Artesyn Embedded Power sold for $400M

Advanced Energy to acquire Artesyn Embedded Power for $400M

Advanced Energy buys Artesyn Embedded for $400M, Stockwinners

Advanced Energy (AEIS) announced that it has entered into a definitive agreement to acquire the Embedded Power business of Artesyn Embedded Technologies from Platinum Equity.

The total consideration for this transaction will be approximately $400M.

Strategic benefits of the deal include:

“Creates a premier global power conversion company with enabling critical power technologies and over $1.3B in annual revenue, based on 2018 combined historical results.

Strong strategic fit with complementary technologies, product portfolios and core competencies in highly engineered, application-specific power solutions for key OEMs in demanding applications.

Accelerates earnings growth with over $20M of expected annualized synergies, driving projected earnings accretion of over 80c per share in 18-24 months and targeting to reach long-term accretion of over $1.50 per share, on a non-GAAP basis.

Creates significant financial value with a purchase price of approximately 5x synergy-adjusted EBITDA, with a path to future margin expansion, additional cost savings and de-levering to create long-term shareholder value.”

Under the terms of the Share Purchase Agreement, based on a total base purchase price of $400M, Advanced Energy will pay approximately $364M in cash and assume approximately $36M of liabilities for Artesyn EP, subject to final adjustments to the valuation of such liabilities and adjustments to reflect working capital as of the closing.

AE expects to finance the transaction through a combination of existing cash and $350N of debt supported by commitments from its lenders. The transaction has been approved by the board of Advanced Energy.

The transaction, which is expected to close during the second half of 2019, is subject to the satisfaction of customary closing conditions, including receipt of international regulatory approvals and completion of certain carve out activities involving Artesyn’s Embedded Computing and Consumer Products businesses.

AEIS +$4.38 to $52.84.

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WalMart Earnings Outlook

Walmart (WMT) is scheduled to report results of its fourth quarter before the market open on Tuesday, February 19, with a conference call scheduled for 8:00 am EDT.

Wal-Mart reports next week. See Stockwinners.com for the report

What to watch for:

1. OUTLOOK: Walmart previously raised its fiscal 2019 EPS view to $4.90-$5.05 and narrowed its net sales view to up about 2%, but cut its EPS outlook at its investor meeting in October to $4.65-$4.80.

In its November earnings report, Walmart again raised its FY19 EPS outlook to $4.75-$4.85. The current Street forecast for FY19 EPS stands at $4.84 on revenue of $514.33B.

The company previously said it was moving to an annual guidance framework with its quarterly updates, and that while there may be fluctuations within the quarters, “we believe EPS growth will be relatively consistent across the year.”

Baird analyst Peter Benedict said he expects Walmart’s Q4 earnings to be solid, and expects guidance to remain intact, although he recognizes the uncertainty with Flipkart as the result of new regulations in India.

2. HOLIDAY SEASON:

Jet.com’s holiday weekend was “truly horrible,” with sales down 6% on Thanksgiving and Black Friday and a 39% plunge on Cyber Monday vs. last year, BuzzFeed News reported, citing data from market research firm Edison Trends.

According to the data, Target.com (TGT) sales increased 48% on Thanksgiving and Black Friday and 19% on Cyber Monday, Amazon (AMZN) increased by 25% on Black Friday and Thanksgiving and 17% on Cyber Monday, and Jet.com parent Walmart.com increased sales revenue by 23% on Thanksgiving and Black Friday and 32% on Cyber Monday.

In late December, Amazon said that it had a “record-breaking” holiday season with more items ordered worldwide than ever before. Amazon customers shopped at record levels from a wide selection of products across every department, it said.

3. COMPETITION:

Retailers like Walmart have been hurt by an increase in online shopping on sites like Amazon rather than at brick-and-mortar stores. Walmart is seeking to create a big ad business to rival that of Amazon, Bloomberg reported, adding that it has hired executives from NBC (CMCSA) and CBS (CBS) to help bolster its advertising business.

Walmart has also launched a private-label furniture brand, called MoDRN, which is “a direct hit to big furniture retailers” such as Wayfair (W) and Ikea and a challenge to rival Amazon, Erica Pandey wrote for Axios.

4. FLIPKART:

Bernstein analyst Brandon Fletcher said that India has been bandying about restrictive e-commerce regulations this past year, and finally pulled the trigger despite protestations from both Walmart and Amazon.

Walmart to pay about $16B for initial stake of about 77% in India's Flipkart, Stockwinners
Walmart to pay about $16B for initial stake of about 77% in India’s Flipkart, Stockwinners

The new rules put a damper on 1P selling models, pricing discounts, supplier exclusives, and supplier shares of sales above 25%, all of which are important to both companies’ planned models.

While not significant to Walmart’s total revenues, the analyst believes it does put a damper on its long-term growth potential in the market through Flipkart and raises the question of where Walmart will make up that growth.

Morgan Stanley analyst Simeon Gutman said Flipkart’s losses will likely rise due to new e-commerce regulations in India and Walmart investors “can’t ignore Flipkart” as it once again becomes a bigger part of the retailer’s investment narrative.

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Penn Virginia sold for $1.7 billion

Denbury Resources to acquire Penn Virginia in cash, stock deal valued at $1.7B

 

Penn Virginia sold for $1.7 billion, Stockwinners
Penn Virginia sold for $1.7 billion, Stockwinners

Denbury Resources (DNR) and Penn Virginia Corporation (PVAC) announced that they have entered into a definitive merger agreement pursuant to which Denbury will acquire Penn Virginia in a transaction valued at approximately $1.7B, including the assumption of debt.

The consideration to be paid to Penn Virginia shareholders will consist of 12.4 shares of Denbury common stock and $25.86 of cash for each share of Penn Virginia common stock.

Penn Virginia shareholders will be permitted to elect all cash, all stock or a mix of stock and cash, subject to proration, which will result in the aggregate issuance of approximately 191.6M Denbury shares and payment of $400M in cash.

The transaction was unanimously approved by the board of directors of each company, and Penn Virginia shareholders holding 15% of the outstanding shares signed a voting agreement to vote “for” the transaction.

Under the terms of the definitive merger agreement, shareholders of Penn Virginia will receive, subject to proration, a combination of 12.4 shares of Denbury common stock and $25.86 of cash for each share of Penn Virginia common stock, representing consideration to each Penn Virginia shareholder of $79.80 per share based on the closing price of Denbury common stock on October 26, 2018.

Penn Virginia shareholders will have the option to receive all stock or all cash, subject to proration such that the overall mix of consideration does not result in more or less than $400M in cash being paid.

The overall mix of consideration will be 68% Denbury common stock and 32% cash.

The stock portion of the consideration received by Penn Virginia’s shareholders is expected to be tax-free. Upon closing of the transaction, Denbury stockholders will own approximately 71% of the combined company, and Penn Virginia shareholders will own approximately 29%.

The transaction, which is expected to close in the first quarter of 2019, is subject to the approval of Penn Virginia shareholders and is subject to approval by Denbury’s stockholders of the issuance of common stock and an amendment to Denbury’s charter to increase its authorized shares.

The transaction is also conditioned on clearance under the Hart-Scott Rodino Act and other customary closing conditions.

The merger agreement contains a covenant that upon its closing, Denbury’s board will be expanded from eight directors to ten directors, to include two independent members of Penn Virginia’s board of directors who are mutually agreed upon by Denbury and Penn Virginia.


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Coca-Cola to acquire Costa for $5.1B

Coca-Cola to acquire Costa in deal valued at $5.1B

Coca-Cola to acquire Costa for $5.1B, Stockwinners
Coca-Cola to acquire Costa for $5.1B, Stockwinners

Coca-Cola (KO) announced that it has reached a definitive agreement to acquire Costa Limited.

The acquisition of Costa from parent company Whitbread PLC is valued at $5.1B and will give Coca-Cola a strong coffee platform across parts of Europe, Asia Pacific, the Middle East and Africa, with the opportunity for additional expansion.

Costa operations include a leading brand, nearly 4,000 retail outlets with highly trained baristas, a coffee vending operation, for-home coffee formats and Costa’s state-of-the-art roastery.

For Coca-Cola, the expected acquisition adds a scalable coffee platform with critical know-how and expertise in a fast-growing, on-trend category. Costa has a solid presence with Costa Express, which offers barista-quality coffee in a variety of on-the-go locations, including gas stations, movie theaters and travel hubs.

Costa, in various formats, has the potential for further expansion with customers across the Coca-Cola system. The acquisition will expand the existing Coca-Cola coffee lineup by adding another leading brand and platform. The portfolio already includes the market-leading Georgia brand in Japan, plus coffee products in many other countries.

The purchase price is approximately $5.1B.

Upon the closing, Coca-Cola will acquire all issued and outstanding shares of Costa Limited, a wholly owned subsidiary of Whitbread. This subsidiary contains all of the existing operating businesses of Costa.

Whitbread will be seeking shareholder approval for the transaction, which is expected to take place by mid-October.

The deal is subject to customary closing conditions, including antitrust approvals in the European Union and China.

It is expected to close in the first half of 2019. Coca-Cola expects the transaction to be slightly accretive in the first full year, not taking into account any impact from purchase accounting.

For FY18, Costa generated revenue and EBITDA of roughly $1.7B in revenue and $312M in EBITDA.

Because Coca-Cola expects the transaction to close in the first half of 2019, there is no change to 2018 guidance.

The company’s long-term targets also remain unchanged.


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Pfizer shares lower after talk with President prompts rollback

Pfizer under pressure after talk with President prompts rollback

Pfizer shares lower after talk with President prompts rollback, Stockwinners
Pfizer shares lower after talk with President prompts rollback, Stockwinners

After speaking with President Donald Trump, Pfizer (PFE) stated that it will roll back its July 1 price increases “to give the president an opportunity to work on his blueprint to strengthen the healthcare system and provide more access for patients.”

Additionally this morning, the company announced that it will reorganize into three units, separating its consumer health-care business, which the drugmaker has been trying to sell since last year, from its groups focused on “innovative” medicines” and “established” medicines.

PRICE ROLLBACK

In a statement provided to CNBC’s Meg Tirrell yesterday, Pfizer said it will roll back its July 1 price increases “to give the president an opportunity to work on his blueprint to strengthen the healthcare system and provide more access for patients.”

The company released the statement following an “extensive discussion” with President Trump. Pfizer said it will return such prices to their pre-July 1 levels as soon as technically possible, and the prices will remain in effect until the earlier of when the president’s blueprint goes into effect or the end of the year. In addition, the drug giant said that the price declines the company took as of July 1 will remain in effect.

This comes after President Trump called out the company and other drugmakers for raising prices.

In a tweet, Trump previously said Pfizer and peers “should be ashamed that they have raised drug prices for no reason,” accusing the company and industry of “merely taking advantage of the poor and others unable to defend themselves, while at the same time giving bargain basement prices to other countries in Europe and elsewhere.”

BUSINESS REORGANIZATION

This morning, Pfizer also announced it will organize the company into three businesses, namely a science-based Innovative Medicines business that will now include biosimilars and a new hospital business unit for anti-infectives and sterile injectables; an off-patent branded and generic Established Medicines business operating with substantial autonomy within Pfizer; and a Consumer Healthcare business.

These changes will be effective at the beginning of the company’s 2019 fiscal year, and are not expected to impact current capital allocation priorities or full-year 2018 financial guidance.

READ-THROUGH TO OTHERS IN THE SECTOR

Commenting on the events, Wells Fargo analyst David Maris told investors that drug stocks will not react favorably to this news, given the chilling effect this will likely have on others looking to take price increases.

Nonetheless, the analyst pointed out that the price increases taken in July are only small compared to other increases taken over the past year or several years, so the impact of the rollback to the healthcare system is insignificant in the big picture.

Maris also added that he believes the administration’s and other key legislators’ focus is not only on drug pricing, but on the overall supply chain and delivery system, including drug rebating, co-pay coupons, etc.

WHAT’S NOTABLE

According to Bloomberg, Gilead (GILD), Roche (RHHBY), Novo Nordisk (NVO) and Novartis (NVS) have all sent notices to California health plans rescinding or reducing previously announced price hikes in the wake of a new drug pricing transparency law that was enacted in the state.

The California measure, which is among the most aggressive efforts by states to rein in drug costs, is being challenged in court by the drug industry’s lobbying group, the report noted.

Other large cap pharmaceutical companies include AstraZeneca (AZN), Bristol-Myers (BMY), Eli Lilly (LLY), GlaxoSmithKline (GSK), Johnson & Johnson (JNJ), Merck (MRK), and Sanofi (SNY).

PRICE ACTION

In morning trading, shares of Pfizer have dropped about 0.5% to $37.28.


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Boeing reports tomorrow

What to watch in Boeing’s earnings report 

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Boeing reports tomorrow

Boeing (BA) is scheduled to report results of its fiscal fourth quarter before the market opens on Wednesday, January 30, with a conference call scheduled for 10:30 am ET.

What to watch for:

1. GUIDANCE:

When Boeing reported its fiscal third quarter results on October 25, 2017, the company increased its fiscal 2017 adjusted earnings per share view to $9.90-$10.10 from $9.80-$10.00, against consensus estimates of $10.04 at that time, and reaffirmed its FY17 revenue expectations of $90.5B-$92.5B, against analyst estimates of $92.15B.

Current consensus estimates sit at $10.21 and $92.55B, respectively. The company also backed its FY17 commercial airplane deliveries view of 760-765.

2. CAPITAL RETURNS:

On December 11, 2017, Boeing announced a new $18B share repurchase program and a 20% increase to its quarterly dividend. The board declared the dividend will increase 20% to $1.71 per share.

The board also replaced the existing share repurchase program with a new $18B authorization. The new dividend will be payable March 2, 2018, to shareholders of record as of February 9, 2018.

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Defense spending increase should help Boeing

The company this year has repurchased $9.2B worth of its shares from the $14B authorization approved in December 2016. The new repurchase program replaces the existing one, bringing the total authorization to $18B.

3. ANTI-DUMPING:

On December 20, 2017, U.S. Secretary of Commerce Wilbur Ross announced the affirmative final determinations in the antidumping duty and countervailing duty investigations of 100-seat to 150-seat large civil aircraft from Canada.

“This decision is based on a full and unbiased review of the facts in an open and transparent process.” said Secretary Ross.

“The United States is committed to a free, fair, and reciprocal trade and will always stand up for American workers and companies being harmed by unfair imports.”

Commerce determined that exporters from Canada sold 100- to 150-seat large civil aircraft in the United States at 79.82% less than fair value.

Commerce also determined that Canada is providing unfair subsidies to its producers of 100- to 150-seat large civil aircraft at a rate of 212.39%. Commerce will instruct U.S. Customs and Border Protection to collect cash deposits from importers of 100- to 150-seat large civil aircraft based on the final rates.

Bombardier (BDRBF), the Government of Canada, and Petitioners agreed that the proposed transaction between Bombardier and Airbus (EADSY) does not impact these investigations.

4. EMBRAER

Boeing confirmed takeover talks with Embraer (ERJ) during the quarter. The Brazilian government, which owns a golden share in Embraer, represents a potential hurdle in the deal.

Investors should look for more guidance on this topic when Boeing reports. BA last traded at $337.10.


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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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Scana Corporation sold for $14.6 billion

Dominion, Scana announce all-stock merger valuing Scana at $55.35 a share

 Scana Corporation sold for $7.9 billion. Stockwinners.com
Scana Corporation sold for $7.9 billion.

Dominion Energy (D) and Scana Corporation (SCG) announced an agreement for the companies to combine in a stock-for-stock merger in which Scana shareholders would receive 0.6690 shares of Dominion Energy common stock for each share of Scana common stock, the equivalent of $55.35 per share, or about $7.9B based on Dominion Energy’s volume-weighted average stock price of the last 30 trading days ended Jan. 2.

Including assumption of debt, the value of the transaction is approximately $14.6B.

The agreement also calls for significant benefits to Scana’s South Carolina Electric & Gas Company subsidiary electric customers to offset previous and future costs related to the withdrawn V.C. Summer Units 2 and 3 project.

After the closing of the merger and subject to regulatory approvals, this includes: A $1.3B cash payment within 90 days upon completion of the merger to all customers, worth $1,000 for the average residential electric customer.

Payments would vary based on the amount of electricity used in the 12 months prior to the merger closing; An estimated additional 5% rate reduction from current levels, equal to more than $7 a month for a typical SCE&G residential customer, resulting from a $575M refund of amounts previously collected from customers and savings of lower federal corporate taxes under recently enacted federal tax reform; A more than $1.7B write-off of existing V.C. Summer 2 and 3 capital and regulatory assets, which would never be collected from customers.

This allows for the elimination of all related customer costs over 20 years instead of over the previously proposed 50-60 years; Completion of the $180M purchase of natural-gas fired power station at no cost to customers to fulfill generation needs.

Scana would operate as a wholly owned subsidiary of Dominion Energy.

It would maintain its significant community presence, local management structure and the headquarters of its SCE&G utility in South Carolina.

The transaction would be accretive to Dominion Energy’s earnings upon closing, which is expected in 2018 upon receipt of regulatory and shareholder approvals.

The merger also would increase Dominion Energy’s compounded annual earnings-per-share target growth rate through 2020 to 8% or higher.

The merger is contingent upon approval of Scana’s shareholders, clearance from the U.S. Federal Trade Commission/the U.S. Department of Justice under the Hart-Scott-Rodino Act, and authorization of the Nuclear Regulatory Commission and Federal Energy Regulatory Commission.

Scana and Dominion Energy also will file for review and approval from the public service commissions of South Carolina, North Carolina, and Georgia.


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ANZ’s life insurance businesses sold for $2.14 billion

Zurich enters agreement to acquire ANZ’s life insurance businesses in Australia 

ANZ's life insurance businesses sold for $2.14B. See Stockwinners.com
ANZ’s life insurance businesses sold for $2.14B

Zurich Insurance Group (ZURVY) yesterday announced that it has entered into an agreement to acquire 100% of ANZ’s (ANZBY) life insurance businesses, OnePath Life, in Australia for A$2.85B, or $2.14B.

Both parties expect the transaction, which is subject to regulatory approval, to be completed by the end of 2018.

The transaction price comprises A$1B of upfront reinsurance commissions, expected to be paid subject to regulatory approval in May 2018 with the remaining balance paid on completion.

The acquisition is expected to contribute to the Group’s profitability from day one, generating strong cash flows which will support future dividend growth.

The transaction will also increase the proportion of stable life protection-based earnings, reducing overall Group earnings volatility and increasing the proportion of life earnings remitted as cash back to the Group.

In view of these earnings benefits, Zurich expects to raise its current BOPAT ROE target by 50 basis points by 2019.

The transaction is also expected to increase the level of overall cash remittances over the 2017-2019 planning period by A$300M.

As part of the transaction, Zurich will enter into a 20-year distribution agreement with ANZ in Australia to distribute life insurance products through bank channels.

The acquisition is expected to be funded through a mixture of Zurich’s internal cash resources and senior debt, and is expected to reduce Zurich’s capital position only modestly.

ZURVY closed at $30. ANZBY closed at $21.53.


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Pfizer may buy Bristol-Myers

Senate tax bill raises odds of Pfizer buying Bristol-Myers, says Citi

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Pfizer may buy Bristol-Myers

The Senate tax bill, which lowers the cost of bringing cash back home from outside the U.S., increases the probability of the “often-discussed” potential acquisition of Bristol-Myers Squibb (BMY) by Pfizer (PFE), Citi analyst Andrew Baum tells investors in a research note.

The analyst points out that Pfizer has repeatedly underscored the importance of tax reform both from a competitive angle as well as from a merger perspective.

Further, the analyst says that while Roche’s (RHHBY) IMpower 150 Tecentriq lung cancer data in Geneva will take center stage this week, Bristol-Myers should benefit from two recent positive developments.

The FDA’s and Centers for Medicare and Medicaid Services’ recommendation of Tumor Mutational Burden testing for lung cancer and other tumors will likely materially accelerate adoption and create more favorable reimbursement, Baum writes in a research note partially titled “Stars Converging for BMY.”

The analyst keeps a Buy rating on Bristol shares with a $72 price target. BMY closed at $62.47. PFE ended at $36.06.

On a separate front,  Bristol-Myers Squibb Co.’s blockbuster drug Opdivo had a stunning effect on a lung-cancer patient treated at a Paris hospital: it drained hard-to-reach reservoirs of his HIV infection, too.  The 51-year-old man, who was diagnosed with HIV in 1995, had a “drastic and sustained decrease” in the reservoir of cells where the virus hides to evade existing therapies, researchers wrote in a letter published in the journal Annals of Oncology.

Note that Bristol has a market cap of $102 billion while Pfizer’s market cap is $215 billion.


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Shell paints a rosy picture

Shell annual organic free cash flow outlook increased to $25B-$30B by 2020

Shell annual organic free cash flow outlook increased to $25B-$30B by 2020

Royal Dutch Shell (RDS.a) CEO Ben van Beurden updated investors on the company’s strategy, setting out plans to grow returns and free cash flow, and outlining its ambition to reduce the net carbon footprint of its energy products.

Van Beurden highlighted three updates from his presentation:

“We have increased our outlook for organic free cash flow, which has been consistently strong over the past five quarters. We have also made significant progress with our divestment programme, allowing us to reduce net debt in that time.

Meanwhile, we intend to cancel our scrip dividend programme with effect from the fourth quarter 2017.”

The outlook for annual organic free cash flow has increased to $25 to $30 billion by 2020 at a Brent crude oil price of $60 per barrel (real terms 2016).

This is $5 billion more than the outlook Shell provided during its capital markets day in June 2016.

The delivery of new projects continues, and the company remains on track to deliver 1 million barrels of oil equivalent per day, and $10 billion of cash flow from operations from new projects by 2018, at $60 per barrel, real terms 2016.

It expects to deliver an incremental $5 billion cash flow from operations by 2020. Annual capital investment will continue to be between $25 and $30 billion, and at current oil prices capital investment will be managed towards the bottom end of that range, or lower if needed.

Annual underlying operational expenditure will remain below $38 billion until 2020, with efficiency gains expected to deliver further reductions, building on the more than 20% reduction in operational expenditure since 2014. The company expects to continue to grow organic free cash flow throughout the 2020s at a more moderate rate.

Increased distributions to shareholders in the form of share buybacks in line with the plans confirmed below is expected to support a stronger growth in its metrics per share.

RDS-a closed at $61.85.


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Rockwell Automation rejects Emerson proposal

Rockwell Automation board unanimously rejects Emerson proposal

Rockwell receives $29B takeover offer. See Stockwinners.com for details

Rockwell Automation (ROK) announced that its Board of Directors has unanimously rejected Emerson’s (EMR) unsolicited proposal to acquire Rockwell Automation received on November 16.

The company said, “The Rockwell Automation Board of Directors, in consultation with its financial and legal advisors, has thoroughly considered Emerson’s November 16 proposal and has unanimously determined that it is not in the best interests of Rockwell Automation and its shareowners.

Emerson’s proposal undervalues Rockwell Automation and its prospects for continued growth and value creation, presents significant long-term risk for Rockwell Automation’s shareowners, and would create a company that is not well-positioned to compete successfully in the evolving market.

The Board believes that continuing to execute Rockwell Automation’s successful strategy, which is generating extraordinary returns for the company’s shareowners, will create greater long-term value than pursuing Emerson’s proposal.”

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ROK closed at $193.02. EMR closed at $60.35.


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DOJ to block AT&T and Time Warner’s merger

Analysts cut Time Warner, AT&T targets following DOJ lawsuit

Time Warner Name to Become History, See Stockwinners.com Market Radar

Following the news that the U.S. Department of Justice is suing to block AT&T (T) and Time Warner’s (TWX) merger deal, several Wall Street analysts lowered their price targets for both names.
Nonetheless, Baird analyst William Power argued that he sees the merits of the antitrust case favoring AT&T.

DOJ LAWSUIT

Yesterday, the U.S. Department of Justice announced that it is suing to block the deal agreed to between AT&T and Time Warner.
Commenting on the news, AT&T’s Senior Executive VP and General Counsel David McAtee II said the DOJ lawsuit is “a radical and inexplicable departure from decades of antitrust precedent.”
He added: “Vertical mergers like this one are routinely approved because they benefit consumers without removing any competitor from the market.
We see no legitimate reason for our merger to be treated differently. […] Fortunately, the Department of Justice doesn’t have the final say in this matter. Rather, it bears the burden of proving to the U.S. District Court that the transaction violates the law. We are confident that the Court will reject the Government’s claims and permit this merger under longstanding legal precedent.”

PRICE CUTS

In light of the news that the DOJ will be suing to block the merger, Wells Fargo analyst Marci Ryvicker lowered her price target for Time Warner to $84 from $100 to reflect its standalone value.
Looking at Time Warner purely on fundamentals, the analyst told investors that she is not totally sure 2018 estimates are accurate given that the company has given no sense of trends for next year.
While #Ryvicker acknowledged that many investors have asked what Time Warner is worth, she does not think anyone steps in for it. The analyst reiterated a Market Perform rating on Time Warner’s shares.
Her peer at Barclays also cut his price target for Time Warner to $92 from $107.
Analyst Kannan #Venkateshwar argued that the DOJ move “in effect goes against almost 40 years of judicial commentary and action and, therefore, is quite unprecedented.”
Based on past DOJ frameworks, the analyst believes it may be tough for it to establish competitive harm, but the companies are likely in a 4-6 month period of litigation that should delay not only the closing of the deal but may also “chill other M&A activity across the space.”
Absent a deal, Venkateshwar estimates Time Warner could trade at $77 per share.
Meanwhile, Nomura Instinet analyst Jeffrey Kvaal lowered his price target for AT&T shares to $42 from $45 as he considers shares on fundamentals, while noting that he did not cut his target post the third quarter video miss given the pending deal.
Nonetheless, Kvaal told investors he believes the shares have “room to run” with or without Time Warner.

CASE MERITS FAVOR AT&T

Commenting on the lawsuit, Baird analyst William Power argued that the merger deal may be delayed, but is not dead.
The analyst argued that with Facebook (FB), Google (GOOG; GOOGL), Amazon (AMZN) and Netflix (NFLX) now media forces, including in original content, he finds it difficult to believe that AT&T will be able to significantly raise pricing for the Turner properties or HBO and risk driving away current partners.
Ultimately, Power believes the merits of the case favor AT&T. The analyst reiterated an Outperform rating and $42 price target on AT&T shares.

PRICE ACTION

In Tuesday’s trading, shares of Time Warner have gained over 1% to $88.79 while AT&T is fractionally down to $34.42 per share.


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Wal-Mart reports on Thursday

What to watch in Wal-Mart earnings report

Wal-Mart Guides Higher. See Stockwinners.com for details

Wal-Mart (WMT) is scheduled to report results of its third quarter before the market open on Thursday, November 16, with a conference call scheduled for 7:00 am EDT.

What to watch for:

1. GUIDANCE:

Wal-Mart is expected to update its guidance for the fiscal year. Wal-Mart previously forecast Q3 EPS of 90c-98c and comp sales for Walmart U.S. up 1.5%-2% excluding fuel and Sam’s Club comps excluding fuel up 1%-1.5%.

The company raised the low end of its FY18 adjusted EPS view to $4.30-$4.40 from $4.20-$4.40 and backed this guidance at its investor day.

Also at the investor day event, Wal-Mart forecast FY19 EPS to be up approximately 5% vs. FY18 adjusted EPS, with consolidated net sales growing at or above 3%. Baird analyst Peter Benedict expects a solid quarter with good comps and traffic momentum and a guide to earnings growth.

2. COMPETITION:

Retailers like Wal-Mart have been hurt by an increase in online shopping on sites like Amazon (AMZN) rather than at brick-and-mortar stores.

According to reports, Wal-Mart has raised prices for some food and household items on its U.S. website to be higher than prices for the same products sold in-store in an effort to increase profits and drive store traffic.

Wal-Mart, which has previously tried to keep online prices equal to in-store prices, is testing a new system, which has caused higher web prices for products that would otherwise be unprofitable to ship.

Wal-Mart recently sent a recreational vehicle to the University of Pennsylvania as part of a roughly dozen college recruitment tour to break into Ivy League recruitment, Bloomberg reported. The move comes after CEO Doug McMillon told investors Wal-Mart would “look even more like a tech company” to respond to competition from Amazon.

Recently, rival eBay (EBAY) said it will match rivals’ prices on many top Black Friday deals through Cyber Monday. Lidl is gaining little traction after expanding in the U.S. with grocers Wal-Mart and Kroger (KR) recovering most of the market share they lost when the German discounter opened its first nine U.S. stores in June, The Wall Street Journal reported last month.

In October, Wal-Mart said it expects to have grocery pickup in over 2,000 stores by the end of 2018 and noted that its Sam’s Club fresh food efforts are “really encouraging.”

3. OTHER INITIATIVES:

Wal-Mart is looking to grow its presence in the online fashion market, recently buying Bonobos, ShoeBuy, Moosejaw and ModCloth.

Wal-Mart President and CEO Doug McMillon said on the Q2 earnings call that the retailer is testing associate delivery of online orders in “a few” stores and plans to have approximately 100 automated pickup towers in stores across the U.S. by the end of the year, “where customers can pick up their orders within a matter of minutes.”

He also noted that Wal-Mart has tests going on with “digital endless aisle shopping, robotics and image analytics to scan aisles for outs and we’re using machine learning to assist our merchants with pricing.”

More recently, Walmart.com and Lord & Taylor said that Lord & Taylor will launch a flagship store on Walmart.com in Spring 2018.

4. HOLIDAY SEASON:

Wal-Mart is giving employees the opportunity to work extra hours during the holiday season rather than hire temporary seasonal workers.

In addition, the retailer said it will offer more than 2M items for free two-day shipping without a membership fee on orders over $35.

Also, Wal-Mart announced plans to bring back its Holiday Helpers, associates dedicated to assisting customers, and will increase the number of them in stores to help customers.

Wal-Mart will also host more than 20,000 holiday parties at its Supercenters.

WMT last traded at $90.58.


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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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