EQGP Holdings sold for $20.00 per share

Equitrans Midstream to acquire EQGP Holdings for $20.00 per unit in cash

Equitrans Midstream Corporation (ETRN) announced that it has entered into definitive purchase agreements with certain unitholders of EQGP Holdings (EQGP) to acquire limited partner interests in EQGP for $20.00 per unit in cash, which is a 17.5% premium to the EQGP closing market price as of November 29, 2018.

The Private Purchases are expected to close on or about December 31, 2018, after which ETRN and its affiliates will own more than 95% of the outstanding EQGP Common Units. Upon closing of the Private Purchases, ETRN intends to exercise the Limited Call Right under EQGP’s partnership agreement to acquire all remaining EQGP Common Units not then owned by ETRN and its affiliates.

If the Limited Call Right is exercised, the remaining holders of EQGP Common Units will receive at least the same cash price per unit that will be paid in the Private Purchases.

The Limited Call Right is expected to close in January 2019 and will be a taxable transaction for EQGP unitholders.

ETRN intends to use the cash proceeds from a newly issued Term Loan B to finance the Private Purchases and the purchases pursuant to the Limited Call Right.

ETRN has secured committed financing in support of these purchases. ETRN also announced that it has made a proposal to EQM Midstream Partners (EQM) for the exchange of its incentive distribution rights and the economic general partner interest in EQM for 95 million units in EQM and a non-economic general partner interest in EQM, subject to the closing of the Private Purchases and completion of the Limited Call Right.

ETRN expects that a portion of the units received will be in the form of Payment-In-Kind Units.

The PIK Units would receive distributions in the form of additional PIK Units and would convert on a one-to-one basis into common units representing limited partner interests in EQM at a date to be determined.

Final terms of the Proposed IDR Transaction are subject to negotiation with the board of directors of EQM’s general partner or its conflicts committee, and assuming an agreement is reached, ETRN expects that the Proposed IDR Transaction would close in the first quarter of 2019.

Upon completion of the Private Purchases, the Limited Call Right, and the Proposed IDR Transaction, ETRN will have accomplished a full simplification of EQGP and EQM, resulting in a projected 61% ownership of EQM.

Additionally, EQM will be the only publicly traded partnership under ETRN and is expected to benefit from the elimination of the IDR burden, as well as stronger coverage and balance sheet metrics.

Highlights: The proposed transactions would not result in a distribution cut for EQM unitholders; Targeting 6% – 8% annual distribution growth beginning in 2019; 2019 distribution coverage in excess of 1.0x; Long-term distribution coverage target in excess of 1.2x beginning in 2020; Long-term debt to EBITDA target of 3.5x – 4.0x beginning in 2020; PIK Units will provide balance sheet and coverage support; Improves cost of capital; No equity issuance is required to fund capital projects for the next several years; Reduces corporate overhead associated with the elimination of a publicly traded entity.

ETRN expects that the EQM Conflicts Committee will review the Proposed IDR Transaction. Unitholder voting is not required in connection with the Private Purchases, the exercise of the Limited Call Right, or the Proposed IDR Transaction.


STOCKWINNERS

To read timely stories similar to this, along with money making trade ideas, sign up for a membership to Stockwinners.

This article does not constitute investment advice. Each reader is encouraged to consult with his or her individual financial professional and any action a reader takes as a result of information presented here is his or her own responsibility.

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).


STOCKWINNERS

To read timely stories similar to this, along with money making trade ideas, sign up for a membership to Stockwinners.

This article does not constitute investment advice. Each reader is encouraged to consult with his or her individual financial professional and any action a reader takes as a result of information presented here is his or her own responsibility.

Cinedigm to acquire ComicBlitz 

Cinedigm to acquire ComicBlitz 

 

Cinedigm to acquire ComicBlitz , Stockwinners
Cinedigm to acquire ComicBlitz , Stockwinners

Cinedigm (CIDM) announced an agreement to acquire the digital comic book service ComicBlitz, which will provide access to approximately 10,000 digital comic books, with more than 175,000 pages of content from a growing network of 30 or more publishers.

#ComicBlitz content will be distributed globally as a licensed offering for mobile carriers, OTT providers and other media companies.

It will also be integrated with Cinedigm’s existing and planned OTT services, including the fandom lifestyle network CONtv.

Cinedigm expects that the acquisition will close before the end of the year. Cinedigm plans on rapidly enhancing ComicBlitz’s content and services offering by leveraging Cinedigm’s forthcoming, next-generation technology platform and expects to service global distribution of the ComicBlitz content and platform offerings alongside Cinedigm’s existing footprint of nine OTT channel offerings.

From a business perspective, the transaction is expected to generate revenues through content licensing, subscription and advertising revenues, new distribution platform partnerships and by accelerating global expansion of Cinedigm’s OTT business.

Cinedigm expects the acquisition will be accretive within the first quarter following closing, pending certain license deals currently in negotiation. The deal could be expected to generate more than $5M in incremental annual digital revenues within 18-24 months after closing, if new platform and licensing agreements related to this acquisition are consummated.

This deal will support Cinedigm’s strategy to provide high quality turn-key offerings to third party platforms on a global scale through acquisition and partnerships.

It will also provide a deep portfolio of quality comic book offerings that significantly broadens the company’s content portfolio for highly sought after fandom audiences worldwide.

The worldwide digital comic book and graphic novel market is estimated at over $1B in annual sales. Launched in 2015, ComicBlitz has a distribution footprint of over 133 countries, with key penetration in North America and major territories including the United Kingdom, Australia, India, Mexico, Brazil and Germany.


STOCKWINNERS

To read timely stories similar to this, along with money making trade ideas, sign up for a membership to Stockwinners.

This article does not constitute investment advice. Each reader is encouraged to consult with his or her individual financial professional and any action a reader takes as a result of information presented here is his or her own responsibility.

Investment Technology Group sold for $1 billion

ITG to be acquired by Virtu Financial for $30.30 per share in cash

Investment Technology Group sold for $1 billion, Stockwinners
Investment Technology Group sold for $1 billion, Stockwinners

Investment Technology Group (ITG) announced that it has reached a definitive agreement for Virtu Financial (VIRT) to acquire all outstanding shares of ITG’s Common Stock for $30.30 per share in cash.

Investment Technology Group, Inc. operates as a financial technology company in the United States, Canada, Europe, and the Asia Pacific.

Virtu Financial, Inc.  provides market making and liquidity services through its proprietary, multi-asset, and multi-currency technology platform to the financial markets worldwide.

The price represents a premium of more than 40% over ITG’s average closing share price of $21.55 in the 30 days prior to news reports of a potential sale on October 4, 2018.

Minder Cheng, Chairman of the Board of Directors, said, “ITG has made tremendous progress in executing on its Strategic Operating Plan over the past two years, and the agreement with Virtu is a result of the dedicated efforts of our management team and employees.

After careful consideration, ITG’s Board of Directors determined that the proposal from Virtu, which provides an immediate and significant cash premium, offers the most value for ITG stockholders. The combination of Virtu and ITG will create an industry-leading financial technology franchise with true global capabilities and scale.” J.P. Morgan is serving as the financial advisor and Wachtell, Lipton, Rosen & Katz is providing legal counsel to ITG.


STOCKWINNERS

To read timely stories similar to this, along with money making trade ideas, sign up for a membership to Stockwinners.

This article does not constitute investment advice. Each reader is encouraged to consult with his or her individual financial professional and any action a reader takes as a result of information presented here is his or her own responsibility.

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.


STOCKWINNERS

To read timely stories similar to this, along with money making trade ideas, sign up for a membership to Stockwinners.

This article does not constitute investment advice. Each reader is encouraged to consult with his or her individual financial professional and any action a reader takes as a result of information presented here is his or her own responsibility.

Red Hat sold for $34 billion

 IBM to acquire Red Hat for $190 per share

Red Hat sold for $34 billion, Stockwinners
Red Hat sold for $34 billion, Stockwinners

IBM (IBM) and Red Hat (RHT) announced that the companies have reached a definitive agreement under which IBM will acquire all of the issued and outstanding common shares of Red Hat for $190 per share in cash, representing a total enterprise value of approximately $34B.

With this acquisition, IBM will remain committed to Red Hat’s open governance, open source contributions, participation in the open source community and development model, and fostering its widespread developer ecosystem.

In addition, IBM and Red Hat will remain committed to the continued freedom of open source, via such efforts as Patent Promise, GPL Cooperation Commitment, the Open Invention Network and the LOT Network. IBM and Red Hat also will continue to build and enhance Red Hat partnerships, including those with major cloud providers, such as Amazon Web Services (AMZN), Microsoft (MSFT) Azure, Google (GOOG; GOOGL) Cloud, Alibaba (BABA) and more, in addition to the IBM Cloud.

At the same time, Red Hat will benefit from IBM’s hybrid cloud and enterprise IT scale in helping expand their open source technology portfolio to businesses globally.

Upon closing of the acquisition, Red Hat will join IBM’s Hybrid Cloud team as a distinct unit, preserving the independence and neutrality of Red Hat’s open source development heritage and commitment, current product portfolio and go-to-market strategy, and unique development culture.

Red Hat will continue to be led by Jim Whitehurst and Red Hat’s current management team.

Jim #Whitehurst also will join IBM’s senior management team and report to Ginni #Rometty.

IBM intends to maintain Red Hat’s headquarters, facilities, brands and practices.

The acquisition will accelerate IBM’s revenue growth, gross margin and free cash flow within 12 months of closing.

It also will support a solid and growing dividend. The company will continue with a disciplined financial policy and is committed to maintaining strong investment grade credit ratings.

The company will target a leverage profile consistent with a mid to high single A credit rating. The company intends to suspend its share repurchase program in 2020 and 2021.

The company intends to close the transaction through a combination of cash and debt. The acquisition has been approved by the boards of directors of both IBM and Red Hat.

It is subject to Red Hat shareholder approval. It also is subject to regulatory approvals and other customary closing conditions. It is expected to close in the latter half of 2019.


STOCKWINNERS

To read timely stories similar to this, along with money making trade ideas, sign up for a membership to Stockwinners.

This article does not constitute investment advice. Each reader is encouraged to consult with his or her individual financial professional and any action a reader takes as a result of information presented here is his or her own responsibility.

JetPay sold for $184 million

NCR Corp. to acquire JetPay for $5.05 per share

JetPay sold for $184 million, Stockwinners
JetPay sold for $184 million, Stockwinners

NCR Corporation (NCR) announced a definitive agreement to acquire Allentown, PA-based JetPay (JTPY).

The transaction will be a cash tender offer of $5.05 per JetPay share, which represents a multiple of 2.9 times 2018 consensus revenue forecast of $63.4 million.

The purchase price is approximately $184 million and will be financed with a combination of cash on hand and existing capacity under NCR’s revolving credit facility.

The offer has been approved by each company’s board of directors.

This acquisition will enable NCR to integrate a cloud-based payments platform into its enterprise point-of-sale solutions for retail and hospitality industries.

It also accelerates NCR’s strategy of increasing recurring revenue growth and expanding margins by enhancing its mix of software and services.

The transaction is anticipated to close by year-end, subject to regulatory approval and other customary closing conditions. The two companies anticipate a smooth transition for customers, channel partners and employees.

Two of JetPay’s major stockholders, Flexpoint Ford, a private equity investment firm that specializes in the financial services and healthcare industries, and Larry Stone, a longstanding executive in the payment processing industry, have agreed to tender their shares in support of the transaction.


STOCKWINNERS

To read timely stories similar to this, along with money making trade ideas, sign up for a membership to Stockwinners.

This article does not constitute investment advice. Each reader is encouraged to consult with his or her individual financial professional and any action a reader takes as a result of information presented here is his or her own responsibility.

Musk’s tweet sends Tesla shares lower

Tesla slides after Elon Musk mocks SEC on Twitter

https://stockwinners.com/blog/
Musk’s tweet sends Tesla shares lower

Shares of Tesla (TSLA) dropped in Friday’s trading after Elon Musk, the company’s CEO, mocked the Securities and Exchange Commission in a tweet, calling the agency the “Shortseller Enrichment Commission.”

Last weekend Musk reached an agreement with the SEC to settle fraud charges, and that charge is currently pending approval from a federal judge.

MUSK MOCKS SEC

On Thursday, Musk tweeted, in apparent reference to the SEC, “Just want to [sic] that the Shortseller Enrichment Commission is doing incredible work. And the name change is so on point!”

Musk’s tweet came just hours after Musk and the SEC were told by U.S. District Court Judge Alison Nathan, who must approve the deal, to explain why the settlement is “fair and reasonable” by October 11, Bloomberg reported.

Separately, Musk took aim at BlackRock (BLK) and other large fund managers for fueling short sellers.

Musk alleged in a tweet that BlackRock and other firms pocket “excessive profit from short lending while pretending to charge low rates for ‘passive’ index tracking.”

SEC SETTLEMENT

This past weekend, the SEC announced that Musk agreed to settle the securities fraud charge brought against him last week.

The settlement requires that Musk will step down as Tesla’s chairman and will be ineligible to be re-elected chairman for three years.

Additionally, Tesla will appoint two new independent directors to its board and both the CEO and company will each pay $20M penalties to settle allegations that Musk misled investors in August by tweeting that he was considering taking Tesla private and had secured funding for the effort.

According to the SEC’s complaint, Musk’s misleading tweets caused Tesla’s stock price to jump by over 6% on August 7, and led to “significant market disruption.”

Additionally, the SEC is requiring that Musk get approval from the company’s lawyer before tweeting anymore company news, which reports had said could clamp down on Musk’s “headline-grabbing, unpredictable approach to promoting Tesla’s brand.”

Recode’s Teddy Schleifer reported via Twitter after the “Shortseller Enrichment Commission” tweet that the SEC agreement on Musk’s tweets “does not take effect for 90 days from the settlement date, per source. So he still has ~80 days to tweet whatever he wants.”

The SEC declined to comment on Musk’s tweet, Schleifer said.

Additionally, Fox Business Network’s Charlie Gasparino also tweeted, saying that the “@SEC_Enforcement continues to investigate @Tesla over possible misstatements on production/profitability targets-sources focus is on stated targets for Model 3/co profitability.

SEC sources say case is tougher case than @elonmusk ‘funding secured’ tweet.”

PRICE ACTION

In Friday morning trading, shares of Tesla are down 4.2% to $270.17.


STOCKWINNERS

To read timely stories similar to this, along with money making trade ideas, sign up for a membership to Stockwinners.

This article does not constitute investment advice. Each reader is encouraged to consult with his or her individual financial professional and any action a reader takes as a result of information presented here is his or her own responsibility.

J.C. Penney names new CEO, Shares rise

J.C. Penney spikes after naming former Joann Stores chief as new CEO

Retail selloff continues with J.C. Penney report. See Stockwinners.com for details.
J.C. Penney names new CEO, Shares rise

Shares of J.C. Penney (JCP) surged in Wednesday’s pre-market trading after the company named Jill Soltau as its new chief executive officer.

The CEO role has been vacant since the resignation of Marvin Ellison earlier this year to become the CEO of Lowe’s (LOW).

J.C. PENNEY GETS ITS CEO

On Tuesday after the market close, J.C. Penney said that Jill Soltau, the former president and CEO of fabric and crafts retailer Joann Stores, will become its next CEO.

Her appointment is effective on October 15.

In a statement, J.C. Penney director and chairman of the search committee Paul Brown said “Jill stood out from the start among an incredibly strong slate of candidates,” adding that “As we looked for the right person to lead this iconic company, we wanted someone with rich apparel and merchandising experience and found Jill to be an ideal fit.”

Former CEO Marvin Ellison left the company in May to become CEO of Lowe’s, and the CEO role at J.C. Penney has been vacant ever since.

Additionally, last week, J.C. Penney announced the resignation of CFO Jeffrey Davis to pursue another opportunity. His departure was effective October 1.

As J.C. Penney looks for Davis’ replacement, the company said Jerry Murray, senior VP of finance, will serve as interim CFO.

The retailer said it will consider both internal and external candidates to replace Davis, who has been CFO since July 24, 2017.

This summer, Chief Customer Officer Joe McFarland quit after less than a year to become executive vice president, stores, at Lowe’s.

Following Ellison’s departure, J.C. Penney created an “Office of the CEO,” comprised of Davis, McFarland, Chief Information Officer and Chief Digital Officer Therace Risch and EVP of Supply Chain Mike Robbins. Just two of those executives are still working at J.C. Penney.

WHAT’S NOTABLE

Mall-based retailers, including J.C. Penney, have been hurt by the increasing popularity of fast-fashion retailers like Zara, Forever 21 and H&M, as well as an increasing shift by shoppers to purchase online on sites like Amazon (AMZN).

J.C. Penney has struggled more than some of its peers, including Nordstrom (JWN) and Macy’s (M), and in August, cut its outlook for fiscal 2018 as it continued to deal with too much inventory.

ANALYST COMMENTARY

In a research note to investors, Piper Jaffray analyst Erinn Murphy said Soltau has “direct insights” on J.C. Penney’s core consumer given the overlap of the consumer base in her prior roles as Joann Stores CEO, but remains sidelined on shares due to her longer-term view on department store retailing and her belief that J.C. Penney is still in the process of “right-sizing” its inventory.

Murphy has a Neutral rating and $1.50 price target on the shares.

PRICE ACTION

In pre-market trading, shares of J.C. Penney are up nearly 13% to $1.76.


STOCKWINNERS

To read timely stories similar to this, along with money making trade ideas, sign up for a membership to Stockwinners.

This article does not constitute investment advice. Each reader is encouraged to consult with his or her individual financial professional and any action a reader takes as a result of information presented here is his or her own responsibility.

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.


STOCKWINNERS

To read timely stories similar to this, along with money making trade ideas, sign up for a membership to Stockwinners.

This article does not constitute investment advice. Each reader is encouraged to consult with his or her individual financial professional and any action a reader takes as a result of information presented here is his or her own responsibility.

Yum China receives takeover offer

Yum China rises after reportedly spurning $46 per share takeover bid

Yum China receives takeover offer, Stockwinners
Yum China receives takeover offer, Stockwinners

Shares of Yum China (YUMC) are on the rise following a media report saying the company has rejected a buyout offer of $46 per share made by a consortium led by Hillhouse Capital.

Earlier this month, Bloomberg had reported that China’s sovereign wealth fund, China Investment Corp., was part of the consortium bidding to take Yum China private.

BUYOUT OFFER REPORTEDLY REJECTED

Yum China has rejected a private buyout offer from a consortium of investors that valued the company at over $17B, according to The Wall Street Journal, citing a person familiar with the matter.

An investor group led by Hillhouse Capital Group in recent months offered to take the restaurant operator private at $46 per share, but the all-cash offer was turned down by the company’s board in recent weeks, source told the publication.

Last month, The Information had reported that Hillhouse Capital was in talks to acquire Yum China. The company operates over 8,000 KFC and Pizza Hut restaurants across mainland China.

A takeover led by Hillhouse would assist the company in accelerating its efforts to implement high-tech initiatives in its brick-and-mortar stores in order to attract Chinese millennials, the report pointed out.

CHINA INVESTMENT PART OF CONSORTIUM

Earlier this month, Bloomberg reported that China’s sovereign wealth fund, China Investment Corp., was part of the consortium bidding to take Yum China private.

The sovereign fund and DCP Capital, an investment fund run by former KKR (KKR) executives, are considering a buyout of Yum China, which runs KFC and Pizza Hut outlets, along with Hillhouse Capital, the publication added. Yum China spun off from Yum! Brands (YUM) in 2016.

PRICE ACTION

In tuesday’s trading, shares of Yum China trading in New York are off their earlier highs, but are trading up 3.8% to $37.14.


STOCKWINNERS

To read timely stories similar to this, along with money making trade ideas, sign up for a membership to Stockwinners.

This article does not constitute investment advice. Each reader is encouraged to consult with his or her individual financial professional and any action a reader takes as a result of information presented here is his or her own responsibility.

L Brands drops after PINK CEO departs

L Brands slides after slashing earnings forecast, PINK brand CEO departure 

L Brands drops after PINK CEO departs, Stockwinners
L Brands drops after PINK CEO departs, Stockwinners

Shares of L Brands (LB) are sliding after the parent of Victoria’s Secret and Bath & Body Works reported better than expected quarterly earnings and revenue but lowered its profit outlook.

While Jefferies analyst Randal Konik reduced his price target for L Brands and recommended investors sell the shares, his peer at Citi argued that the guidance cut was expected and reiterated a Buy rating on the stock.

QUARTERLY RESULTS

Last night, L Brands reported second quarter adjusted earnings per share of 36c and revenue of $2.98B, both above the consensus of 34c and $2.93B, respectively.

The company also lowered its FY18 earnings per share view to $2.45-$2.70 from $2.70-$3.00, with consensus at $2.77.

Additionally, L Brands said second quarter consolidated same-store sales for Stores and Direct were up 3%, while same-store sales for the quarter at Victoria’s Secret were down 1% and up 10% at at Bath & Body Works.

Alongside quarterly results, the company announced that Denise Landman, CEO of Victoria’s Secret PINK, has made the decision to retire at the end of this year.

Pink CEO departs, Shares slide

Amy Hauk, currently president for merchandising and product development of Bath & Body Works, will replace Landman as CEO of Victoria’s Secret PINK.

JEFFERIES SAYS SELL SHARES

In a research note to investors this morning, Jefferies’ Konik lowered his price target for L Brands to $20 from $23 and recommended investors sell the shares.

The analyst argued that the company’s fiscal year earnings guidance cut is still not low enough, and sees PINK on “precipice of massive declines.” Further, the analyst thinks L Brands’ free cash flow guidance is too high as its net debt continues to grow.

The dividend is at risk in the medium-term and the company needs to save cash now “before the next recession,” Konik contended.

The analyst reiterated an Underperform rating on the stock.

Meanwhile, his peer at JPMorgan also lowered his price target for L Brands to $26 from $28.

While the stock was bracing for an earnings forecast reduction, the magnitude of management’s near-term third quarter cut was greater than expected, calling for break-even earnings at the low-end, the first time in more than a decade, analyst Matthew Boss contended.

He reiterated a Neutral rating on the shares. Voicing a similar opinion, Wells Fargo analyst Ike Boruchow lowered his price target for L Brands to $30 from $42 and kept a Market Perform rating on the shares as the core Victoria’s Secret concept continues to struggle.

Pointing out that the second quarter results “raised a number of red flags,” including “severe” margin contraction, “bloated” inventory, Bath & Body Works returning to margin contraction and issues at PINK, Nomura Instinet analyst Simeon Siegel reiterated a Neutral rating and $31 price target on L Brands’ shares.

CITI SAYS RISK/REWARD STILL ATTRACTIVE

Still bullish on the stock, Citi analyst Paul Lejuez told investors that while the turnaround path for Victoria’s Secret “remains unclear,” the market expected last night’s fiscal 2018 guidance cut.

With a 7.5% dividend yield, the stock’s risk/reward is attractive, particularly given actions by management that suggest “they have more than enough liquidity to continue funding the dividend,” Lejuez argued.

The analyst reiterated a Buy rating on the shares and said he views the dividend as safe.

While lowering her price target for L Brands to $44 from $49, B. Riley FBR analyst Susan Anderson kept a Buy rating on the stock as she believes Bath & Body Works continues to excel and Victoria’s Secret remains a work in progress.

While weaker PINK performance is “disappointing,” the analyst believes management is taking steps to correct lounge performance as well as improve performance in lingerie.

Further, Anderson highlighted that L Brands reiterated its commitment to share repurchases and dividend, and reiterated that the company has substantial liquidity to fund the dividend and other expenditures.

PRICE ACTION

In Thursday’s trading, shares of L Brands have plunged over 12% to $28.50.


STOCKWINNERS

To read timely stories similar to this, along with money making trade ideas, sign up for a membership to Stockwinners.

This article does not constitute investment advice. Each reader is encouraged to consult with his or her individual financial professional and any action a reader takes as a result of information presented here is his or her own responsibility.

Scotts Miracle-Gro dragged down by Bayer woes

Bayer drags Scotts Miracle-Gro down after Monsanto weed killer ruling

Scotts Miracle-Gro dragged down by Bayer woes, Stockwinners
Scotts Miracle-Gro dragged down by Bayer woes, Stockwinners

Shares of Bayer (BAYRY) trading in New York are sliding after the recently acquired Monsanto was ordered to pay $289M by a California court, who found it liable in a lawsuit alleging that the company’s Roundup caused cancer.

Commenting on the news, JPMorgan analyst Richard Vosser told investors that the selloff in the shares is “significantly overdone” as he sees the potential for the verdict to be overturned on appeal and for the damage amount to be greatly reduced.

Meanwhile, his peer at Bank of America Merrill Lynch argued that the ruling adds cloud over an important product for Scotts Miracle-Gro (SMG).

ROUNDUP RULING

Last week, a jury found Monsanto, which was recently acquired by Bayer for $63B, liable in a lawsuit alleging that the company’s glyphosate-based weedkillers, including its Roundup brand, caused cancer.

The case against Monsanto is the first of more than 5,000 similar lawsuits across the U.S.

The jury at San Francisco’s Superior Court of California found that Monsanto had failed to warn school groundskeeper Dewayne Johnson and other consumers of the cancer risks posed by its weed killers, and awarded Johnson $250M in punitive damages and about $39M in compensatory damages.

Monsanto, which plans to appeal the verdict, has denied that glyphosate causes cancer and has contended that decades of scientific studies have shown the chemical to be safe for human use.

SELLOFF ‘SIGNIFICANTLY OVERDONE’

In a research note to investors, JPMorgan’s Vosser said he views the selloff in shares of Bayer after a California jury ordered the company’s Monsanto unit to pay $289M for not warning of cancer risks posed by its weed killer, Roundup, as “significantly overdone.”

The analyst added that he sees the potential for the verdict to be overturned on appeal and for the damage amount to be greatly reduced. Overall, Vosser believes current share levels of Bayer provide a good long-term buying opportunity and reiterated an Overweight rating on the name.

RULING ‘ADDS CLOUD’ OVER IMPORTANT PRODUCT

Also commenting on the California court’s ruling, BofA/Merrill analyst Christopher Carey pointed out in a research note of his own that while the product is owned by Monsanto, Scotts Miracle-Gro is the exclusive distributor/marketer of consumer Roundup in the U.S. and Canada, with the brand on track to be about 15% to FY18 profit, but less in FY19 as a 3-year term for $20M annual payments from Monsanto ends in FY18.

Carey noted that he does not expect a ban of glyphosate, but argued that the court decision nevertheless “adds a cloud” over a product which is important for Scotts Miracle-Gro.

While any additional impact from Roundup is unclear, this adds another layer to risks, he contended, highlighting that the company already must overcome a number of headwinds in 2019.

The analyst reiterated an Underperform rating and $74 price target on Scotts Miracle-Gro’s shares. Meanwhile, his peer at SunTrust told investors that there is likely no legal risk to Scotts Miracle-Gro from Friday’s jury verdict in California.

As part of the master agreement between Scotts and Monsanto signed three years ago, Scotts is indemnified from any litigation relating to the Roundup/glyphosate issue, analyst William Chappell pointed out.

Further, the analyst noted that the company is not listed as a defendant in any of the cases filed against Monsanto.

Nevertheless, Chappell estimates that Roundup represents roughly 10% of Scotts’ EBITDA, and believes sales could be impacted over the long-term from these trials.

The analyst reiterated a Buy rating and $100 price target on Scotts Miracle-Gro’s shares.

PRICE ACTION

In Monday morning trading, shares of Bayer in New York have dropped over 10% to $23.75, while Scotts Miracle-Gro’s stock has slipped 2.25% to $73.65.


STOCKWINNERS

To read timely stories similar to this, along with money making trade ideas, sign up for a membership to Stockwinners.

This article does not constitute investment advice. Each reader is encouraged to consult with his or her individual financial professional and any action a reader takes as a result of information presented here is his or her own responsibility.

Dun & Bradstreet sold for $6.9 billion

Dun & Bradstreet to be acquired by investor group for $145 per share cash

Dun & Bradstreet sold for $6.9 billion, Stockwinners
Dun & Bradstreet sold for $6.9 billion, Stockwinners

Dun & Bradstreet (DNB) announced that it has entered into a definitive merger agreement to be acquired by an investor group led by CC Capital, Cannae Holdings and funds affiliated with Thomas H. Lee Partners, L.P., along with a group of other distinguished investors.

Under the terms of the agreement, which has been unanimously approved by Dun & Bradstreet’s Board of Directors, Dun & Bradstreet shareholders will receive $145.00 in cash for each share of common stock they own, in a transaction valued at $6.9 billion including the assumption of $1.5 billion of Dun & Bradstreet’s net debt and net pension obligations.

The purchase price represents a premium of approximately 30% over Dun & Bradstreet’s closing share price of $111.63 on February 12, 2018, the last day of trading prior to Dun & Bradstreet’s announcement of a strategic review and an indication of its willingness to consider all options for value creation.

The transaction is expected to close within six months, subject to Dun & Bradstreet shareholder approval, regulatory clearances and other customary closing conditions.

The Dun & Bradstreet Board is unanimously recommending that shareholders vote to adopt the merger agreement at an upcoming special meeting of the shareholders.

Upon the completion of the transaction, Dun & Bradstreet will become a privately held company and shares of Dun & Bradstreet common stock will no longer be listed on any public market.

DNB closed at $122.80.


STOCKWINNERS

To read timely stories similar to this, along with money making trade ideas, sign up for a membership to Stockwinners.

This article does not constitute investment advice. Each reader is encouraged to consult with his or her individual financial professional and any action a reader takes as a result of information presented here is his or her own responsibility.

Tesla’s going private is questioned by analysts

Tesla consolidates as analysts debate if Musk should take carmaker private

Shares of Tesla (TSLA) jumped yesterday after CEO Elon Musk said he would like to see the company go private, but have since stepped into negative territory as analysts debate the idea.

 

https://stockwinners.com/blog/
Tesla’s going private is questioned by analysts, Stockwinners
While Jefferies analyst Philippe Houchois believes going private “feels like the right thing to do,” his peer at Morgan Stanley questions the feasibility of Musk actually being able to achieve that goal.

TAKING TESLA PRIVATE

Yesterday, Tesla CEO Elon Musk tweeted that he is considering taking the electric carmaker private.

 

In an email to the company’s employees, the executive explained: “Earlier today, I announced that I’m considering taking Tesla private at a price of $420/share. […] As a public company, we are subject to wild swings in our stock price that can be a major distraction for everyone working at Tesla, all of whom are shareholders. Being public also subjects us to the quarterly earnings cycle that puts enormous pressure on Tesla to make decisions that may be right for a given quarter, but not necessarily right for the long-term. Finally, as the most shorted stock in the history of the stock market, being public means that there are large numbers of people who have the incentive to attack the company.”
Tesla gets a boost from Bud. See Stockwinners.com
Tesla’s going private is questioned by analysts

Meanwhile, members of Tesla’s board said on Wednesday that they have “met several times over the last week” and are “taking the appropriate next steps to evaluate” Musk’s desire to take the company private. Their talks with Musk, which started last week, included “discussions as to how being private could better serve Tesla’s long-term interests, and also addressed the funding for this to occur,” the board members stated in a press release.

‘RIGHT THING TO DO’:

Commenting on the news, Jefferies’ Houchois told investors in a research note that the move “feels right” even if Musk is downplaying how supportive public markets have been. With Tesla unable to take on more debt, the analyst wonders who may fund the potential deal and end up as a new large shareholder. While the second quarter de-stressed the near-term outlook, Houchois pointed out that Tesla did not reassure about sustained demand for Model 3 at high prices and that profitability can support organic funding of investments in future products and manufacturing capacity.

He continues to think Tesla will need additional capital to fund these or risk being caught with a narrow and ageing product range within 2 years. Noting that his discounted cash flow fair value points to $300 per share, the analyst raised his price target on the stock to $360 from $250, “bridging the gap” to the $420 potential going private bid. The analyst reiterated a Hold rating on Tesla.

BUT WILL IT BE FEASIBLE?:

While Morgan Stanley analyst Adam Jonas sympathizes with Elon Musk’s argument that Tesla could be better off as a private company, he questions the feasibility of the CEO actually being able to achieve that goal.
Taking the company private would assume either that the company is on the verge of generating self-sustaining cash flows or that it can tap into a range of strategic sources of capital not previously at its disposal, said Jonas, who sees strategic value at Tesla, but thinks the “LBO math required to support [a price of] $420 is extremely aggressive.”
Tesla Model 3 named Popular Mechanics' Car of the Year
Tesla Model 3 named Popular Mechanics’ Car of the Year
The benefits of being private are outweighed by the risks of added financial leverage, which could be even more strategically limiting, added Jonas, who reiterated an Equal Weight rating and a $291 price target on Tesla shares.
Meanwhile, his peer at JPMorgan raised his price target for Tesla to $308 from $195 to reflect the possibility of the company going private. However, analyst Ryan Brinkman told investors that he still believes that Tesla’s valuation based on fundamentals alone “is worth no more than $195” per share.
The analyst added that he is not as certain as CEO Elon Musk on Tesla going private, and assigns only a 50% probability to such a scenario, while reiterating an Underweight rating on the shares.

PRICE ACTION:

In Wednesday afternoon trading, shares of Tesla have dropped 1.6% to $373.63.


STOCKWINNERS

To read timely stories similar to this, along with money making trade ideas, sign up for a membership to Stockwinners.

This article does not constitute investment advice. Each reader is encouraged to consult with his or her individual financial professional and any action a reader takes as a result of information presented here is his or her own responsibility.