holds 108,000 shares of Virtusa Convertible Preferred Stock and whose CEO is Vikram Pandit, an independent member of the Board, has entered into a voting agreement under which it has agreed to vote all of Orogen’s Convertible Preferred Stock in favor of the transaction.

Orogen Group is a major shareholder of Virtusa

Orogen’s shares of preferred stock are convertible into 3,000,000 shares of Virtusa common stock and represent approximately 10 percent of the voting power in the Company.

The directors and executive officers of Virtusa have also entered into this voting agreement, and hold an additional approximate 5.7% of the voting power of the Company.”

VRTU closed at $40.50, last traded at $50.45.

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Stein Mart files for Chapter 11 bankruptcy

Stein Mart voluntarily files Chapter 11 bankruptcy protection

Stein Mart (SMRT) announced that it and its subsidiaries have filed voluntary petitions for relief under Chapter 11 of the Bankruptcy Code in the United States Bankruptcy Court for the Middle District of Florida – Jacksonville Division.

Stein Mart files for bankruptcy protection

Stein Mart offers designer and name-brand fashion apparels, home decor merchandise, accessories, and shoes at everyday discount prices in the United States. As of June 3, 2020, it operated 281 stores in 30 states. The company was founded in 1908 and is headquartered in Jacksonville, Florida.

The Company has filed customary motions with the Bankruptcy Court that will authorize, upon Bankruptcy Court approval, the Company’s ability to maintain operations in the ordinary course of business, including, among other things, the payment of employee wages and benefits without interruption, payment of suppliers and vendors in the normal course of business, and the use of cash collateral.

Too much savings caused Stein Mart’s demise

These motions are typical in the Chapter 11 process and the Company anticipates that they will be approved shortly after the commencement of its Chapter 11 case.

Details on the Company’s Chapter 11 process and go-forward strategy are as follows:

The Company expects to close a significant portion, if not all, of its brick-and-mortar stores and, in connection therewith, the Company has launched a store closing and liquidation process.

The Company, however, will continue to operate its business in the ordinary course in the near term; and the Company is evaluating any and all strategic alternatives, including the potential sale of its eCommerce business and related intellectual property. 

SMRT last traded at $0.18.

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National General sold for $4 billion

Allstate to acquire National General for $34.50 per share, in cash

Allstate (ALL) has agreed to acquire National General (NGHC) for approximately $4B in cash, or $34.50 per share.

The companies said in a release, “The transaction is expected to close in early 2021, subject to regulatory approvals and other customary closing conditions.

National General sold for $4B

National General provides a wide range of property-liability products through independent agents with a significant presence in non-standard auto insurance.

The company also has attractive Accident and Health and Lender-Placed Insurance businesses.

Gross premiums written were $5.6 billion, which generated operating income of $319 million in 2019.

National General shareholders will receive $32.00 per share in cash from Allstate, plus closing dividends expected to be $2.50 per share, providing $34.50 in total value per share.

Allstate will fund the share purchase by deploying $2.2 billion in combined cash resources and, subject to market conditions, issuing $1.5 billion of new senior debt.

Allstate expects to maintain its current share repurchase program.

National General’s board of directors has approved the transaction, which includes customary terms and conditions, including a breakup fee of $132.5 million.

A voting agreement has also been signed with entities controlling 40% of National General’s common shares to vote for the transaction.

MSD Capital, which owns approximately 7.4% of National General’s outstanding common shares, also supports the transaction.

NGHC closed at $20.41.

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Chesapeake Energy may file for bankruptcy

Chesapeake Energy slides as company considers bankruptcy, strategic alternatives

Shares of Chesapeake Energy (CHK) are tumbling after the company warned that it might not be able to stay in business amid low commodity prices caused by a global price war and depressed demand due to the COVID-19 pandemic.

Chesapeake is near bankruptcy

EVALUATING STRATEGIC ALTERNATIVES:

On Monday, Chesapeake Energy announced that it filed its Form 10-Q for the three-month period ended March 31, 2020 and, in light of the unprecedented market environment, has withdrawn the financial outlook it previously provided on February 26, 2020.

The company also reinstated a “going concern” warning. “Fluctuations in oil and natural gas prices have a material impact on our financial position, results of operations, cash flows and quantities of oil, natural gas and NGL reserves that may be economically produced.

Historically, oil and natural gas prices have been volatile; however, the volatility in the prices for these commodities has substantially increased as a result of COVID-19 and the OPEC+ decisions […]

Historical oil prices represented in 2020 dollar, Stockwinners

If the current depressed prices persist, combined with the scheduled reductions in the leverage ratio covenant and an expected significant reduction in our borrowing base in our scheduled determination, then our liquidity and our ability to comply with our financial covenants during the next 12 months will be adversely affected,” Chesapeake said in the filing.

Boom to bust for CHK

“Based on our current forecast, we do not expect to be in compliance with our financial covenants beginning in the fourth quarter of 2020. Failure to comply with these covenants, if not waived, would result in an event of default under our revolving credit facility, the potential acceleration of outstanding debt thereunder and the potential foreclosure on the collateral securing such debt, and could cause a cross-default under our other outstanding indebtedness.

As a result of the impacts to the company’s financial position resulting from declining industry conditions and in consideration of the substantial amount of long-term debt outstanding, the company has engaged advisors to assist with the evaluation of strategic alternatives, which may include, but not be limited to, seeking a restructuring, amendment or refinancing of existing debt through a private restructuring or reorganization under Chapter 11 of the Bankruptcy Code.

However, there can be no assurances that the company will be able to successfully restructure its indebtedness, improve its financial position or complete any strategic transactions. As a result of these uncertainties and the likelihood of a restructuring or reorganization, management has concluded that there is substantial doubt about the company’s ability to continue as a going concern.”

REVERSE STOCK SPLITs NEVER WORK:

Chesapeake stock has lost about 50% of it’s value since a 1-for-200 reverse stock split took effect after the close of trading on April 14, 2020.

The company had implemented the reverse split to raise its share price enough to regain compliance with listing standards, but it was viewed as validation of investor concerns as the company struggled with falling commodities prices, high debt levels and the effects of the COVID-19 pandemic, the author added.

The company lost its way after Aubrey McClendon, a founder and former chief executive of Chesapeake Energy, died in a fiery car crash in 2016, a day after he was charged with conspiring to rig bids for oil and natural gas leases. Many believe he committed suicide.

Aubrey McClendon

McClendon — a key player in the U.S. shale boom — co-founded Chesapeake in 1989 and stepped down from the company in 2013. Chesapeake used to be the second-largest natural gas producer in the United States.

PRICE ACTION: In afternoon trading on Tuesday, shares of Chesapeake have dropped almost 22% to $10.13.

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Uber in talks to acquire GrubHub

Uber made all-stock offer to acquire GrubHub, WSJ reports

Shares of food delivery company GrubHub are sharply higher after the Wall Street Journal reported that Uber Technologies (UBER) approached GrubHub (GRUB) earlier this year with a takeover offer and the parent company of Uber Eats and its rival service operator continue to discuss a possible combination.

Uber may buy GrubHub, Stockwinners

Uber is seeking to acquire GrubHub in an all-stock deal that would reshape the meal-delivery business, but “it’s far from guaranteed the talks will produce a deal,” according to the report.

UberEats has 25% of the food delivery market, Stockwinners

Bloomberg’s Ed Hammond has separately reported this morning that Uber has made an offer to acquire GrubHub.

The companies are in talks about a deal and could reach an agreement as soon as this month, sources told Bloomberg. 

“While our Rides business has been hit hard by the ongoing pandemic, we have taken quick action to preserve the strength of our balance sheet, focus additional resources on Uber Eats, and prepare us for any recovery scenario,” said Uber CEO Dara Khosrowshahi.

Uber has a market cap of $57B

Uber Eats is a direct competitor to Grubhub, with Grubhub controlling  26.7% of the market while Uber holds a 25.2% market share. 

Grubhub has a market cap of more than $5.3 billion. Uber has a market cap of $57 billion.

GrubHub (GRUB) is seeking 2.15 Uber (UBER) share in exchange for each of its own shares in a potential takeover and Uber’s board is expected to review the latest GrubHub counter proposal, according to The Wall Street Journal, citing sources.

NEEDHAM

After Bloomberg reported that Uber (UBER) has approached GrubHub (GRUB) with a takeover offer, Needham analyst Brad Erickson said such a deal would be consistent with his bullish thesis that Uber Eats could eliminate as much as $500M of its roughly $1.2B in losses last year through such a GrubHub acquisition.

With Uber having exited India and seven other unprofitable markets, Erickson thinks investors would “further recognize a dramatically clearer picture towards food delivery profitability” if a GrubHub deal were to occur, he added. Erickson reiterates a Buy rating and $42 target on Uber shares.

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Amazon may buy AMC Movie Theatres

As AMC considers bankruptcy, Amazon may snap up the company

Amazon.com (AMZN) has held talks to acquire the troubled movie chain AMC Entertainment Holdings (AMC), but it is unclear if the discussions are still active, Jamie Nimmo of Daily Mail reports, citing sources.

The companies are thought to have held talks about a potential takeover of AMC by Amazon, the sources said.

Amazon may buy AMC

Buying a cinema chain would enable Amazon to control the screening of films, giving it greater dominance of the industry. Amazon’s interest in cinemas is not new. 

In 2018, Amazon looked at buying American arthouse cinema chain Landmark Theatres, but lost out to the eventual buyer, Cohen Media Group. Netflix was also reportedly in the running to buy Landmark.

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Amazon.com is in talks to buy AMC, Stockwinners

However, a takeover of AMC would be on a different scale as Landmark only had about 250 screens in the US, while AMC has about 1,000 around the world.

Amazon certainly has the means to buy AMC, whose stock market value has collapsed in recent years to just $420million.

In a sign of bad times in the movie business, earlier this month AMC Theatres (AMC) sent a letter to Universal Studios (CMCSA) chairman Donna Langley, saying that, going forward, AMC will not license any Universal films in any of its 1,000 globally effective immediately.

Amazon bought supermarket chain Whole Foods Market in 2017 in a sign that the company was willing to spend money buying non-web-based companies. 

Stockwinners offers stocks to buy, stocks to watch, upgrades, stock downgrades, earnings, Stocks to Avoid
Amazon bought Wholefoods in 2017

AMC was bought by Chinese conglomerate Dalian Wanda for $2.6 billion in 2012, but it bought back $600 million worth of shares in 2018 after Beijing cracked down on overseas investments by Chinese companies.

Under Wanda, AMC launched a major expansion plan, and in 2016 bought Odeon in the UK for £920 million from British financier Guy Hands’ private equity firm, Terra Firma, and US group Carmike Cinemas for $1.1 billion.

The deals turned AMC into the world’s largest cinema company, with 1,000 outlets and 10,000 screens around the world.

However, the expansion plan backfired and left AMC saddled with debts that are now close to $ 5billion. Last month, AMC raised $500 million from bond investors in an effort to stay afloat during the crisis. 

However, investors still questioned whether AMC could avoid bankruptcy, given its parlous financial state.

A group of AMC’s lenders reportedly hired lawyers to advise on restructuring options last month, underlining AMC’s financial strife. 

In Monday’s pre-market trading, AMC shares are up 70% to $7.00. AMZN closed at $2379.61.

Read our blog about AMC.

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Norwegian Cruise Line shores up its balance sheet, raises $2B

NCL Corporation announces $400M investment by L Catterton

Norwegian Cruise proposes $650M note sale

Norwegian Cruise Line Holdings (NCLH) announced a private placement of up to $400 million in aggregate principal amount of exchangeable senior notes due 2026 to an affiliate of L Catterton.

Norwegian raises $2 billion to shore up its balance sheet

The Private Exchangeable Notes will be general senior unsecured obligations of NCLC, guaranteed by NCLH, and will be exchangeable at the holder’s option at any time prior to the close of business on the business day immediately preceding the maturity date into Series A Preference Shares of NCLC, which shall be automatically exchangeable into a number of ordinary shares of NCLH.

Material Terms: The Private Exchangeable Notes will accrue payment-in-kind interest at a rate of 7.0% per annum for the first year post-issuance, 4.5% per annum payment-in-kind interest plus 3.0% per annum cash interest for the following four years post issuance and 7.5% in cash for the final year prior to maturity; L Catterton will be entitled to nominate one member to the Company’s board of directors so long as a minimum ownership threshold is met, as well as one observer to the Company’s board of directors; The closing of the Private Exchangeable Notes is expected to occur upon the satisfaction of certain customary closing conditions, including a condition that the Company raises at least $1.0 billion in proceeds in the aggregate from other offerings; L Catterton will have certain registration rights in respect of the ordinary shares underlying the Private Exchangeable Notes and will be subject to certain customary transfer, voting and standstill restrictions, including a one-year lock-up agreement.

Share Offerings

Norwegian Cruise Line Holdings announced an underwritten public offering of $350 million of ordinary shares of the company.

The company intends to grant the underwriters an option to purchase up to $52.5 million of additional ordinary shares.

The company expects to use the net proceeds from the Offering for general corporate purposes. Goldman Sachs & Co. LLC, Barclays Capital Inc., Citigroup Global Markets Inc., J.P. Morgan Securities LLC and Mizuho Securities USA LLC are acting as joint book-running managers for the Offering.

Goldman Sachs

Goldman Sachs analyst Stephen Grambling lowered the firm’s price target on Norwegian Cruise Line to $15 from $34 as he updated his estimates to reflect canceled itineraries through July, a sluggish recovery in 2020-2021 and capital markets activity over the past few weeks, but not the cruise operator’s just announced and pending transactions.

After the company announced plans to raise $600M of senior secured debt, $650M of exchangeable notes, and $350M in equity, and placed $400mn of exchangeable notes with Catterton Partners, Grambling said the added $2B in liquidity provides the company with runway of over 14 months at company estimated cash burn rates. He keeps a Neutral rating on Norwegian shares.

NCLH is down $2.80 to $11.65. We believe shares have found support at these levels.

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Retail bankruptcy filings are coming

J. Crew files for bankruptcy; Madewell to remain part of J.Crew

J.Crew Group announced it has reached an agreement with its lenders holding approximately 71% of its Term Loan and approximately 78% of its IPCo Notes, as well as with its financial sponsors, under which the Company will restructure its debt and deleverage its balance sheet, positioning J.Crew and Madewell for long-term success.

Madewell to remain part of the J.Crew Company, Stockwinners

Under the terms of the Transaction Support Agreement, the Company’s lenders will convert approximately $1.65 billion of the Company’s debt into equity.

To facilitate the restructuring contemplated by the TSA, the parent company of J.Crew Group, Inc., Chinos Holdings, Inc. and certain affiliates, have filed voluntary petitions for relief under Chapter 11 of the U.S. Bankruptcy Code in the U.S. Bankruptcy Court for the Eastern District of Virginia.

The Company has secured commitments for a debtor-in-possession financing facility of $400 million and committed exit financing provided by existing lenders Anchorage Capital Group, L.L.C., GSO Capital Partners and Davidson Kempner Capital Management LP, among others.

Subject to Court approval, the DIP financing, combined with the Company’s projected cash flows, is expected to support its operations during the restructuring process.

As part of the TSA, Madewell will remain part of J.Crew Group, Inc.

Libby Wadle will continue in her role as CEO of Madewell.

J.Crew files for Chapter 11 bankruptcy protection, Stockwinners

“This agreement with our lenders represents a critical milestone in the ongoing process to transform our business with the goal of driving long-term, sustainable growth for J.Crew and further enhancing Madewell’s growth momentum,” said Jan Singer, CEO, J.Crew Group.

Neiman Marcus is expected to file for bankruptcy protection too

“Throughout this process, we will continue to provide our customers with the exceptional merchandise and service they expect from us, and we will continue all day-to-day operations, albeit under these extraordinary COVID-19-related circumstances.

Pier 1 Imports filed for bankruptcy protection

As we look to reopen our stores as quickly and safely as possible, this comprehensive financial restructuring should enable our business and brands to thrive for years to come.”

GNC is also expected to file for bankruptcy protection

The Company has filed a series of customary “first day” motions with the Bankruptcy Court seeking to maintain its operations during the restructuring process to help facilitate a smooth transition into Chapter 11.

JCP is inline for bankruptcy filing protection following weak sales

Note that in 2011, TPG Capital LP and Leonard Green & Partners LP privatized J.Crew in a $3 billion leveraged buyout.

Recent bankrupt retailers include Forever 21 and Pier 1 Imports.

Forever 21 filed for bankruptcy protection recently

Other retailers that may file for bankruptcy in the near future include: Neiman Marcus, JCP, GNC, and AEO. Note that Gaps (GPS) has been suffering from soft retail sales. Lands’ End (LE) is also suffering from soft sales.

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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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Northview REIT sold for $4.8B

Northview REIT to be acquired by Starlight, KingSett for $36.25 per unit

Northview Apartment Real Estate Investment Trust (NPRUF) announced that it has entered into an arrangement agreement with affiliates of Starlight Group Property Holdings pursuant to which the Purchasers will acquire Northview, and the holders of Northview’s outstanding trust units will receive $36.25 per Unit in cash in a transaction valued at $4.8 billion including net debt.

Northview REIT sold for $4.8B, Stockwinners

Under the Arrangement Agreement, the Purchasers will acquire Northview, and the holders of Northview’s outstanding Units will receive $36.25 per Unit.

The Offer Price represents a total equity value of approximately $2.5 billion on a fully diluted basis and a total transaction value of approximately $4.8 billion including the assumption of net debt. The Transaction is not subject to a financing condition.

Unitholders will be able to elect to receive 100% of the Offer Price in the form of cash.

Starlight buys Northview REIT, Stockwinners

Alternatively, unitholders may elect to receive all or a portion of the Offer Price in units of a new, multi-residential fund that would own a geographically diverse portfolio of Northview properties located in six Canadian provinces and two territories.

The High Yield Fund will apply to list its units on a Canadian securities exchange concurrently with the close of the Transaction. The listing will be subject to the High Yield Fund fulfilling all of the initial listing requirements and conditions of the Exchange.

Further details with respect to the High Yield Fund will be provided in the management information circular to be mailed to Northview Unitholders. Elections to receive High Yield Fund units will be subject to proration.

All-Cash Elections will not be subject to proration. Unitholders not specifying an election will be deemed to have elected to receive the All-Cash Consideration.

Pursuant to the Arrangement Agreement, Northview has an initial 30-day go-shop period, beginning on February 19, 2020 and ending on March 20, 2020, during which it is permitted to actively solicit, evaluate and enter into negotiations with third parties that express an interest in acquiring Northview. Northview has the option to extend the Go-Shop Period by up to 30 days, in certain circumstances.

Mr. Daniel Drimmer, Chief Executive Officer and President of Starlight, has committed to vote the Units he beneficially owns, controls or directs in favour of, or tender his Units into, any all-cash superior proposal received during the Go-Shop Period, subject to certain terms and conditions, pursuant to a voting and support agreement.

The Arrangement Agreement also provides a two-tier termination fee structure such that if Northview is successful in completing a transaction pursuant to a superior proposal received during the Go-Shop Period, there will be a termination fee payable to the Purchasers of $37.7 million.

If a transaction is completed pursuant to a superior proposal received following the expiry of the Go-Shop Period, the Purchasers will be entitled to a termination fee of $88.0 million.

The Purchasers will have the right to match any superior proposals received either during or after the Go-Shop Period. The Transaction is structured as a statutory plan of arrangement under the Alberta Business Corporations Act.

Completion of the Transaction requires approval of at least 66 2/3% of the votes cast by unitholders and holders of special voting units, as well as the approval by a simple majority of votes cast by disinterested unitholders and holders of special voting units, excluding Starlight, its affiliates and any other unitholders required to be excluded under Multilateral Instrument 61-101 – Protection of Minority Security Holders in Special Transactions.

The Transaction is also subject to approval of the Alberta Court of Queen’s Bench, regulatory approvals, consents and approvals from Canada Mortgage and Housing Corporation and certain of Northview’s lenders and the satisfaction of other customary closing conditions.

Northview expects to continue to pay a monthly distribution of $0.1358 per trust unit through closing of the Transaction. The Transaction is expected to close by Q3 of 2020.

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