Altria to buy stake in Juul Labs

Altria, under pressure from FDA, said in talks to buy stake in Juul Labs

 

Altria to buy stake in Juul Labs, Stockwinners
Altria to buy stake in Juul Labs, Stockwinners

Following a report that Altria Group (MO) is in talks to take a “significant” stake in Juul Labs, an analyst said that an agreement could make strategic sense for the tobacco giant to gain exposure to a fast-growing product that poses a threat to its cigarette business.

The Wall Street Journal said Altria is in talks to take a “significant” minority interest in Juul Labs, a controversial e-cigarette startup.

According to people familiar with the matter, any deal is likely several weeks away. Juul was last valued at $16B in a private fundraising round this summer.

Altria has an agreement with Philip Morris (PM) to market IQOS, subject to regulatory approval. Philip Morris is already selling it in 43 countries and has said it could get approved for the U.S. by the end of the year.

Juul has drawn criticism over its products’ popularity with teens.

Juul, whose products are sold online and in convenience stores, gas stations and vape shops, accounted for about three-quarters of the U.S. e-cigarette market in the four-week period ended November 17, according to the Wells Fargo analysis of Nielsen data.

Earlier this month, the U.S. Food and Drug Administration announced plans to place restrictions on sales of flavored e-cigarettes.

Juul also said it would restrict sales of nearly all its flavored pods to the internet, and stop most social media promotion to combat youth vaping.

“More than 99% of all social media content related to JUUL Labs is generated through third-party users and accounts with no affiliation to our company. Nevertheless, we understand that many young people get their information from social media. To remove ourselves entirely from participation in the social conversation, we have decided to shut down our U.S.-based social media accounts on Facebook (FB) and Instagram. We have never used Snapchat (SNAP),” the company stated.

WHAT’S NOTABLE

Following the FDA statement on the agency’s proposed steps against underage smoking, Altria General Counsel Murray Garnick said it “welcomed” the FDA’s efforts to address the underage use of e-vapor products and said it believes Congress should raise the legal age of purchase for all tobacco products to 21.

Last month, Altria said it would pull its pod-based e-vapor products from the market until approved by FDA.

The company said Nu Mark will remove MarkTen Elite and Apex by MarkTen pod-based products from the market “until these products receive a market order from the FDA or the youth issue is otherwise addressed,” and that for the remaining MarkTen and Green Smoke cig-a-like products, Nu Mark will sell only tobacco, menthol and mint varieties.

Nu Mark will discontinue the sale of all other flavor variants of our cig-a-like products until these products receive a market order from the FDA.

The FDA is also pursuing a ban on menthol cigarettes, which could remove nearly a third of the roughly 250B cigarettes sold annually in the U.S., The Wall Street Journal said.

A rule could take a year or more to finalize, the FDA said. The FDA concluded in 2013 that menthols are harder to quit and likely pose a greater health risk than regular cigarettes.

ANALYST COMMENTARY

Morgan Stanley analyst Pamela Kaufman said she has no knowledge of a potential deal between Altria and Juul but that taking such a stake could make strategic sense for Altria to gain exposure to a fast growing product that poses a threat to its cigarette business.

Altria does not have a robust reduced risk product portfolio and Juul’s e-cigs could significantly enhance its competitive position, stated Kaufman, who also believes Altria would likely be buying in at a lower valuation than the previously reported $15B given the FDA recently prohibited flavored pods sales in convenience stores.

 OTHERS TO WATCH

Publicly traded companies in the tobacco products space also include Philip Morris and British American Tobacco (BTI).


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Pareteum to acquire iPass

Pareteum to acquire iPass in all-stock transaction

Pareteum to acquire iPass, Stockwinners.com
Pareteum to acquire iPass, Stockwinners.com

Pareteum (TEUM) and iPass (IPAS) announced that they have entered into a definitive agreement under which Pareteum will acquire iPass in an all-stock transaction whereby iPass shareholders will receive 1.17 shares of Pareteum common stock in an exchange offer.

With this accretive acquisition, Pareteum expects to gain a strategic position with new marquee brands and new markets including the enterprise, airline, hospitality, retail and internet of things sectors.

Pareteum expects to strengthen its established intellectual property portfolio with the addition of over 40 U.S. and international patents.

With more than 500 expected new customers and a global network of over 68M Wi-Fi hot spots, coupled with proven connection management technology, location services and Wi-Fi performance data, Pareteum is now poised to take its global communications software solutions to every market vertical.

The transaction is expected to be immediately accretive to Pareteum’s non-GAAP EPS and free cash ow after anticipated synergies.

Pareteum anticipates achieving more than $15 million in annual cost synergies with greater than $12 million of those expected to be realized in the rst full quarter of combined operations. Pareteum currently estimates approximately $2.0 million of GAAP earnings accretion and $5.5 million of non-GAAP earnings accretion in the rst full year after closing the transaction.

In addition, the acquisition will add new offices and talent in Silicon Valley, California and Bangalore, India, expanding Pareteum’s presence globally.

Under the terms of the acquisition agreement, a wholly-owned subsidiary of Pareteum will commence an exchange offer to acquire all of the outstanding shares of iPass common stock, offering 1.17 shares of Pareteum common stock in exchange for each share of iPass common stock tendered.

Upon satisfaction of the conditions to the exchange offer, and after the shares tendered in the exchange oer are accepted for payment, the agreement provides for the parties to effect, as promptly as practicable, a merger, which would not require a vote by iPass stockholders, and which would result in each share of iPass common stock not tendered in the exchange offer being converted into the right to receive 1.17 shares of Pareteum common stock.

The exchange offer is subject to customary conditions, including the tender of at least a majority of the outstanding shares of iPass common stock and certain regulatory approvals, and is expected to close in the rst quarter of calendar year 2019.

No approval of the stockholders of Pareteum is required in connection with the proposed transaction.

Terms of the agreement were approved by the board of directors for both Pareteum and iPass.


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Athenahealth sold for $5.7 billion

Athenahealth to be acquired by Veritas Capital for $135 per share in cash

Athenahealth sold for $5.7 billion, Stockwinners
Athenahealth sold for $5.7 billion, Stockwinners

Athenahealth (ATHN), Veritas Capital and Evergreen Coast Capital, announced that they have entered into a definitive agreement under which an affiliate of Veritas and Evergreen will acquire athenahealth for approximately $5.7B in cash.

Under the terms of the agreement, athenahealth shareholders will receive $135 in cash per share.

The per share purchase price represents a premium of approximately 12% over the company’s closing stock price on November 9, 2018, the last trading day prior to today’s announcement, and a premium of approximately 27 percent over the company’s closing stock price on May 17, 2017, the day prior to Elliott Management Corporation’s announcement that it had acquired an approximate 9% interest in the company.

Following the closing, Veritas and Evergreen expect to combine athenahealth with Virence Health, the GE Healthcare Value-based Care assets that Veritas acquired earlier this year.

The combined business is expected to be a leading, privately-held healthcare information technology company with an extensive national provider network of customers and world-class products and solutions to help them thrive in an increasingly complex environment.

Following the close of that transaction, the combined company is expected to operate under the athenahealth brand and be headquartered in Watertown, Massachusetts.

The company will be led by Virence Chairman and Chief Executive Officer Bob Segert and an executive leadership team comprised of executives from both companies.

Following the completion of the transaction, Virence’s Workforce Management business will become a separate Veritas portfolio company under the API Healthcare brand.

Athenahealth investor Elliott Management has expressed support for the transaction.

Elliott Partner Jesse Cohn said, “We are pleased to support this transformative transaction combining athenahealth and Virence, which we believe represents an outstanding, value-maximizing outcome for athenahealth shareholders.”

Upon completion of the transaction, Elliott’s private equity subsidiary, Evergreen Coast Capital, will retain a minority investment stake in the combined company.

The transaction is expected to close in the first quarter of 2019, subject to the approval of the holders of a majority of athenahealth’s outstanding shares and the satisfaction of customary closing conditions and regulatory approvals.

The athenahealth Board of Directors has unanimously approved the merger agreement and intends to recommend that athenahealth shareholders vote in favor of it at a Special Meeting of Stockholders, to be scheduled as soon as practicable.

The transaction is not subject to a financing condition. In light of today’s announcement and the pending transaction, athenahealth will no longer be hosting its previously announced Q3 2018 earnings call.

ATHN closed at $120.35.


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JP Morgan is positive on NY Times

NY Times rises on subscriber growth, Analyst Comments

JP Morgan is positive on NY Times, Stockwinners
JP Morgan is positive on NY Times, Stockwinners

Shares of New York Times (NYT) have jumped after the company reported better than expected third quarter results and strong subscriber growth.

Notably, the Times’ 203,000 total net new digital-only subscriptions represents the highest gain in digital subscribers in a quarter since the “Trump bump” in the fourth quarter of 2016 and the first quarter of 2017 after the presidential election.

Commenting on the announcement, JPMorgan analyst Alexia Quadrani told investors that she is “extremely encouraged” by the results and sees momentum continuing on digital subscriber additions.

QUARTERLY RESULTS

New York Times reported third quarter adjusted earnings per share of 15c and revenue $417.35M, both above consensus of 11c and $408.54M, respectively.

The number of digital subscribers showed a net increase of roughly 203,000, with 143,000 of those signing on for digital new products and the remainder paying for the company’s cooking and crossword features.

Operating profits rose 30% to $41.4M in the period.

Mark Thompson, president and CEO, said, “This was a strong third quarter for the company. […] We passed two significant milestones, and now have more than 3M digital-only subscriptions and more than 4M total subscriptions. We’re executing on our subscription-first strategy; this quarter, subscription revenues accounted for nearly two-thirds of the company’s revenues. We’re investing aggressively in our journalism, product and marketing and are seeing tangible results in our digital growth.

Turning to advertising, as expected, we are seeing a much stronger second half of the year. We had an exceptional third quarter with digital advertising up 17% and growth of 7% in total advertising.”

Responding to a question during its earnings conference call from JPMorgan’s Quadrani regarding potential subscription drivers, including stories that may have caused a spike in adds, the company highlighted the “important role” played by the $1 per week promotion.

NY Times also acknowledged that “there were some spikes” during the quarter related to specific stories, namely “the anonymous editorial, the story about family separation at the border and the one on the Trump family.”

MOMENTUM TO CONTINUE

In a post-earnings note, JPMorgan‘s Quadrani pointed out that NY Times reported third quarter earnings with revenue, adjusted operating profit, and EPS all ahead of consensus and her estimates.

Most notably, the analyst noted that digital subscriber net adds in the quarter were 203,000 compared to her 130,000 estimate, with the core news product adding 143,000 and digital other adding 60,000.

The 143,000 net adds for news compares to 68,000 in the second quarter, and is the best quarter for the company since the “Trump bump” driven first quarter of 2017, Quadrani contended.

Overall, the analyst said she is “extremely encouraged” by these results and sees momentum continuing on digital subscriber additions helped by the current elevated news cycle and the midterm elections. Quadrani has an Outperform rating on the shares.

FAILING’ NEW YORK TIMES

Last month, Trump criticized a NY Times investigation into his and his family’s use of “dubious tax schemes” over the years and the origins of his own wealth, calling the article an “old, boring and often told hit piece.”

In a tweet, the President said “The Failing New York Times did something I have never seen done before. They used the concept of “time value of money” in doing a very old, boring and often told hit piece on me. Added up, this means that 97% of their stories on me are bad. Never recovered from bad election call!”

This is not the first time Trump called the publication the “failing New York Times.”

Denouncing what he referred to as a “gutless editorial” posted by the New York Times in September, in which an unnamed administration official alleged that advisers to the President were intentionally attempting to thwart his misguided impulses from the inside, Trump tweeted: “Does the so-called “Senior Administration Official” really exist, or is it just the Failing New York Times with another phony source? If the GUTLESS anonymous person does indeed exist, the Times must, for National Security purposes, turn him/her over to government at once!”

PRICE ACTION

In Thursday’s trading, shares of New York Times gained 7.5% to $28.39.


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WildHorse Resource sold for $3.977 billion

Chesapeake to buy WildHorse Resource in $3.977B cash and stock deal

WildHorse Resource sold for $3.977 billion, Stockwinners
WildHorse Resource sold for $3.977 billion, Stockwinners

Chesapeake Energy (CHK) and WildHorse Resource Development (WRD) today jointly announced that Chesapeake has entered into a definitive agreement to acquire WildHorse, an oil and gas company with operations in the Eagle Ford Shale and Austin Chalk formations in southeast Texas, in a transaction valued at approximately $3.977B, based on yesterday’s closing price, including the value of WildHorse’s net debt of $930M as of June 30, 2018.

At the election of each WildHorse common shareholder, the consideration will consist of either 5.989 shares of Chesapeake common stock or a combination of 5.336 shares of Chesapeake common stock and $3 in cash, in exchange for each share of WildHorse common stock.

The transaction was unanimously approved by the Board of Directors of each company.

The deal is projected to double adjusted oil production by 2020 from stand-alone adjusted 2018 estimates, increasing to a projected range of 125,000 to 130,000 barrels of oil per day in 2019, and 160,000 to 170,000 bbls of oil per day in 2020; Chesapeake’s 2020 projected adjusted oil production mix is expected to increase to approximately 30% of total production, compared to approximately 19% today; Increases projected EBITDA per barrel of oil equivalent margin by approximately 35% in 2019 and by approximately 50% in 2020, based on current strip prices; $200M-$280M in projected average annual savings, totaling $1B-$1.5B by 2023, due to operational and capital efficiencies as a result of Chesapeake’s significant expertise with unconventional assets and technical and operational excellence; incremental savings through elimination of redundant corporate overhead, gathering, processing and transmission synergies and improved capital markets execution due to improved credit metrics.

Upon closing, Chesapeake shareholders will own approximately 55% of the combined company, and WildHorse shareholders will own approximately 45%, depending on the consideration elected.

Chesapeake expects to finance the cash portion of the WildHorse acquisition, which is expected to be between $275M and approximately $400M, through its revolving credit facility.

The transaction, which is subject to shareholder approvals from both companies and customary closing conditions and regulatory approvals, is expected to close in the first half of 2019.


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Electro Scientific sold for $1 billion

MKS Instruments to acquire Electro Scientific for $30.00 per share

Electro Scientific sold for $1 billion, Stockwinners
Electro Scientific sold for $1 billion, Stockwinners

MKS Instruments (MKSI) and Electro Scientific (ESIO) announced that they have entered into an agreement for MKS to acquire ESI for $30.00 per share.

The all-cash transaction is valued at approximately $1B.

The combined company is expected to have approximately $2.2B in pro forma annual revenue, based on the two companies’ calendar 2017 historical results.

The transaction is expected to be accretive to MKS’ non-GAAP net earnings and free cash flow during the first 12 months post-closing.

The combined company expects to realize $15M in annualized cost synergies within 18 to 36 months.

MKS anticipates the acquisition will further advance the MKS strategy to enhance our Surround the WorkpieceSM offerings by adding systems expertise and deep technical understanding of laser materials processing interactions.

ESI’s knowledge in printed circuit board processing systems and other capabilities will provide MKS the opportunity to accelerate the roadmaps and performance of laser, motion and photonics portfolio.

In addition, ESI brings a new platform of industrial markets enabling MKS to leverage its expertise more broadly. MKS intends to fund the transaction with a combination of available cash on hand and up to $650M in committed term loan debt financing.

On a pro forma basis, as if the transaction closed on June 30, we expect the combined company to have a strong balance sheet with combined pro forma net cash and investments of approximately $400M and total term loan debt outstanding of $1B. This would result in pro forma trailing twelve month leverage, defined as debt to Adjusted EBITDA of 1.3 times and pro forma net leverage of 0.8 times.

Actual leverage ratios will depend upon a number of factors and shall be determined at the time of the closing. The company has also obtained a commitment to upsize its asset based revolving credit facility to $100M.

The transaction has been unanimously approved by the MKS and ESI boards of directors and is subject to customary closing conditions, including regulatory approvals and approval by ESI’s shareholders, and is expected to close in Q1 of 2019.


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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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L3 Technologies and Harris to merge

Harris, L3 Technologies to combine in merger of equals

L3 Technologies and Harris to merge, Stockwinners
L3 Technologies and Harris to merge, Stockwinners
L3 Technologies and Harris to merge, Stockwinners
L3 Technologies and Harris to merge, Stockwinners

Harris Corporation (HRS) and L3 Technologies (LLL) have agreed to combine in an all stock merger of equals.

Under the terms of the merger agreement, which was unanimously approved by the boards of directors of both companies, L3 shareholders will receive a fixed exchange ratio of 1.30 shares of Harris common stock for each share of L3 common stock, consistent with the 60-trading day average exchange ratio of the two companies.

Upon completion of the merger, Harris shareholders will own approximately 54% and L3 shareholders will own approximately 46% of the combined company on a fully diluted basis.

The combined company, L3 Harris Technologies, will be the 6th largest defense company in the U.S. and a top 10 defense company globally, with approximately 48,000 employees and customers in over 100 countries.

For calendar year 2018, the combined company is expected to generate net revenue of approximately $16B, EBIT of $2.4B and free cash flow of $1.9B.

The combination is expected to generate approximately $500M of annual gross pre-tax cost synergies, or $300M net of savings returned to customers, in year 3.

The savings will come from reducing direct and indirect spend, rationalizing footprint, consolidating corporate and segment headquarters, establishing a common shared services platform for IT and finance and reducing other overhead costs.

The company is expected to invest approximately $450M cash to achieve the synergies over the next 3 years.

The combined company will target $3B in free cash flow by year 3, driven by organic growth, cost synergies, working capital improvements and capital expenditure efficiencies. L3 Harris Technologies will be well capitalized with a strong balance sheet and a leverage ratio of 2.2 times net debt to trailing twelve months EBITDA.

The combined company will remain committed to maintaining an investment grade credit rating and a dividend payout consistent with each company’s current practice and deploying excess cash toward share repurchases, including up to $2B in share repurchases in the 12 months post-closing.

L3 Harris Technologies will be headquartered in Melbourne, Florida.

The combined company’s Board of Directors will have 12 members, consisting of six directors from each company. William Brown will serve as chairman and CEO, and Christopher Kubasik will serve as vice chairman, president and COO for the first two years following the closing of the transaction. For the third year, Brown will transition to executive chairman and Kubasik to CEO, after which Kubasik will become chairman and CEO.

The merger is expected to close in mid-calendar year 2019, subject to satisfaction of customary closing conditions, including receipt of regulatory approvals and approval by the shareholders of each company.


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Sarepta gene therapy showed functional improvements

Sarepta gene therapy showed functional improvements across all measures 

Sarepta drops after U.K. trial halt,
Sarepta gene therapy showed functional improvements

Sarepta Therapeutics (SRPT) announced  at the 23rd International Congress of the World Muscle Society in Mendoza, Argentina, Jerry Mendell, M.D., of Nationwide Children’s Hospital presented updated results from its gene therapy clinical trial assessing AAVrh74.MHCK7.micro-Dystrophin in individuals with Duchenne muscular dystrophy.

Dr. Mendell presented the following updated data on the four patients enrolled in the study: All patients showed robust expression of transduced micro-dystrophin, which is properly localized to the muscle sarcolemma, as measured by immunohistochemistry.

Mean gene expression for the study, as measured by percentage of micro-dystrophin positive fibers was 81.2% and the mean intensity of the fibers was 96.0% compared to normal control.

All post-treatment biopsies showed robust levels of micro-dystrophin as measured by Western blot, with a mean of 74.3% compared to normal utilizing Sarepta’s method, or 95.8% compared to normal pursuant to Nationwide Children’s quantification of Sarepta’s method that adjusts for fat and fibrotic tissue.

Gene expression for the fourth patient was robust, as follows: As measured by immunohistochemistry, micro-dystrophin positive fibers was 96.2% and the mean intensity of the fibers was 160.0% compared to normal control. As measured by Western blot, patient 4 showed robust levels of micro-dystrophin, with a mean of 182.7% compared to normal utilizing Sarepta’s method, or 222% compared to normal pursuant to Nationwide Children’s quantification of Sarepta’s method that adjusts for fat and fibrotic tissue.

In all patients, expression of micro-dystrophin was associated with significant expression and up-regulation of the dystrophin-associated protein complex, an additional indication of functionality of dystrophin.

All patients showed significant decreases of serum creatine kinase levels at last measure, with a mean reduction of CK of over 78% from baseline.

Doug Ingram, Sarepta’s president and CEO, said, “The encouraging results that we previously saw and reinforced in the fourth patient strengthen our resolve to rapidly move to a confirming trial and, assuming successful, to bring this therapy to the Duchenne community around the world with a sense of urgency.”

SRPT closed at $147.38; it last traded at $152.50.


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Barrick Gold acquires Randgold

Barrick acquires Randgold in all-stock deal, sees ‘industry-leading’ company

Barrick Gold acquires Randgold, Stockwinners
Barrick Gold acquires Randgold, Stockwinners

Barrick Gold (ABX) announced that it has reached agreement on the terms of a recommended share-for-share merger of Barrick and Randgold Resources Limited (GOLD).

The merger is subject to approval by both sets of shareholders, regulatory approvals and other customary closing conditions.

It is intended that the merger will be implemented by means of a court-sanctioned scheme of arrangement of Randgold Resources and the Randgold shareholders under Article 125 of the companies Law 1991, with the entire issued and to be issued share capital of Randgold being acquired by Barrick.

Under the terms of the merger, each Randgold shareholder will receive 6.1280 new Barrick shares for each Randgold share.

Following completion of the merger, Barrick shareholders will own approximately 66.6% and Randgold shareholders will own approximately 33.4% of the new Barrick Group on a fully-diluted basis.

The company said, “The Merger will create an industry-leading gold company with the greatest concentration of Tier One Gold Assets in the industry, led by a proven management team of owners. Superior operating metrics, including the highest Adjusted EBITDA margin and the lowest total cash cost position among Senior Gold Peers, will support sustainable investment in growth and shareholder returns.”

The merger is expected to close by Q1 2019.

Following completion of the merger: John Thornton, Executive Chairman of Barrick, will become Executive Chairman of the New Barrick Group; Mark Bristow, Chief Executive Officer of Randgold, will become President and Chief Executive Officer of the new Barrick Group; Graham Shuttleworth, Finance Director and Chief Financial Officer of Randgold, will become Senior Executive Vice President and Chief Financial Officer of the new Barrick Group; Kevin Thomson, Senior Executive Vice President, Strategic Matters of Barrick, will become Senior Executive Vice President, Strategic Matters of the new Barrick Group; Two-thirds of the directors of the board of the new Barrick Group will be nominated by Barrick, and one-third will be nominated by Randgold.


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Integrated Device Technology sold for $6.7 billion

Renesas acquires Integrated Device for $49 per share or $6.7B

 

Integrated Device Technology sold for $6.7 billion, Stockwinners
Integrated Device Technology sold for $6.7 billion, Stockwinners

Renesas Electronics (RNECY) and Integrated Device Technology (IDTI) announced they have signed a definitive agreement under which Renesas will acquire IDT for $49.00 per share in an all-cash transaction representing an equity value of approximately $6.7B.

The stock closed yesterday down 58c to $42.08. Closing of the transaction is expected to occur in the first half of 2019, following approvals by IDT shareholders and the relevant regulatory authorities.

Renesas anticipates near- and long-term revenue growth from “expanded opportunities and access to fast-growing industries, and cost savings from a greater scale business platform to bring innovation and improvements” with an expected financial impact of approximately over $250M.

The transaction is expected to be accretive to Renesas’ non-GAAP gross margin and non-GAAP earnings per share by approximately 1.6%pts and 18%, respectively, immediately after closing.

Renesas plans to finance the transaction with cash reserves and approximately 679B yen of bank loans. Renesas does not intend to raise equity financing for this transaction. T

he companies said, “The acquisition combines two recognized leaders in embedded processors and analog mixed-signal semiconductors, each with unique strengths in delivering products to improve performance and efficiency in high-computing electronic systems. The boards of directors of both companies have unanimously approved the transaction.”


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Engility Holdings sold for $2.5 billion

SAIC to acquire Engility in all-stock deal valued at $2.5B

Engility Holdings sold for $2.5 billion, Stockwinners
Engility Holdings sold for $2.5 billion, Stockwinners

SAIC (SAIC) and Engility Holdings (EGL) announced that they have entered into a definitive agreement under which SAIC will acquire Engility in an all-stock transaction valued at $2.5B, $2.25B net of the present value of tax assets, creating the second largest independent technology integrator in government services with $6.5B of pro-forma last 12 months’ revenue.

The combination of these two complementary businesses will accelerate SAIC’s growth strategy into key markets, enhance its competitive position and provide significant financial benefits.

The transaction will create market sub-segment scale in strategic business areas of national interest, such as defense, federal civilian agencies, intelligence, and space.

In addition, it expands the capabilities of both companies, bringing additional systems engineering, mission, and IT capabilities to a broader base of customers.

Under the terms of the merger agreement, Engility stockholders will receive a fixed exchange ratio of 0.450 shares of SAIC common stock for each share of Engility stock in an all-stock transaction.

Based on an SAIC per share closing price of $89.86 on September 7, 2018, the transaction is valued at $40.44 per share of Engility common stock or $2.5B in the aggregate, including the repayment of $900M in Engility’s debt.

SAIC has obtained a financing commitment letter from Citigroup Global Markets Inc. for a new seven-year senior secured $1.05B term loan facility under our existing credit agreement.

The proceeds will be used to repay Engility’s existing debt and associated fees. SAIC expects no immediate change to its quarterly cash dividend as a result of this transaction.

The transaction is expected to close by the end of the fiscal fourth quarter ending February 1, 2019, following customary closing conditions, including regulatory and SAIC and Engility shareholder approvals.

The transaction has been unanimously approved by both boards.

The businesses will continue to operate separately until the transaction closes. The combined company will retain the SAIC name and continue to be headquartered in Reston, Virginia.

Following closing, Tony Moraco will continue as CEO and as an SAIC board member. SAIC will expand its board to include two additional members from Engility’s board.


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Ocean Rig sold for $2.7B

Transocean to acquire Ocean Rig for $2.7B including debt

 

Ocean Rig sold for $2.7B, Stockwinners
Ocean Rig sold for $2.7B, Stockwinners

Transocean (RIG) and Ocean Rig UDW Inc. (ORIG) announced that they have entered into a definitive merger agreement under which Transocean will acquire Ocean Rig in a cash and stock transaction valued at approximately $2.7B, inclusive of Ocean Rig’s net debt..

The transaction consideration is comprised of 1.6128 newly issued shares of Transocean plus $12.75 in cash for each share of Ocean Rig’s common stock, for a total implied value of $32.28 per Ocean Rig share, based on the closing price on August 31, 2018.

This represents a 20.4% premium to Ocean Rig’s ten-day volume weighted average share price.

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

Transocean intends to fund the cash portion of the transaction consideration through a combination of cash on hand and fully committed financing provided by Citi.

The merger is not subject to any financing condition. Upon completion of the merger, Transocean’s and Ocean Rig’s shareholders will own approximately 79% and approximately 21%, respectively, of the combined company.

No changes to Transocean’s board of directors, executive management team, or corporate structure are anticipated as a result of the acquisition.

The Company will remain headquartered in Steinhausen, Switzerland, with significant operating presence in Houston, Texas, Aberdeen, Scotland and Stavanger, Norway.

The transaction, which is expected to be completed during the first quarter of 2019, is subject to the approval of both Transocean and Ocean Rig shareholders and the satisfaction of customary closing conditions, including applicable regulatory approvals.

The merger is not subject to any financing condition.

Also, consistent with the Company’s strategy of recycling less competitive rigs, Transocean will retire two of its floaters, the ultra-deepwater drillship C.R. Luigs and the midwater floater Songa Delta.

The rigs will be classified as held for sale and will be recycled in an environmentally responsible manner. Both floaters are currently stacked.

Transocean anticipates re-ranking the combined fleet, which may result in additional rigs being recycled.


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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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Keystone Foods sold for $2.16B

Tyson Foods to acquire Keystone Foods for $2.16B 

Keystone Foods sold for $2.16B, Stockwinners
Keystone Foods sold for $2.16B, Stockwinners

Tyson Food (TSN) announced it has reached a definitive agreement to buy the Keystone Foods business from Marfrig Global Foods for $2.16B in cash.

The acquisition of Keystone, a major supplier to the growing global foodservice industry, is Tyson Foods’ latest investment in furtherance of its growth strategy and expansion of its protein capabilities.

Headquartered in West Chester, Pennsylvania, Keystone supplies chicken, beef, fish and pork to some of the quick-service restaurant chains, as well as retail and convenience store channels.

Its product portfolio includes chicken nuggets, wings and tenders; beef patties; and breaded fish fillets.

The acquisition includes six processing plants and an innovation center in the U.S. with locations in Alabama, Georgia, Kentucky, North Carolina, Pennsylvania and Wisconsin. It also includes eight plants and three innovation centers in China, South Korea, Malaysia, Thailand and Australia.

Keystone, which employs approximately 11,000 people, generated annual revenue of $2.5B and adjusted EBITDA of $211M in the last 12 months ending June 30, excluding non-controlling interest and other adjustments.

During the same period, the company generated approximately 65% of its revenue from U.S.-based production and the remaining 35% from its Asia Pacific plants.

The acquisition will be funded through a combination of existing liquidity and proceeds from the issuance of new debt. Initial leverage metrics are expected to be well within levels appropriate for the company’s existing investment-grade credit ratings.

The company plans to use its cash flows to pay down debt to continue to support its credit ratings and to strengthen its balance sheet.The transaction, which has been approved by Tyson Foods’ board of directors, is expected to close in mid-fiscal 2019. It is subject to customary closing conditions, including regulatory approvals.


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