Investors unhappy with Bed Bath & Beyond

Investor group outlines strategic plan for Bed Bath & Beyond

Bed Bath & Beyond tumbles on competition. Stockwinners.com

Investor group outlines strategic plan for Bed Bath & Beyond , Stockwinners

Legion Partners Holdings, Macellum Advisors GP and Ancora Advisors released a presentation outlining the Investor Group’s Strategic Plan for Bed Bath & Beyond (BBBY).

The group said, “The plan outlines the path forward to modernizing Bed Bath’s retail practices and delivering a significant earnings per share improvement which could drive $5.00 per share of annual earnings – a level that Bed Bath achieved just a few short years ago.

The Investor Group’s Strategic Plan includes the following highlights: Revamp executive management – recruiting a top-flight CEO to lead Bed Bath going forward and instill a world-class winning culture.

We plan to launch a search in the near term to address this key position. Reverse sales weakness – fixing the merchandise over-assortment problem through a detailed SKU rationalization process as well as developing a merchandise architecture that will better resonate with customers.

Making the in-store experience something that drives traffic to the stores will be a major priority.

Turn around Company culture – increase focus on employee training and education to improve motivation; empower employees to better use technology and improve customer experience.

Significantly expand gross margins – improve vendor relations and drive profits by establishing a direct sourcing strategy and private label program as well as fixing mix issues created by the Company’s shift to commoditized and lower margin products.

Implement cost cutting – conducting an extensive reassessment of the increases in expenses over the last five years, including the explosion of the Company’s advertising budget, seemingly endless array of initiatives that have failed to produce meaningful results and extensive use of consultants.

Improve inventory – increasing inventory turns which would result in a substantial release of cash tied up in slow moving goods. Fix capital allocation – reviewing all non-core businesses and assessing their value as part of the business or their potential value to other parties.

Excess cash created could be applied to share or debt repurchases, both of which are significantly accretive given discounted trading levels.

Lastly, the increase in capital expenditures will be addressed. Above all, the Investor Group’s director nominees have the relevant experience and commitment to execute on these priorities and hold management accountable for delivering results.”

BBBY last traded at $16.68

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.

Alliance Data sells Epsilon for $4.4 billion

Publicis to acquire Epsilon for $4.40B in cash

Publicis (PUBGY) announced it has entered into an agreement with Alliance Data Systems (ADS) under which Publicis will acquire Alliance Data’s Epsilon business for a net purchase price of $3.95B after tax step-up – total cash consideration of $4.40B – and build a strategic partnership with Alliance Data remaining business.


Publicis to acquire Epsilon for $4.40B in cash , Stockwinners

The acquisition gives Publicis access to Epsilon’s data capabilities. The company says, for example, it has more than 250 million unique consumers identified in the U.S. The company says it can build on top of a client’s first-party data with its own assets, like behavioral and transactional data.

The Directoire, or Management Board, and the Conseil de Surveillance, or Supervisory Board, of Publicis have unanimously approved this transaction.

Alliance Data sells Epsilon for $4.4 billion, Stockwinners

Arthur Sadoun, Chairman and CEO of Publicis, said that, “Our clients are facing increasing pressure from the rise in consumer expectations, the mainstreaming of direct-to-consumer brands and new data regulations. The only response is to deliver personalized experiences at scale. They have to transform to meet this new market imperative.”

Edward Heffernan, Alliance Data Systems’ President and CEO, added that, “I’m pleased to say today’s announcement represents a trifecta win for Alliance Data, Epsilon and Publicis Groupe.

The announcement of this transaction represents the culmination of an extensive assessment of strategic options for our Epsilon business.

With this transaction, we have found what we believe to be the right home for Epsilon’s technology, data assets and associates.

Publicis Groupe will be the ideal cultural and strategic fit for Epsilon and its Conversant business, and will help drive Publicis Groupe’s own transformation in today’s data-driven digital world.

Furthermore, the unique relationships that have been cultivated between Epsilon and our other Alliance Data businesses will remain intact, and we look forward to working with Publicis Groupe to develop an even broader relationship promoting mutual and sustainable growth going forward.”

Under the terms of the agreed transaction, Publicis will acquire Epsilon for a cash consideration of $4.40B, representing a net purchase price of $3.95B after deducting the benefit of acquisition-related tax step-up.

This implies an 8.2-times multiple, based on a 2018 Adjusted EBITDA of $485M.

According to Publicis, the transaction will be double digit accretive to its headline EPS and free Cash Flow per share from year one.

Publicis also said that it “remains committed” to its 45% dividend payout ratio and will put on hold its share repurchase program in the context of this acquisition.

The transaction remains subject to customary approvals and is expected to close in Q3 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.

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.

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.

Tesaro sold for $75 per share

Tesaro to be acquired by GSK for approx. $5.1B

 

Tesaro could be sold soon, Stockwinners
Tesaro sold for $75 per share, Stockwinners

GlaxoSmithKline (GSK) and TESARO (TSRO) announced that the companies have entered into a definitive agreement pursuant to which GSK will acquire TESARO, an oncology-focused company based in Waltham, Massachusetts, for an aggregate cash consideration of approximately $5.1B.

The proposed transaction significantly strengthens GSK’s pharmaceutical business, accelerating the build of GSK’s pipeline and commercial capability in oncology. The acquisition price of $75 per share in cash represents a 110% premium to TESARO’s 30 day Volume Weighted Average Price of $35.67 and an aggregate consideration of approximately $5.1B including the assumption of TESARO’s net debt.

Zejula’s revenues in its current approved indication as second-line maintenance treatment for ovarian cancer were $166 million for the 9 months ended 30 September 2018.

GSK expects the acquisition of TESARO and associated R&D and commercial investments will impact Adjusted EPS for the first two years by mid to high single digit percentages, reducing thereafter with the acquisition expected to start to be accretive to Adjusted EPS by 2022. GSK’s guidance for full-year 2018 Adjusted EPS growth remains unchanged at 8 to 10% at CER.

GSK continues to expect to deliver on its previously published Group Outlooks to 2020, but following the acquisition of TESARO now expects Adjusted EPS growth at CER for the period 2016-2020 to be at the bottom end of the mid to high single digit percentage CAGR range.

GSK confirms no change to its current dividend policy and continues to expect to pay 80p in dividends for 2018. GSK expects to fund the acquisition from cash resources and drawing under a new acquisition facility.

Please click here and read our blog when we predicted this 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.

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.


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.

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.


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.

Datawatch sold for $176 million

Altair to acquire Datawatch for $13.10 per share

Datawatch sold for $176 million, Stockwinners
Datawatch sold for $176 million, Stockwinners

Altair (ALTR) and Datawatch (DWCH) announced the signing of a definitive merger agreement under which Altair has agreed to acquire Datawatch. Under the terms of the agreement, Altair will pay $13.10 per share in cash, representing a fully diluted equity value of approximately $176M.

The transaction was unanimously approved by the boards of both companies.

Under the terms of the definitive merger agreement, Altair will commence a tender offer within ten business days to acquire all of the outstanding shares of common stock of Datawatch for $13.10 per share in cash.

This represents a 35% percent premium to the closing price of Datawatch’s common stock on November 2.

The tender offer is subject to customary closing conditions, including the tender of at least a majority of the outstanding shares of Datawatch common stock and the expiration or early termination of the applicable waiting period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976.

Following the closing of the tender offer, a wholly-owned subsidiary of Altair will merge with and into Datawatch, with each share of Datawatch common stock that has not been tendered being converted into the right to receive the same $13.10 per share in cash offered in the tender offer.

The transaction is anticipated to close in Q4.

Datawatch Corporation designs, develops, markets, and distributes business computer software products to self-service data preparation and visual data discovery markets in the United States and internationally.

Altair Engineering Inc. provides enterprise-class engineering software worldwide. The company operates through two segments, Software and Client Engineering Services. Its integrated suite of multi-disciplinary computer aided engineering software optimizes design performance across various disciplines, including structures, motion, fluids, thermal management, electromagnetics, system modeling and embedded systems, as well as provides data analytics and true-to-life visualization and rendering.


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.

LSC Communications sold for $1.4 billion

Quad/Graphics to acquire LSC Communications in all-stock deal valued at $1.4B

LSC Communications sold for $1.4 billion, Stockwinners
LSC Communications sold for $1.4 billion, Stockwinners

Quad/Graphics (QUAD) and LSC Communications (LKSD) announced that their boards of directors have approved a definitive agreement whereby Quad will acquire LSC Communications in an all-stock transaction valued at approximately $1.4B, including the refinancing of LSC Communications’ debt.

As of September 30, 2018, the combined company would have had annual revenue of approximately $8B.

The deal is expected to close in mid-2019, and be accretive to earnings, excluding non-recurring integration costs.

Net synergies are expected to be approximately $135M, and will be achieved in less than two years and result in substantial additional Free Cash Flow generation.

Under the terms of the agreement, LSC Communications shareholders will receive 0.625 shares of Quad Class A common stock for each LSC Communications share they own, representing approximately 29 percent total economic ownership of the combined company and approximately 11 percent of the vote of the combined company.

Based on the closing share prices of both companies on October 30, 2018, the merger consideration represents a premium of 34 percent to LSC Communications shareholders.

Quad shareholders will continue to own Class A and Class B shares, representing approximately 71 percent total economic ownership of the combined company and approximately 89 percent total voting power of the combined company.

The transaction supports Quad’s long-term strategic vision by preserving the Quadracci Family leadership and voting control in the company. Quad expects the transaction to be accretive to earnings, excluding non-recurring integration costs.

Net synergies are expected to be approximately $135 million, and will be achieved in less than two years, through the elimination of duplicative functions, capacity rationalization, greater operational efficiencies and greater efficiencies in supply chain management that will also benefit our clients.

Joel Quadracci will be Chairman, President and Chief Executive Officer of the combined company.

Quad will expand its board of directors to include two members from LSC Communications’ existing board.

The transaction is expected to close in mid-2019, subject to approval by Quad and LSC Communications shareholders, regulatory approval and other customary closing conditions.

The Quadracci Family Voting Trust, holder of approximately 64 percent of the voting power of Quad’s outstanding common stock, has entered into a voting agreement with LSC Communications pursuant to which it will vote in favor of the issuance of shares in connection with 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.

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.


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.

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.


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 jumps on results, upgrades

Tesla rises as analysts digest first profit in two years

Tesla Model 3 named Popular Mechanics' Car of the Year
Tesla Model 3 named Popular Mechanics’ Car of the Year

Shares of Tesla (TSLA) are on the rise after the company reported third quarter results, with a net profit of $312M, the electric-vehicle maker’s largest ever.

Tesla also said deliveries of its Model 3 grew to 56,000, adding that it “was the best-selling car in the U.S. in terms of revenue and the 5th best-selling car in terms of volume.”

Following the announcement, Wolfe Research analyst Dan Galves upgraded Tesla to Outperform, while several other firms raised their targets on the stock. Nonetheless, some Wall Street analysts remain bearish on Tesla, telling investors to “not get used to [this quarter’s profitability.]”

stockwinners.com/blog
Tesla jumps on results, upgrades – See Stockwinners Market Radar

RESULTS

Last night, Tesla reported third quarter adjusted earnings per share of $2.90 and revenue of $6.82B, both above consensus of (19c) and $6.3B, respectively.

The company said that, “Model 3 quarterly production and deliveries should continue to increase in the fourth quarter compared to the third quarter.

Our target of delivering 100,000 Model S and X vehicles this year remains unchanged.

We expect gross margin for Model 3 to remain stable in the fourth quarter as manufacturing efficiencies and fixed cost absorption offset a slightly lower trim mix and the negative impact of tariffs from Chinese sourced components.

https://stockwinners.com/blog/
Stockwinners.com,Tesla jumps on results, upgrades

For all three vehicles, additional tariffs in the fourth quarter on parts sourced from China will impact our gross profit negatively by roughly $50M […] The third quarter of 2018 was a truly historic quarter for Tesla.

Model 3 was the best-selling car in the U.S. in terms of revenue and the 5th best-selling car in terms of volume.

With average weekly Model 3 production through the quarter, excluding planned shutdowns, of roughly 4,300 units per week, we achieved GAAP net income of $312M.”

WOLFE RESEARCH SAYS BUY TESLA

In a post-earnings research note, Wolfe Research’s Galves upgraded Tesla to Outperform from Peer Perform, with a $410 price target.

Saying that “Tesla became a real company,” the analyst argued that third quarter non-GAAP earnings of $2.90 and free cash flow of $881M are proof that Tesla’s earnings power is likely to outperform traditional automakers.

Management’s focus on cost and capital efficiency boosted Galves’ confidence that priorities have changed from unit growth at all cost to profitable growth and self-funding.

Further, the analyst argued that demand and margin outlook appear “very positive” and the fact that 50% of trade-ins on the Model 3 are non-luxury vehicles indicates the buyer base is likely bigger than expected.

Also bullish on the stock, Piper Jaffray analyst Alexander Potter raised his price target for Tesla to $396 from $389 as he believes the company reported a “milestone quarter,” with margins, earnings, and cash flow easily beating expectations.

While there is a still a lot of “hair” on the company, bears will struggle to poke holes in the results, Potter contended, adding that Tesla appears increasingly likely to achieve financial self-sufficiency.

The analyst reiterated an Overweight rating on Tesla shares. Oppenheimer, JMP Securities, and RBC Capital also raised their price targets on the stock.

‘DON’T GET USED TO IT’

Still bearish on Tesla shares, UBS analyst Colin Langan reiterated a Sell rating on the stock in a research note titled “Profitability at last, just don’t get used to it.”

The analyst continues to expect Model 3 average selling prices to decline into fourth quarter and 2019 as Tesla begins delivering the new $46,000 mid-range model.

Voicing a similar opinion, Needham analyst Rajvindra Gill told investors that while Tesla posted its first quarterly profit and positive free cash flow in over two years thanks to higher-margin Model 3 sales, he remains concerned over margin in the first half of 2019 given an “unfavorable mix shift of Model 3s, decline in ZEV sales, service margins stay in -35%-40% and pricing pressure on Model S/X.” Gill also questions the speed and profitability of Tesla’s production of a $45K car, “not to mention the $35K version”, in order to match its backlog of orders.

The analyst reiterated an Underperform rating on the shares.

PRICE ACTION

In Thursday’s trading, shares of Tesla have gained about 5% to $302.46.


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.