Unity Buys IronSource, Shares Tumble

Unity Software, IronSource to merge in a$4.4B all-stock deal

Unity (U) and ironSource (IS) announced that they have entered into a definitive agreement under which ironSource will merge into a wholly-owned subsidiary of Unity via an all-stock deal, where each ordinary share of ironSource will be exchanged for 0.1089 shares of Unity common stock.

Once closed, current Unity stockholders will own approximately 73.5% and current ironSource shareholders will own approximately 26.5% of the combined company.

The companies’ complementary offerings create a unique end-to-end platform that allows creators to create, publish, run, monetize, and grow live games and RT3D content seamlessly.

The proposed all-stock transaction has been approved by the boards of directors of both companies, is expected to close during Unity’s fourth quarter of 2022 and is subject to customary closing conditions, and regulatory and shareholder approval.

The combined company is expected to generate a run rate of $1B in Adjusted EBITDA by the end of 2024.

Six Months Chart of Unity

Unity Cuts Guidance

Unity Software cut FY22 revenue view to $1.3B-$1.35B from $1.35B-$1.425B – FY22 consensus was for $1.47B. Cites current assessment of macro trends, product launch and competitive dynamic with the monetization business.

Unity expects second quarter financial results to be slightly higher than the top end of the guidance range provided during its first quarter earnings call.

Needham

Needham analyst Bernie McTernan downgraded ironSource (IS) to Hold from Buy after the company announced its intent to merge with Unity (U) in an all-stock transaction. The analyst notes that ironSource shares trade at a 8% discount to the implied takeout price.

McTernan adds that the companies’ complementary platform fit, plus profitability that ironSource provides, were reasons for the large premium paid and will likely prevent smaller players from making an over-the-top offer as consolidation continues to be a theme in the mobile ad-tech space.

Piper Sandler

Piper downgrades Unity to Neutral, says ironSource deal creates overhang – Piper Sandler analyst Brent Bracelin downgraded Unity (U) to Neutral from Overweight with a price target of $34, down from $55, after the company announced a deal to merge with ironSource (IS).

While stating that the pending merger “appears to be a highly strategic acquisition that not only adds material scale and product breadth to the gaming segment but could also help improve profitability,” Bracelin cut his rating based on the near-term overhang that he sees the merger creating as well as increased execution risk over the next six to nine months.

DA Davidson

DA Davidson analyst Franco Granda lowered the firm’s price target on Unity (U) to $60 from $85 and keeps a Buy rating on the shares. The company’s deal to acquire ironSource (IS) is “very attractive” due to the confluence of revenue and cost synergies, attractive valuation, and highly complementary tech stack amidst a backdrop of privacy-driven platform changes and macro pressures, though his reduced price target reflects lower broader market multiples, the analyst tells investors in a research note.

Ark Investments

Cathie Wood’s ARK Investment bought 1.02M shares of Unity on Wednesday.

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Rate Hikes are Coming!

Fed Chair confirmed a 25 bp rate hike this month

Fed’s Beige Book was released a few minutes ago. The report reiterated the economy expanded at a “modest to moderate” pace. Many Districts reported that the surge in Covid cases and severe winter weather disrupted businesses. Some firms noted a “temporary” weakening in demand in the hospitality sector to Covid.

The Beige Book reports an expanding economy

“All Districts” said supply chain issues and low inventories continued to restrain growth, especially in construction.

The overall outlook for the next 6 months remained one of stable and general optimism, though with elevated uncertainty.

Powell, FOMC Chair, Stockwinners
Fed Chief Jerome Powell

For the labor market, the widespread strong demand for labor was hampered by “equally widespread reports of worker scarcity.”

Meanwhile,  Fed Chair Powell’s testified before the Congress today. He confirmed a 25 basis points rate hike is in the cards for the March 15-16 meeting.

FOMC as policymakers look to address “indisputably” high inflation pressures. He also suggested more aggressive increases could be warranted down the road. Powell said liquidity has been functional thanks to a number of measures and facilities put in place, including swap lines and the standing repo facility.

FOMC is looking to soak up liquidity

The Fed has “institutionalized liquidity provisions” — hence the geopolitical pressures have not added stresses in the funding markets.

The markets are sharply higher across all sectors.

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Lee Enterprises receives take over offer

Alden Global Capital offers to acquire Lee Enterprises for $24.00 per share

Alden Global Capital sent the following letter to the Board of Directors of Lee Enterprises (LEE):

“Alden Global Capital is a significant investor in American newspapers, with platforms including MediaNews Group, Inc. and Tribune Publishing Company that are committed to ensuring communities nationwide have access to robust, independently minded local journalism.

Our goal is to provide valued news and information to local subscribers nationwide, led by a talented team of seasoned newspaper executives who have worked in journalism for an average of more than 30 years.

Our newspapers include The Chicago Tribune, The Denver Post, The Mercury News, The New York Daily News, The Orange County Register, The Boston Herald, The Baltimore Sun and other leading newspapers across the U.S.

As you are aware, an affiliated entity of ours owns approximately 6% of the issued and outstanding common stock of Lee Enterprises, Incorporated.

We believe that as a private company and part of our successful nationwide platforms, Lee would be in a stronger position to maximize its resources and realize strategic value that enhances its operations and supports its employees in their important work serving local communities.

Our interest in Lee is a reaffirmation of our substantial commitment to the newspaper industry and our desire to support local newspapers over the long term.

Accordingly, we propose to purchase Lee for $24.00 per share in cash, representing a substantial premium of approximately 30% to Lee’s closing share price of $18.49 on November 19th, 2021.

We have the ability to fully finance this all-cash proposal and the definitive merger agreement will not include a financing condition.

We have engaged an experienced team of advisors, including Moelis & Company as financial advisor as well as Akin Gump Strauss Hauer & Feld LLP and Olshan Frome Wolosky LLP as legal counsel, and have conducted a comprehensive review of publicly available information about Lee.

Based on our review of this information and in consultation with our counsel, we do not believe any material regulatory issues would inhibit the completion of this transaction in a timely manner.

The foregoing indicative terms are based solely on our review of publicly available information, are subject to completion of our due diligence and execution of definitive documentation acceptable to us and we reserve the right to withdraw or modify our proposal in any manner.

Following the review of targeted additional information pursuant to a mutually acceptable nondisclosure agreement, we expect that we would complete our work, including negotiation of definitive documentation, in approximately four weeks.

We are keenly interested in working constructively with the Lee Board of Directors, with the goal of getting to a successful transaction with value, speed and certainty.

Scale is critical for newspapers to ensure necessary staffing and in order to thrive in this challenging environment where print advertising continues to decline and back office operations and legacy public company functions remain bloated, thus depriving newsrooms of resources that are best used serving readers with relevant, trustworthy and engaging content.

We hope that the Board will work with us to maximize value and opportunities for all Lee stockholders and employees, and we look forward to receiving a response to this non-binding proposal in an expeditious manner.”

Lee Enterprises, founded in 1890, provides local news and information, and advertising services in the United States. The company offers print and digital editions of daily, weekly, and monthly newspapers and publications; and digital services, including Web hosting and content management for other content producers. Additionally, the company publishes 9 daily newspapers, and weekly newspapers and specialty publications.

LEE last traded at $22.92, up $4.47 on the day.

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GE to split into three companies

General Electric to form three public companies

GE announced its plan to form three industry-leading, global public companies focused on the growth sectors of aviation, healthcare, and energy, by: Pursuing a tax-free spin-off of GE Healthcare, creating a pure-play company at the center of precision health in early 2023, in which GE expects to retain a stake of 19.9 percent; and Combining GE Renewable Energy, GE Power, and GE Digital into one business, positioned to lead the energy transition, and then pursuing a tax-free spin-off of this business in early 2024.

GE to split into three

Following these transactions, GE will be an aviation-focused company shaping the future of flight.

As independently run companies, the businesses will be better positioned to deliver long-term growth and create value for customers, investors, and employees, with each benefitting from: Deeper operational focus, accountability, and agility to meet customer needs; Tailored capital allocation decisions in line with distinct strategies and industry-specific dynamics; Strategic and financial flexibility to pursue growth opportunities; Dedicated boards of directors with deep domain expertise; Business- and industry-oriented career opportunities and incentives for employees; and Distinct and compelling investment profiles appealing to broader, deeper investor bases.

GE Chairman and CEO H. Lawrence Culp, Jr. said, “At GE we have always taken immense pride in our purpose of building a world that works. The world demands-and deserves-we bring our best to solve the biggest challenges in flight, healthcare, and energy.

By creating three industry-leading, global public companies, each can benefit from greater focus, tailored capital allocation, and strategic flexibility to drive long-term growth and value for customers, investors, and employees. We are putting our technology expertise, leadership, and global reach to work to better serve our customers.”

Culp will serve as non-executive chairman of the GE healthcare company upon its spin-off.

He will continue to serve as chairman and CEO of GE until the second spin-off, at which point, he will lead the GE aviation-focused company going forward.

Peter Arduini will assume the role of president and CEO of GE Healthcare effective January 1, 2022.

Peter Arduin

Scott Strazik will be the CEO of the combined Renewable Energy, Power, and Digital business while John Slattery continues as CEO of Aviation.

Scott Strazik

GE intends to execute the spin-offs of Healthcare in early 2023 and of the Renewable Energy and Power business in early 2024.

John Slattery

The respective capital structures, brands, and leadership teams for each independent company will be determined and announced later.

Where required to do so, GE will consult with employee representatives in line with its legal obligations before any final decisions are taken.

Through the transition, GE will be able to monetize its stakes in AerCap and Baker Hughes, prioritizing further debt reduction.

Each of the three resulting independent companies will be well capitalized with investment-grade ratings.

Following the spin-off transactions, GE will retain other assets and liabilities of GE today, including run-off insurance operations.

Upon closing the Healthcare transaction, GE expects to retain a stake of 19.9 percent in the healthcare company to provide capital allocation flexibility.

GE also intends that Healthcare will issue debt securities, the proceeds of which will be used to pay down outstanding GE debt.

The transactions are not subject to bondholder consent.

The company expects to incur one-time separation, transition, and operational costs of approximately $2 billion and tax costs of less than $0.5 billion, which will depend on specifics of the transaction.

The proposed spin-offs of Healthcare and the Renewable Energy and Power business are intended to be tax-free for GE and GE shareholders for U.S. federal income tax purposes.

The transactions are subject to the satisfaction of customary conditions, including final approvals by GE’s Board of Directors, private letter rulings from the Internal Revenue Service and/or tax opinions from counsel, the filing and effectiveness of Form 10 registration statements with the U.S. Securities and Exchange Commission, and satisfactory completion of financing.

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Spectrum Brands shares soar on sale of it’s division

Spectrum Brands agrees to sell Hardware & Home Improvement segment for $4.3B

Spectrum Brands Holdings (SPB) announced it has entered into a definitive agreement to sell its HHI segment to ASSA ABLOY (ASAZY) for $4.3B in cash, which it said represents over 14 times HHI’s expected FY21 Adjusted EBITDA.

Upon closing of the transaction, Spectrum Brands expects to receive approximately $3.5B in net proceeds, subject to final tax calculations and purchase price adjustments.

Spectrum Brands expects to use the proceeds from this transaction to repay debt and reduce its gross leverage ratio to approximately 2.5x times in the near term.

Excess proceeds are expected to be allocated to invest for organic growth, fund complementary acquisitions and return capital to shareholders.

The company expects to maintain its quarterly cash dividend of 42c per common share, which will be subject to the company’s continued review from time to time.

The sale of HHI is expected to close following the receipt of certain regulatory approvals and customary closing conditions.

The results of operations of HHI will be reported as discontinued operations beginning in the fourth quarter of 2021. David Maura, CEO of Spectrum Brands, said, “I am exceedingly proud of the fact that our Hardware & Home Improvement business nearly doubled its EBITDA under Spectrum Brands’ ownership.

I am pleased to know that HHI has found a new home with a great partner, and I am confident that ASSA ABLOY will take it to its highest potential, bringing great value and innovation to consumers for generations to come.

We believe this transaction demonstrates the tremendous value of Spectrum Brands as an owner and steward of our businesses and places the Company in a strong position for the future by allowing us to further reduce our leverage levels, and enhance our capital allocation strategy.

Our remaining business will be more focused, allowing us to prioritize innovation to accelerate organic growth and pursue synergistic acquisitions to further drive value creation in Global Pet Care and Home & Garden, while continuing to look for strategic and organic ways to enhance the value of Home and Personal Care.

After the closing, we will become a more pure play consumer staples company with higher growth rates and strong margins.”

The company added: “Spectrum Brands will be a simplified business consisting of three focused business units with leading market share, strong growth opportunities and consistent performance.

The pro forma business generated $3.0B in net sales and $386 million in Adjusted EBITDA representing a 13.0% margin for the LTM period ended July 4, 2021.

Spectrum Brands will report its fourth quarter 2021 results in mid-November and expects to provide Fiscal 2022 Earnings Framework at that time.”

ASSA ABLOY AB is a Swedish company that provides door opening products, solutions, and services for the institutional, commercial, and residential markets in Europe, the Middle East, Africa, North and South America, Asia, and Oceania.  In addition, the company offers entrance automation products, services, and components, such as automatic swing, sliding, and revolving doors; industrial doors; garage doors; high-performance doors; docking solutions; hangar doors; gate automation products; components for overhead sectional doors and sensors; and high security fencings and gates. The company provides its products primarily under the ASSA ABLOY, Yale, and HID brands.

Spectrum’s Hardware & Home Improvement segment offers hardware products under the National Hardware and FANAL brands; locksets and door hardware under the Kwikset, Weiser, Baldwin, EZSET, and Tell Manufacturing brands; and plumbing products under the Pfister brand. Its Home and Personal Care segment provides home appliances under the Black & Decker, Russell Hobbs, George Foreman, Toastmaster, Juiceman, Farberware, and Breadman brands; and personal care products under the Remington and LumaBella brands.

The company’s Global Pet Care segment provides rawhide chewing, dog and cat clean-up and food, training, health and grooming, small animal food and care, and rawhide-free products under the 8IN1 (8-in-1), Dingo, Nature’s Miracle, Wild Harvest, Littermaid, Jungle, Excel, FURminator, IAMS, Eukanuba, Healthy-Hide, DreamBone, SmartBones, ProSense, Perfect Coat, eCOTRITION, Birdola, and Digest-eeze brands.

ASAZY is down 38 cents to $15.53 per share while SPB is up $15 to $94.

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Uncertainty in economy pushes lawmakers to come up with stimulus bill!

Powell says outlook for economy is ‘extraordinarily uncertain’

In prepared remarks for the Senate Committee on Banking, Housing, and Urban Affairs, Federal Reserve Chair Jay Powell said:

Jerome Powell say economy is on shaky ground

“Economic activity has continued to recover from its depressed second-quarter level. The reopening of the economy led to a rapid rebound in activity, and real gross domestic product, or GDP, rose at an annual rate of 33 percent in the third quarter.

In recent months, however, the pace of improvement has moderated.

Household spending on goods, especially durable goods, has been strong and has moved above its pre-pandemic level.

In contrast, spending on services remains low largely because of ongoing weakness in sectors that typically require people to gather closely, including travel and hospitality.

The overall rebound in household spending is due, in part, to federal stimulus payments and expanded unemployment benefits, which provided essential support to many families and individuals…

As we have emphasized throughout the pandemic, the outlook for the economy is extraordinarily uncertain and will depend, in large part, on the success of efforts to keep the virus in check…

Covid-19 has caused a global slowdown

The rise in new COVID-19 cases, both here and abroad, is concerning and could prove challenging for the next few months.

A full economic recovery is unlikely until people are confident that it is safe to re-engage in a broad range of activities.

Recent news on the vaccine front is very positive for the medium term. For now, significant challenges and uncertainties remain, including timing, production and distribution, and efficacy across different groups.”

Meanwhile lawmakers in Washington have come up with a new stimulus plan.  

A bipartisan group of U.S. lawmakers announced a $908B COVID-19 aid package aimed to breaking a monthslong deadlock between Democrats and Republicans over new emergency relief for small businesses, unemployed people, airlines, and other industries during the coronavirus crisis, Reuters’ Richard Cowan and Doina Chiacu report.

The bill has not yet been written into legislation, nor has it been embraced by the Republican White House, Democratic President-elect Joe Biden, or leaders in the Senate or House of Representatives, the authors note.

The package, however, does come with the support of a group of conservatives and moderates who believe it will appeal to a broad swath of Congress, the authors note.

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IHS Markit sold for $44 billion

S&P Global, IHS Markit to merge in all-stock deal

S&P Global (SPGI) and IHS Markit (INFO) announced they have entered into a definitive merger agreement to combine in an all-stock transaction which values IHS Markit at an enterprise value of $44B, including $4.8B of net debt.

Under the terms of the merger agreement, which has been unanimously approved by the boards of both companies, each share of IHS Markit common stock will be exchanged for a fixed ratio of 0.2838 shares of S&P Global common stock.

Upon completion of the transaction, current S&P Global shareholders will own approximately 67.75% of the combined company on a fully diluted basis, while IHS Markit shareholders will own approximately 32.25%.

Serving a global customer base across financial information and services, ratings, indices, commodities and energy, and transportation and engineering, the pro forma company will provide differentiated solutions to the workflows of many companies.

Combined, the two companies will provide solutions across data, platforms, benchmarks and analytics in ESG, climate and energy transition.

The pro forma company will have 76% recurring revenue and expects to realize 6.5%-8% annual organic revenue growth in 2022 and 2023, balanced across major industry segments.

The combined company will target 200 basis points of annual EBITA margin expansion.

The transaction is expected to be accretive to earnings by the end of the second full year post-closing.

The combined company expects to deliver annual run-rate cost synergies of approximately $480M, with approximately $390M of those expected by the end of the second year post-closing, and $350M in run-rate revenue synergies for an expected total run-rate EBITA impact of approximately $680M by the end of the fifth full year after closing.

The combined company expects to generate annual free cash flow exceeding $5B by 2023, with a targeted dividend payout ratio of 20%-30% of adjusted diluted EPS and a targeted total capital return of at least 85% of free cash flow between dividends and share repurchases.

Both companies expect to maintain their current dividend policies until the close of the transaction.

Following closing, the company will be headquartered in New York with a presence in key global markets across North America, Latin America, EMEA and Asia Pacific.

The leadership team will comprise senior leaders from both organizations.

Ewout Steenbergen, executive VP and CFO of S&P Global, will serve as CFO of the combined company.

Ewout Steenbergen will serve as CFO of the new company

The transaction is expected to close in the second half of 2021, subject to, among other things, the expiration or termination of the applicable waiting periods under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, other antitrust and regulatory approvals, and other customary closing conditions.

The transaction requires the approval of shareholders of both S&P Global and IHS Markit and is not subject to any financing conditions.

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Virtusa sold for $2 billion

Virtusa to be acquired by BPEA for $51.35 per share in cash deal valued at $2B

Baring Private Equity Asia, or BPEA, and Virtusa (VRTU) announced the companies have entered into a definitive merger agreement under which funds affiliated with BPEA will acquire all outstanding shares of common stock of Virtusa for $51.35 per share in an all-cash transaction valued at approximately $2B.

Virtusa Corporation provides digital engineering and information technology (IT) outsourcing services primarily in North America, Europe, and Asia.

Virtusa sold for $2B

The companies said in a release, “The price per share to be paid in the transaction, which was unanimously approved by the Virtusa Board of Directors, represents a premium of approximately 27 percent to the closing price of Virtusa common stock on September 9, 2020, the last trading day prior to the transaction announcement, and premiums of approximately 29 percent and 46 percent to Virtusa’s volume-weighted average prices, or VWAP, for the last 30 and 60 trading days, respectively.

In addition, the price paid implies a valuation of 16.2x Firm Value / Last Twelve Months EBITDA as of June 30, 2020. On July 20, 2020, the Virtusa Board of Directors received an unsolicited proposal from an interested party to acquire Virtusa.

BPEA buys Virtusa for $2 billion

Following receipt of the offer, consistent with the Board’s fiduciary duties to maximize shareholder value, the Board authorized the Company and its financial advisors to engage with other potential strategic buyers and financial sponsors regarding a potential acquisition of Virtusa.

As part of this process, the Company signed non-disclosure agreements with five parties and engaged with two others.

After an independent review of the alternatives available, including the value creation opportunity through continued execution of the Company’s strategic plan, the Virtusa Board unanimously determined that the all-cash premium transaction with BPEA for $51.35 per share in cash maximizes value for Virtusa’s shareholders.

The transaction, which is expected to close in the first half of 2021, is subject to the approval of Virtusa’s shareholders, customary regulatory requirements, including approval from The Committee on Foreign Investment in the United States, or CFIUS, and customary closing conditions.

The transaction is not subject to a financing condition.

The Orogen Group, which holds 108,000 shares of Virtusa Convertible Preferred Stock and whose CEO is Vikram Pandit, an independent member of the Board, has entered into a voting agreement under which it has agreed to vote all of Orogen’s Convertible Preferred Stock in favor of the transaction.

Orogen Group is a major shareholder of Virtusa

Orogen’s shares of preferred stock are convertible into 3,000,000 shares of Virtusa common stock and represent approximately 10 percent of the voting power in the Company.

The directors and executive officers of Virtusa have also entered into this voting agreement, and hold an additional approximate 5.7% of the voting power of the Company.”

VRTU closed at $40.50, last traded at $50.45.

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FDA approves Exact Sciences’ COVID-19 test

Exact Sciences receives revised EUA for COVID-19 test

A letter to Exact Sciences Laboratories (EXAS), dated August 3, posted to the site of the FDA states:

“On May 22, 2020, based on your request, the Food and Drug Administration issued a letter determining that your product met the criteria for issuance under section 564(c) of the Act to be eligible for authorization under the March 31, 2020, Emergency Use Authorization – EUA – for Molecular-based Laboratory Developed Tests for Detection of Nucleic Acid from SARS-CoV-2 for the qualitative detection of nucleic acid from SARS-CoV-2 in respiratory specimens collected from individuals suspected of COVID-19 by their healthcare provider…

On July 17, 2020, FDA received a request from you to revise the Scope of Authorization, and thus the test’s intended use as originally specified by the High Complexity LDT Umbrella EUA, to include self-collection of nasal swab specimens that are self-collected at home or in a healthcare setting by individuals using an authorized home-collection kit specified in this EUA’s authorized labeling when determined to be appropriate by a healthcare provider, and to specify that testing is limited to Exact Sciences Laboratories at two locations..

Having concluded that the criteria for issuance of this authorization under Section 564(c) of the Act are met, I am authorizing the emergency use of your product, as described in the Scope of Authorization of this letter (Section II), subject to the terms of this authorization.”

Exact Sciences is known for it’s Cologuard, colon cancer detection test

The COVID-19 test is offered through US physicians and authorized healthcare providers. The test is intended for use with patients who meet the CDC’s current guidance for evaluation of COVID-19 infection.

EXAS last traded at $92.76.

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AMC Theatres to open in July

AMC to reopen 450 U.S. theaters on July 15

Beginning July 15, AMC will resume operations of 450 U.S. theatres as part of a phased plan that is expected to bring the 600-plus U.S. theatre circuit to nearly full operation leading into the opening of MULAN on July 24 and TENET on July 31.

Adam Aron, CEO & President, AMC Theatres, said, “After a painful almost four-month hiatus due to the coronavirus, we are delighted to announce that movies are coming back to the big screen at AMC.

Our next 100 years of making smiles happen officially begin at approximately 450 theatres across the United States on July 15. I cannot emphasize enough how much care and attention to detail we have taken in developing AMC Safe & Clean, our absolute commitment to optimizing the health and safety of our theatres for our guests and associates.

Remember that there is a rumor that Amazon may buy AMC

Developed along with The Clorox Company, and current and former faculty of Harvard University’s School of Public Health, AMC Safe & Clean represents a comprehensive commitment with a broad array of tools being used in sanitizing our theatres.

Social distancing, reduced seat capacity, greatly intensified cleaning regimens, new employee health protocols, contactless ticketing and mobile food & beverage ordering are all part of AMC Safe & Clean.

So too is a new multimillion-dollar commitment to implementing high tech solutions in making AMC theatres safe, including deploying electrostatic sprayers, HEPA vacuums and upgraded MERV 13 ventilation filters.

All this is being put into motion because at AMC our single highest priority is the health and safety of our guests and associates. Both personally and professionally, I couldn’t be more excited for what this means for movie lovers.”

Disney’s Mulan to open July 24th

In the coming weeks, theatre teams will begin returning to their theatres for training on AMC’s new, enhanced cleaning and safety procedures.

AMC expects that almost all its 600-plus U.S. locations will be open and in operation for the launch of MULAN on July 24 and TENET on July 31.

The resumption of AMC operations may be adjusted if there are changes to the current theatrical release schedule, or as needed in response to local or regional conditions.

To facilitate proper social distancing within theatre auditoriums, AMC will approach seat capacity limitations in four distinct phases. But AMC will always follow all federal, state and local directives, including those that mandate a maximum capacity if lower than those envisioned in AMC’s four phases as now planned.

Tenet is scheduled for July 31 opening

The reopening schedule for specific theatres will be communicated in early July. During the weeks leading up to new major theatrical releases, AMC will be showing popular repertory titles made available from its studio partners. Those titles and ticket price information will be announced prior to reopening.

AMC closed at $5.63.

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Paypal is expected to report strong results

What to watch in PayPal earnings report

PayPal (PYPL) is scheduled to report results of its first fiscal quarter after market close on May 6, with a conference call scheduled for 5:00 pm EDT.

PayPal international business hurt by Covid -19

What to watch for:

1. OUTLOOK: On February 27, PayPal said that it had been “carefully assessing the effect of COVID-19 as conditions continue to evolve… PayPal’s business trends remain strong; however, international cross-border e-commerce activity has been negatively impacted by COVID-19.

We currently estimate the negative impact from COVID-19 to be an approximate one percentage point reduction, on both a spot and foreign currency-neutral basis, to PayPal’s year-over-year revenue growth for the first quarter, as compared to the revenue guidance provided on January 29, 2020.

PayPal domestic business remains strong, Stockwinners

Stronger performance quarter-to-date across our diversified business is partially offsetting this one percentage point negative impact. We now expect to report first quarter 2020 revenue toward the lower end of our previously guided range of $4.78B-$4.84B.”

The company also reaffirmed its Q1 GAAP and non-GAAP EPS guidance.

During the company’s last earnings call in late January, PayPal said it expected Q1 adjusted EPS between 76c-78c, and FY20 adjusted EPS of $3.39-$3.46.

2. ‘RAPID ADOPTION INCREASE’: In a research note to investors last month, Deutsche Bank analyst Bryan #Keane raised the firm’s price target on #PayPal to $147 from $127, while keeping a Buy rating on the shares.

The analyst believes the Street is underappreciating the “rapid adoption increase” toward e-commerce in the new COVID-19 world, with PayPal as one of the main beneficiaries of this trend. The surge in new online shoppers should drive “strong” net new active customers for the company, he contended.

3. TO WAIVE CERTAIN FEES, DEFER PAYMENTS: PayPal announced on March 31 a set of relief measures to help its more than 24M merchants around the world impacted by the coronavirus.

e-Commerce continues to fuel Paypal’s growth, Stockwinners

The company said it was waiving certain fees and deferring repayments on business loans for some of its most affected small business customers.

4. LENDING TO SMALL BUSINESSES: PayPal, Square (SQ), and Intuit (INTU) started lending to small businesses that couldn’t get access to COVID-19 relief funds through large U.S. banks, Bloomberg’s Olivia Rockeman and Edward Ludlow reported last month.

Fintech companies have been pushing to provide emergency loans since mid-March, over a week before the passage of a federal bill that crated the Paycheck Protection Program, the authors noted.

“The PPP program has manual checks and processes that require time, and we’re doing the best we can despite having tech that can operate at scale and efficiency,” said Brian Peters, executive director of Financial Innovation Now, an industry group whose membership includes PayPal and Square.

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Loral Space in ‘advanced talks’ to combine with Telesat

Loral Space & Communications declares $5.50 per share special dividend

Loral Space & Communications (LORL) announced that its board of directors has declared a special dividend of $5.50 per share for an aggregate dividend of approximately $170.5M.

The dividend is payable on May 28 to holders of record of Loral voting and non-voting common stock as of the close of business on May 14.

Loral declares a one time $5.50 special dividend, Stockwinners

Michael Targoff, Vice Chairman of Loral’s Board of Directors, explained that, “in an effort to maximize shareholder value, we have for some time been exploring, and are now in advanced discussions with our Canadian co-owner in Telesat, Public Sector Pension Investment Board, regarding the combination of Loral and Telesat into one public company.

Telesat to combine with Loral Space, Stockwinners

“Given the advanced state of the discussions regarding the combination transaction, it is now appropriate to pay to our shareholders a significant portion of the $243M cash distribution that we previously received from Telesat.”

“It is our intention,” Mr. Targoff continued, “to request that the Board declare an additional distribution to our shareholders in coordination with signing definitive agreements for the combination transaction.”

The company added: “Notwithstanding the advanced state of the discussions regarding the potential combination transaction, there can be no assurance as to whether or when Loral will be able to conclude the ongoing negotiations, that Loral will enter into any agreement that provides for a strategic transaction involving Telesat or Loral’s interest therein, that any strategic transaction will occur, or that any particular economic, tax, structural or other objectives or benefits with respect to any strategic transaction will be achieved.”

Loral Space & Communications Inc. offers satellite-based communications services to the broadcast, telecom, corporate, and government customers worldwide.

Telesat, formerly Telesat Canada, is a Canadian satellite communications company.  The company is now the fourth-largest fixed satellite services provider in the world. It owns a fleet of satellites, with others under construction, and operates additional satellites for other entities.

LORL is up 31% to $23.10.

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Feds inject more money into the economy

Federal Reserve to provide up to $2.3T in loans to support economy

The Federal Reserve on Thursday took additional actions to provide up to $2.3 trillion in loans to support the economy.

“Our country’s highest priority must be to address this public health crisis, providing care for the ill and limiting the further spread of the virus,” said Federal Reserve Board Chair Jerome Powell. “

Powell puts more money into the economy. Stockwinners

The Fed’s role is to provide as much relief and stability as we can during this period of constrained economic activity, and our actions today will help ensure that the eventual recovery is as vigorous as possible.”

The actions the Federal Reserve is taking today to support employers of all sizes and communities across the country will: Bolster the effectiveness of the Small Business Administration’s Paycheck Protection Program, or PPP, by supplying liquidity to participating financial institutions through term financing backed by PPP loans to small businesses.

Cash is infused into the economy at a record rate, Stockwinners

The PPP provides loans to small businesses so that they can keep their workers on the payroll.

The Paycheck Protection Program Liquidity Facility, or PPPLF, will extend credit to eligible financial institutions that originate PPP loans, taking the loans as collateral at face value; Ensure credit flows to small and mid-sized businesses with the purchase of up to $600 billion in loans through the Main Street Lending Program.

Feds put more money in PPP

The Department of the Treasury, using funding from the Coronavirus Aid, Relief, and Economic Security Act, or CARES Act, will provide $75 billion in equity to the facility; Increase the flow of credit to households and businesses through capital markets, by expanding the size and scope of the Primary and Secondary Market Corporate Credit Facilities, or PMCCF and SMCCF, as well as the Term Asset-Backed Securities Loan Facility, or TALF.

These three programs will now support up to $850 billion in credit backed by $85 billion in credit protection provided by the Treasury; and help state and local governments manage cash flow stresses caused by the coronavirus pandemic by establishing a Municipal Liquidity Facility that will offer up to $500 billion in lending to states and municipalities.

The Treasury will provide $35 billion of credit protection to the Federal Reserve for the Municipal Liquidity Facility using funds appropriated by the CARES Act.

The Main Street Lending Program will enhance support for small and mid-sized businesses that were in good financial standing before the crisis by offering 4-year loans to companies employing up to 10,000 workers or with revenues of less than $2.5 billion.

Principal and interest payments will be deferred for one year.

Eligible banks may originate new Main Street loans or use Main Street loans to increase the size of existing loans to businesses.

Banks will retain a 5 percent share, selling the remaining 95 percent to the Main Street facility, which will purchase up to $600 billion of loans.

Firms seeking Main Street loans must commit to make reasonable efforts to maintain payroll and retain workers. Borrowers must also follow compensation, stock repurchase, and dividend restrictions that apply to direct loan programs under the CARES Act.

Firms that have taken advantage of the PPP may also take out Main Street loans.

“The Federal Reserve and the Treasury recognize that businesses vary widely in their financing needs, particularly at this time, and, as the program is being finalized, will continue to seek input from lenders, borrowers, and other stakeholders to make sure the program supports the economy as effectively and efficiently as possible while also safeguarding taxpayer funds. Comments may be sent to the feedback form until April 16,” the central bank said.

To support further credit flow to households and businesses, the Federal Reserve will broaden the range of assets that are eligible collateral for TALF.

As detailed in an updated term sheet, TALF-eligible collateral will now include the triple-A rated tranches of both outstanding commercial mortgage-backed securities and newly issued collateralized loan obligations.

The size of the facility will remain $100 billion, and TALF will continue to support the issuance of asset-backed securities that fund a wide range of lending, including student loans, auto loans, and credit card loans.

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Coronavirus induced slowdown is coming!

U.S. factory orders undershot estimates in January

U.S. factory orders undershot estimates in January, with declines of -0.5% for the headline and -0.1% ex-transportation, alongside a -0.1% factory inventory drop. Note that this report reflects the period prior to the spread of Covid-19 or Coronavirus.

Covid-19 spreads across the World.

The undershoot reflected declines of -0.8% for nondurable shipments and orders, and -0.2% for nondurable inventories, after downward December revisions, with a headwind for both from energy prices.

Factory Orders Slow in January

The equipment data from the durables report were revised modestly lower, alongside slight downward tweaks in the December levels for orders, shipments, and inventories.

The data still show encouraging January gains for most of the equipment data despite downward bumps, but lean shipments and inventory data, with January pull-backs for transportation and defense after December gains.

Analysts still expect a Q4 GDP growth boost to 2.2% from 2.1% but with -$1 B revisions for both factory inventories and equipment spending.

Factory orders fall in January

Analysts expect GDP growth of 2.0% in Q1, with a -5% (was -4%) Q1 contraction rate for real equipment spending after an estimated -4.8% (was -4.4%) Q4 pace. Analysts expect a -$20 B Q1 inventory subtraction that leaves a $9 B liquidation rate, with a big hit to inventories from reduced imports from China.

Analysts assume a -0.1% (was flat) January business inventory drop after a flat (was 0.1%) figure in December.

Earlier, we had a blog regarding slow down in truck sales was flashing an economic slowdown on the horizon. Read the blog here.

Feds Panic

Fed funds futures have continued to rally as the market prices in another 25 bps of easing at the upcoming March 17, 18 FOMC, on top of this week’s 50 bp reduction.

FOMC emergency 50bp rate cut may have hurt the market.

The market is also supported from flight from risk with declines of over 2% on Wall Street in pre-open action.

The futures are now fully priced for a 25 bps easing in two weeks, to be followed by another 25 bps at the April 28, 29 FOMC with about 75% risk, while June is now seeing about a 50-50 bet for yet one more 25 bp cut at the June 9, 10 FOMC.

Jerome Powell gives in to WH pressure and cuts rates.

That would see the policy band at 0% to 0.50%. Analysts continue believe the Fed and the markets are over-reacting and analysts doubt the economic impact of COVID-19 will be as disastrous as the market’s are pricing in.

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Northview REIT sold for $4.8B

Northview REIT to be acquired by Starlight, KingSett for $36.25 per unit

Northview Apartment Real Estate Investment Trust (NPRUF) announced that it has entered into an arrangement agreement with affiliates of Starlight Group Property Holdings pursuant to which the Purchasers will acquire Northview, and the holders of Northview’s outstanding trust units will receive $36.25 per Unit in cash in a transaction valued at $4.8 billion including net debt.

Northview REIT sold for $4.8B, Stockwinners

Under the Arrangement Agreement, the Purchasers will acquire Northview, and the holders of Northview’s outstanding Units will receive $36.25 per Unit.

The Offer Price represents a total equity value of approximately $2.5 billion on a fully diluted basis and a total transaction value of approximately $4.8 billion including the assumption of net debt. The Transaction is not subject to a financing condition.

Unitholders will be able to elect to receive 100% of the Offer Price in the form of cash.

Starlight buys Northview REIT, Stockwinners

Alternatively, unitholders may elect to receive all or a portion of the Offer Price in units of a new, multi-residential fund that would own a geographically diverse portfolio of Northview properties located in six Canadian provinces and two territories.

The High Yield Fund will apply to list its units on a Canadian securities exchange concurrently with the close of the Transaction. The listing will be subject to the High Yield Fund fulfilling all of the initial listing requirements and conditions of the Exchange.

Further details with respect to the High Yield Fund will be provided in the management information circular to be mailed to Northview Unitholders. Elections to receive High Yield Fund units will be subject to proration.

All-Cash Elections will not be subject to proration. Unitholders not specifying an election will be deemed to have elected to receive the All-Cash Consideration.

Pursuant to the Arrangement Agreement, Northview has an initial 30-day go-shop period, beginning on February 19, 2020 and ending on March 20, 2020, during which it is permitted to actively solicit, evaluate and enter into negotiations with third parties that express an interest in acquiring Northview. Northview has the option to extend the Go-Shop Period by up to 30 days, in certain circumstances.

Mr. Daniel Drimmer, Chief Executive Officer and President of Starlight, has committed to vote the Units he beneficially owns, controls or directs in favour of, or tender his Units into, any all-cash superior proposal received during the Go-Shop Period, subject to certain terms and conditions, pursuant to a voting and support agreement.

The Arrangement Agreement also provides a two-tier termination fee structure such that if Northview is successful in completing a transaction pursuant to a superior proposal received during the Go-Shop Period, there will be a termination fee payable to the Purchasers of $37.7 million.

If a transaction is completed pursuant to a superior proposal received following the expiry of the Go-Shop Period, the Purchasers will be entitled to a termination fee of $88.0 million.

The Purchasers will have the right to match any superior proposals received either during or after the Go-Shop Period. The Transaction is structured as a statutory plan of arrangement under the Alberta Business Corporations Act.

Completion of the Transaction requires approval of at least 66 2/3% of the votes cast by unitholders and holders of special voting units, as well as the approval by a simple majority of votes cast by disinterested unitholders and holders of special voting units, excluding Starlight, its affiliates and any other unitholders required to be excluded under Multilateral Instrument 61-101 – Protection of Minority Security Holders in Special Transactions.

The Transaction is also subject to approval of the Alberta Court of Queen’s Bench, regulatory approvals, consents and approvals from Canada Mortgage and Housing Corporation and certain of Northview’s lenders and the satisfaction of other customary closing conditions.

Northview expects to continue to pay a monthly distribution of $0.1358 per trust unit through closing of the Transaction. The Transaction is expected to close by Q3 of 2020.

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