U.S. nonfarm payrolls rose 209k in July

U.S. nonfarm payrolls rose 209k in July with earnings rising 0.3%

U.S. ADP reported private payrolls increased 178k in July. See Stockwinners.com Market Radar to read more

U.S. nonfarm payrolls rose 209k in July with earnings rising 0.3%.

The June 222k job gain was revised up to 231k, but May’s 152k increase was bumped down to 145 (for a net +2k).

There was no revision to June’s 0.2% earnings rise.

The unemployment rate was dipped to 4.3% versus 4.4%. The labor force jumped 349k following the prior 361k gain, while household employment increased 345k from 245k.

The labor force participation rate rose to 62.9% from 62.8%. The workweek was steady at 34.5. Total private payrolls increased 205k (beating ADP’s 178k).

The goods producing sector added 22k workers, with construction up 6k, and manufacturing up 16k.

Jobs in the services sector increased 183k, with the 62k gain in leisure/hospitality leading the way. Education/healthcare gains were up 54k, while business services added 49k. Government jobs rose 4k, with the Federal sector unchanged.

This is another solid report and keeps the Fed on its normalization path, but doesn’t necessarily imply a September rate hike.

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Paysafe Sold for GBP2.96B

Blackstone, CVC Group to buy Paysafe for approximately GBP2.96B

Blackstone, CVC Group to buy Paysafe. See Stockwinners.com Market Radar to read more

The boards of Paysafe Group and Pi UK Bidco Limited, a newly-incorporated company jointly-owned by funds managed by Blackstone (BX) and funds managed and/or advised by CVC, announced that they have reached agreement on the terms of a recommended cash offer to be made by Bidco for the entire issued and to be issued ordinary share capital of Paysafe.

It is intended that the Acquisition will be implemented by way of a Court-sanctioned scheme of arrangement.

Bidco reserves the right to elect, with the consent of the Takeover Panel and subject to the terms of the Bid Conduct Agreement, to implement the Acquisition by way of a Takeover Offer for the entire issued and to be issued ordinary share capital of Paysafe as an alternative to the Scheme. Under the terms of the Acquisition, each Paysafe Shareholder will be entitled to receive: 590p in cash her Paysafe share.

The Acquisition values the entire issued and to be issued ordinary share capital of Paysafe at approximately GBP 2.96 billion.

The Paysafe Independent Directors, who have been so advised by Lazard as to the financial terms of the Acquisition, consider the terms of the Acquisition to be fair and reasonable.

In providing its advice to the Paysafe Independent Directors, #Lazard has taken into account the commercial assessments of the Paysafe Independent Directors. Commenting on the Acquisition, Martin Brand, Senior Managing Director of Blackstone, said: “We are delighted that our proposal has been recommended by the Board and excited by the prospect of working with management to develop Paysafe as one of the leading, global providers of online and mobile payment solutions.

Paysafe’s innovative alternative payment systems and risk management capabilities form a strong value proposition for consumers and merchants alike.

As a leading technology investor, #Blackstone believes that Paysafe is an ideal platform for continued innovation in the payments space, and look forward to supporting Paysafe’s growth both organically and through acquisitions.”

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Jacobs Engineering to Buy Rival CH2M for $3.27 Billion

Jacobs Engineering to acquire CH2M in $3.27B transaction

 Jacobs Engineering to acquire CH2M in $3.27B transaction. See Stockwinners.com Market Radar to read more

Jacobs Engineering (JEC) and CH2M HILL Companies announced that they have entered into a definitive agreement under which Jacobs will acquire all of the outstanding shares of CH2M in a cash and stock transaction with an enterprise value of approximately $3.27B, including approximately $416M of CH2M net debt.

Under the terms of the merger agreement, which has been unanimously approved by the Boards of Directors of both companies, CH2M’s stockholders will have the option to elect to receive either $88.08 in cash, 1.6693 shares of Jacobs common stock or a mix of $52.85 in cash and 0.6677 shares of Jacobs common stock subject to proration such that the aggregate consideration paid to CH2M stockholders will equal 60% cash and 40% Jacobs common stock.

Following the close of the transaction, CH2M stockholders will own 15% of Jacobs shares on a fully diluted basis based on the number of Jacobs shares outstanding. The transaction is not subject to a financing condition.

Jacobs expects to finance the $2.4B cash required for the transaction through a combination of cash on hand, borrowings under the Company’s existing revolving credit facility and $1.2B of new committed 3-year term debt arranged by BNP Paribas and The Bank of Nova Scotia.

Jacobs’ post-close liquidity is expected to remain robust at approximately $900M.

The transaction, which is expected to close in Jacobs’ fiscal 2018 first quarter, is subject to the satisfaction of customary closing conditions, including regulatory approvals and approval by CH2M stockholders.

Apollo Global Management (APO), which has an approximate 18% voting interest in CH2M, has agreed to vote in favor of the transaction.

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PharMerica Sold for $1.4 Billion

PharMerica agrees to be acquired by KKR at $29.25 per share

PharMerica agrees to be acquired by KKR in deal valued at $1.4B. See Stockwinners.com Market Radar to read more.

PharMerica (PMC) announced that it has entered into a definitive merger agreement pursuant to which a newly formed company controlled by KKR (KKR), with Walgreens Boots Alliance (WBA) as a minority investor, will acquire PharMerica.

The all-cash transaction is valued at approximately $1.4B including the assumption or repayment of debt. Upon completion of the transaction, PharMerica will become a private company.

Under the terms of the agreement, PharMerica shareholders will receive $29.25 in cash for each share of PharMerica common stock upon closing of the proposed transaction.

The price represents a premium of approximately 17 percent to PharMerica’s closing share price as of the last trading day prior to announcement and a premium of approximately 18 percent to PharMerica’s 90-day volume weighted average price.

The acquisition agreement was unanimously approved by the Board of Directors of PharMerica. KKR is making the investment primarily through its Americas XII Fund. Walgreens Boots Alliance intends to account for its minority ownership interest in PharMerica as an equity method investment.

The transaction is subject to PharMerica shareholder approval, regulatory approvals, and other customary closing conditions.

PharMerica expects to complete the transaction by early 2018.

UBS Investment Bank and BofA Merrill Lynch are serving as financial advisors to PharMerica and Davis Polk & Wardwell LLP is serving as PharMerica’s legal advisor.

Simpson Thacher & Bartlett LLP and Weil, Gotshal & Manges LLP are serving as legal advisors to KKR and Walgreens Boots Alliance, respectively.

Fully committed debt financing will be provided by Goldman Sachs, Morgan Stanley, Wells Fargo, Jefferies and KKR Capital Markets.

In light of the agreement with KKR and Walgreens, PharMerica has cancelled its second quarter 2017 earnings conference call previously scheduled to be held on Friday, August 4, 2017, at 10:00 a.m. EDT.

PharMerica does not intend to hold earnings conference calls during the pendency of the transaction.

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Private Payroll Rose 178K in July

U.S. ADP reported private payrolls increased 178k in July

 U.S. ADP reported private payrolls increased 178k in July. See Stockwinners.com Market Radar to read more

The 178k July ADP rise undershot the 185k private payroll estimate with a 190k total payroll increase, following a big 33k boost in the June rise to 191k from 158k that reversed the gap to the 187k private payroll rise in that month.

Analysts saw a lean 4k July goods employment rise despite still-firm factory sentiment readings, with gains of 6k for construction and 3k for mining but a 4k drop for factories, alongside a largely expected 174k service job gain.

The “as reported” ADP figures have overshot private payrolls in every month since the October methodology change except April and June, and perhaps now in August, to leave an average overshoot of a hefty 47k and an average monthly 2017 gain of 217k.

Analysts saw undershoots of 29k in June and 17k in April, though with a 94k interim overshoot in May, and prior overshoots of 204k in March, 76k in February, 42k in January, 3k in December, 38k in November, and 15k in October.

The ADP as-reported average absolute error since the 2016 methodology change is 58k, versus a 35k average absolute error for the survey median.

The Labor Department reports July’s job data on Friday August 4th.

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Vertex Says FDA approves Kalydeco for use in more than 600 people with CF

Vertex says FDA approves Kalydeco for use in more than 600 people with CF

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Vertex Pharmaceuticals (VRTX) announced that the U.S. FDA has approved #KALYDECO for use in more than 600 people with cystic fibrosis ages 2 and older who have one of five residual function mutations that result in a splicing defect in the cystic fibrosis transmembrane conductance regulator gene.

This approval was based on Phase 3 clinical data for KALYDECO in these mutations and follows the FDA’s approval of KALYDECO in May 2017 for 23 other residual function mutations, which was based on analyses of in vitro data.

Both approvals are supported by more than five years of real-world clinical experience that demonstrate KALYDECO’s established safety and efficacy profile.

RAISED GUIDANCE

Based on today’s approval, Vertex increased its guidance for 2017 KALYDECO product revenues to a range of $770M-$800M.

Vertex’s guidance range for total CF product revenues in 2017 is now $1.87B-$2.1B, including ORKAMBI guidance of $1.1B-$1.3B. KALYDECO is now approved in the U.S. to treat people with CF ages 2 and older who have one of 38 ivacaftor-responsive mutations in the CFTR gene.

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Barron’s is Bullish on Citi, Honeywell, Remains Bearish on Twitter

Barron’s, the weekly publication owned by the Wall Street Journal, in its latest issue is bullish on several names. They include:

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Advance Auto Parts could rally 20%-30% in two years – Advance Auto Parts (AAP) stock’s valuation seems to discount a lot of bad news, while ignoring the potential for the company to boost profit margins and spur earnings growth in coming years, Vito Racanelli writes in this week’s edition of Barron’s. The shares could rally 20%-30% in the next two years, as earnings rise and the company demonstrates it can hold its own in the face of increasing online competition, he adds.

Citi could rise by 50% – At its first investor day since 2008, Citigroup (C) laid out some ambitious financial targets and Wall Street liked what it heard, Andrew Bary writes in this week’s edition of Barron’s. While the company’s shares finished the week up 2%, there could be more upside because Citi offers the combination of a low valuation and what could be the highest earnings growth rate among its peers in the years to come, Barron’s adds. The bank is targeting $9 a share in 2020 earnings, and suggested its stock could hit $100, 48% above the current level, Bary points out.

Honeywell (HON) shares could return 15% next year – If Darius Adamczyk, Honeywell’s new CEO, delivers as expected, the company’s revenue could rise 4% next year, and earnings, 10%, leading to a higher price/earnings ratio and a 15% total return for the shares, Lawrence Strauss writes in this week’s edition of Barron’s.

Blue Chips set to boost dividends – The third quarter is shaping up to be a ‘very strong one’ for dividend growth among blue-chip names, Lawrence Strauss writes in this week’s edition of Barron’s. IHS Markit expects Mondelez (MDLZ) to announce a 10.5% dividend increase and Intuit (INTU) to declare a hike of 15%, he says. Meanwhile, Microsoft (MSFT) is expected to raise its quarterly dividend by 10.3%, Royal Caribbean Cruises (RCL) to boost its quarterly payout by nearly 15%, Yum! Brands (YUM) to increase 13.3%, and Accenture (ACN) to boost payout by 10%, Barron’s points out.

BEARISH MENTION

Amazon.com, Alphabet to likely ‘cool off for a while,’ – Last week, Alphabet (GOOG; GOOGL) and Amazon (AMZN) beat quarterly sales expectations but showed underwhelming profit and it is not surprising investors would seize upon blemishes in the report as an excuse to take profits, Tiernan Ray writes in this week’s edition of Barron’s. While there is no fundamental weakness with either company, shares will probably show less upside in the rest of this year than in the first half, he notes.

Barron’s sees ‘no relief in sight’ for Twitter – Twitter (TWTR) is nearly as expensive as Facebook (FB), whose revenue and profit are galloping higher, based on next year’s projected earnings before interest, taxes, depreciation and amortization, Jack Hough writes in this week’s edition of Barron’s. That means Twitter must bounce back quickly, or get bought, or suffer a continuing stock-price decline, perhaps to single digits, Hough argues, adding that the first two outcomes are looking increasingly unlikely.

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Rig Counts Rise Again!

Baker Hughes reports U.S. rig count up 8 to 958 rigs

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Baker Hughes (BHGE) reports that the U.S. Rig Count is up 8 rigs from last week to 958, with oil rigs up 2 to 766 and gas rigs up 6 to 192.

The U.S. Rig Count is up 495 rigs from last year’s count of 463, with oil rigs up 392, gas rigs up 106, and miscellaneous rigs down 3 to 0.

The U.S. Offshore Rig Count is up 1 rig from last week to 24 and up 5 rigs year over year.

The Canadian Rig Count is up 14 rigs from last week to 220, with oil rigs up 11 to 129 and gas rigs up 3 to 91.

The Canadian Rig Count is up 101 rigs from last year’s count of 119, with oil rigs up 69, gas rigs up 33, and miscellaneous rigs down 1 to 0.

WTI crude edged a few cents lower after the report, and though remains less than 20 cents below its earlier trend high of $49.80.

#WTI  =  West Texas Intermediate

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Nokia Gets $2 Billion from Apple

Apple Pays $2 billion to Nokia for Patent Infringement

Nokia Gets $2 Billion from Apple. See Stockwinners.com Market Radar

Apple (AAPL) paid Nokia (NOK) $2B in cash as part of a deal to settle a patent disputes in which Nokia claimed Apple was infringing on 32 technology patents, 9to5Mac reports, citing a Nokia conference call.

In the call, Nokia said, “We got a substantial upfront cash payment of EUR$1.7B from Apple, strengthening further our cash position.

As said earlier, our plans is to provide more details on the intended use of cash in conjunction with our Q3 earnings.

Third, instead of a simple patent licensing agreement, we have agreed on a more extensive business collaboration with Apple, providing potential for a meaningful uplift in our IP Routing, Optical Networks and Digital Health business units over time.

Hence, the value of the agreement will be reflected partly as patent licensing net sales in Nokia Technologies, and partly as net sales in other Nokia business groups.”

Nokia first filed the lawsuit claiming Apple was infringing on its technology patents last December, which Apple initially responded to with a lawsuit of its own.

At the center of the dispute were 32 patents involving the iPhone 3GS and later (as well as other Apple products) which Apple claimed Nokia intentionally left out of a 2011 licensing agreement.  Back in May, Apple and Nokia announced that the two companies had reached a resolution to the dispute and would work together by expanding their relationship.

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When It Rains, It Pours

Insurers are dropping Valeant’s top products

Insurers are dropping Valeant's top products. See Stockwinners.com Market Radar

The beleaguered pharmaceutical firm sees its products being denied coverage by major health insurers.

United Healthcare’s (UNH) formulary is no longer covering Valeant Pharmaceuticals’ (VRX) number three branded drug Solodyn and will also now exclude Retin-A brand, its number four branded drug, Wells Fargo analyst David #Maris tells investors in a research note.

The analyst estimates the two drugs represented approximately $214M of Valeant’s sales in 2016. Maris also points out that #Glumetza, Valeant’s number eight branded drug, and Relistor were removed in July from CVS/Caremark’s (CVS) formulary.

These two drugs had approximately $119M in 2016 revenues. Maris notes his counterpart Peter Costa estimates that United Healthcare covers approximately 17% of the U.S. and CVS covers approximately 33%.

Express Scripts (ESRX) is releasing its 2018 national formulary next week, Costa adds.

Maris keeps an Underperform rating on shares of Valeant with a $9 price target. The stock closed on Thursday at $17.13.

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What Caused Stocks to Fall on Thursday?

Legendary investor Howard Marks cautions investors in latest memo

Howard Marks cautions investors in latest memo. See Stockwinners.com for stocks to watch,stocks to trade,stocks to buy

Howard Marks, co-chairman of Oaktree Capital (OAK), penned a memo out on Wednesday urging investors to proceed with caution.

Marks notes that the end of the current bull market may not come today or soon but that risks are elevated and investors may be ignoring them.

“My observations are always indicative, not predictive … an eventual increase in risk aversion – should happen, but they don’t have to happen. And they certainly don’t have to happen soon,” said Marks.

Marks contends the point that bull markets seem to focus on a few stocks as “the greatest.”

He mentions the FAANG’s as the current bull market’s “anointed stocks.” The acronym FAANG is used to describe the current “super stocks”: Facebook (FB), Amazon (AMZN), Apple (AAPL), Netflix (NFLX) and Google (GOOG). In his 22 page memo, Marks says, “I’m not saying the FAANGs aren’t great, or that they’ll suffer such a fate. Just that their elevated status today is a sign of the kind of investor optimism for which we must be on the lookout.”

Marks also turns his sights on digital currencies. “Some businesses accept Bitcoin as payment. Some buyers want to own Ether because it can be used to pay for computing power on the Ethereum network. Some people are eager to speculate on digital currency for profit. Others want to put a little money into these to-date-profitable phenomena rather than run the risk of missing out. But they’re not real!,” Marks explained.

Mark’s ends his discussion by pointing out that the four components of today’s market, “high uncertainty, low prospective returns, high prices and pro-risk behavior – are indisputable.”

Because of this #Marks says this may be a good time to curtail investments, however he points out that large institutional investors do not have the option to stop investing, especially “especially true when the return on cash is as low as it is today.”

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KKR, CVC Capital to bid for Azko Nobel unit 

KKR, CVC Capital work on joint bid for Azko Nobel unit 

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Private equity firms KKR (KKR) and CVC Capital Partners have started to work on a joint bid for the specialty chemicals business of Akzo Nobel (AKZOY) specialty chemicals division, Bloomberg reports, citing people familiar with the situation.

Advent International and Apollo Global Management (APO) are also mulling offers for the unit, which may be valued at over EUR9B or $10.6B.

Akzo Nobel has said it plans to dispose of the unit, part of its defense against PPG Industries Inc.’s unsuccessful 26.9 billion euro takeover bid, and will solicit offers in September.

The sale process is at an early stage and no final decisions have been made, the people said.

Representatives for CVC, KKR, Advent, Apollo, Akzo Nobel declined to comment reports Bloomberg.

TURBULENT TIMES

The company has had a turbulent few months following the PPG offer, which was withdrawn in June.

Chief Executive Officer Ton #Buechner resigned last week for health reasons. That leaves new CEO Thierry #Vanlancker, who joined the company last year, to carry out the ambitious targets Akzo Nobel put forth as its defense against being sold.

Activist investor #Elliott Management Corp., which holds a stake in Akzo Nobel, is attempting to oust the company’s chairman.

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AstraZeneca receives $8.5 Billion from Merck

AstraZeneca receives $1.6B upfront in oncology collaboration with Merck

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AstraZeneca (AZN) and Merck (MRK) announced that they have entered a global strategic oncology collaboration to co-develop and co-commercialise AstraZeneca’s Lynparza for multiple cancer types.

#Lynparza is an oral poly ADP ribose polymerase, or PARP, inhibitor currently approved for BRCA-mutated #ovarian cancer in multiple lines of treatment.

The companies will develop and commercialize Lynparza jointly, both as monotherapy and in combination with other potential medicines.

Independently, the companies will develop and commercialise Lynparza in combination with their respective PD-L1 and PD-1 medicines, Imfinzi and Keytruda.

The companies will also jointly develop and commercialize AstraZeneca’s selumetinib, an oral, potent, selective inhibitor of MEK, part of the mitogen-activated protein kinase pathway, currently being developed for multiple indications including thyroid cancer. Under the terms of the agreement, AstraZeneca and Merck will share the development and commercialization costs for Lynparza and selumetinib monotherapy and non-PD-L1/PD-1 combination therapy opportunities.

Gross profits from Lynparza and selumetinib Product Sales generated through monotherapies or combination therapies will be shared equally.

Merck will fund all development and commercialization costs of Keytruda in combination with Lynparza or selumetinib. AstraZeneca will fund all development and commercialization costs of #Imfinzi in combination with Lynparza or selumetinib. AstraZeneca will continue to manufacture Lynparza and selumetinib.

As part of the agreement, Merck will pay AstraZeneca up to $8.5B in total consideration, including $1.6B upfront, $750M for certain license options and up to $6.15B contingent upon successful achievement of future regulatory and sales milestones.

Under the terms of the agreement, AstraZeneca anticipates approximately $1B to be recorded under Externalization Revenue in 2017.

OTHER EVENTS

AstraZeneca plunged in pre-market trading as Phase III MYSTIC trial endpoint not met. AstraZeneca announced progression-free survival results for the Phase III #MYSTIC trial, a randomized, open-label, multi-center, global trial of Imfinzi monotherapy or Imfinzi in combination with tremelimumab versus platinum-based standard-of-care chemotherapy in previously-untreated patients with metastatic 1st-line non-small cell lung cancer.

MYSTIC TRIAL:

AstraZeneca has announced progression-free survival, or PFS, results for the Phase III MYSTIC trial, which is testing Imfinzi monotherapy or Imfinzi in combination with tremelimumab versus platinum-based standard-of-care chemotherapy in previously-untreated patients with metastatic first line non-small cell lung cancer.

The combination did not meet the primary endpoint of improving PFS compared to standard-of-care in patients whose tumors express PD-L1 on 25% or more of their cancer cells.

PRICE ACTION

In Thursday’s trading, shares of AstraZeneca have dropped over 15% to $28.72, while Bristol’s (BMY) stock has slipped almost 5% to $53.23. MYSTIC trial failure is a negative read-through for Bristol-Myers’ combo of Opdivo + Yervoy in the ongoing CheckMate-227 trial.

Meanwhile, Merck is up over 3% to $63.75.

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Facebook Ahead of Earnings!

Facebook in strong uptrend before the earnings report on Wednesday.

stockwinners.com analysis of facebook stock

The stock has been in a stable uptrend since breaking out in July 2013.

In April of this year, the shares broke out above the top of the bullish price channel that had been in place since July 2013.

The uptrend has accelerated in recent weeks moving price even further from the prior channel top.

The current point of intersection with the old channel top is at the $150 area. If the news is strongly positive, exceeding even the most current expectations, the breakout may extend.

The very top of the current price channel when projected forward in the near-term reaches the $168 area. Beyond that, a move to the $170-$175 area might be possible.

If the news doesn’t meet expectations, given the sentiment in the name a pullback could be quite large.

Initial support would be at the $156.50 area, which is the top of the consolidation range from May to early July of this year. Thereafter the $150 area would be next.

A move below $150 might seem like an extreme move, but would still leave price within the long-term channel. The low of the old long-term channel is at the $135-$134 area.

The consensus estimate on Facebook for Q2 revenue is to reach $9.17 billion. The consensus on adjusted earnings is $1.12 a share. Revenue from advertising is expected to come at $8.78 billion.

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State National Companies Sold for $919 Million

Markel to acquire State National for $21.00 per share in cash

Markel to acquire State National for $21.00 per share in cash. See Stockwinners.com Market Radar

Markel (MKL) and State National Companies (SNC) announced that they have entered into a definitive agreement under which Markel will acquire all of the outstanding shares of State National common stock for $21.00 per share in cash. The transaction has a total value of approximately $919M.

State National Companies, Inc. provides property and casualty insurance in the United States. It operates in two segments, Program Services and Lender Services.

The agreement, which has been unanimously approved by both companies’ board of directors, represents a 38% premium to State National’s 30-day volume-weighted average stock price as of May 18, 2017, the last trading day prior to published market speculation regarding a potential sale of State National, and a premium of approximately 7% to State National’s closing stock price on July 25, 2017.

The transaction, which is subject to the approval of a majority of State National shareholders, approvals by relevant state insurance regulators and other customary closing conditions, is expected to close in the fourth quarter of 2017.

The transaction is not subject to any financing condition, and #Markel plans to finance the transaction using cash balances on hand.

Members of the #Ledbetter family have entered into a voting agreement with Markel in support of the merger. CF SNC Investors LP has entered into a separate similar voting agreement with Markel.

As a result of these voting agreements, approximately 37% of State National’s common stock is committed to vote in favor of the transaction.

Upon completion of the transaction, State National will operate as a separate business unit. The management team, led by Terry Ledbetter, State National’s current Chairman and CEO will remain in place and will continue to be based in Bedford, Texas.

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