ForgeRock sold for $2.3 billion

ForgeRock to be acquired by Thoma Bravo for $23.25 per share in cash

ForgeRock announced that it has entered into a definitive agreement to be acquired by Thoma Bravo for $23.25 per share, in an all-cash transaction valued at approximately $2.3B.

The offer represents a premium of approximately 53% over ForgeRock’s closing share price on October 10, the last full trading day prior to the transaction announcement, and a premium of approximately 44% over the volume weighted average price of ForgeRock stock for the 30 days ending October 10.

The transaction, which was unanimously approved by the ForgeRock board of directors, is currently expected to close in the first half of 2023, subject to customary closing conditions, including approval by ForgeRock’s shareholders and the receipt of required regulatory approvals.

ForgeRock, Inc. operates a digital identity platform to secure, manage, and govern the identities of customers, employees, partners, application programing interfaces (APIs), microservices, devices, and the Internet of things worldwide. It offers identity management products to automate onboarding/registration and progressive profiling, identity lifecycle and relationship management, identity provisioning and synchronization, user self-service, personalization, delegation, and privacy and consent management. 

Upon completion of the transaction, ForgeRock’s common stock will no longer be publicly listed and ForgeRock will become a privately held company.

FORG is up $7.38 to $22.53.

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KnowBe4 receives buyout offer!

KnowBe4 confirms receipt of $24 per share proposal from Vista

KnowBe4 (KNBE) confirmed the receipt of a non-binding proposal from Vista Equity Partners to acquire all outstanding shares of the Company for $24 per share in cash.

KnowBe4, Inc. engages in the development, marketing, and sale of its Software-as-a-Service-based security awareness platform. The company provides a platform incorporating security awareness training and simulated phishing with analytics and reporting that helps organizations manage the ongoing problem of social engineering.

The company also offers Security Coach, a solution to address human behavior risks through human detection and response; and PasswordIQ that would be used to mitigate risk related to password hygiene issues, such as weak or breached passwords. It serves its customers directly through inside sales teams for enterprise and small and medium businesses, as well as indirectly through channel partners and managed service providers.

The proposal represents a 39% premium to KnowBe4’s closing price on September 16, 2022.

The Company’s Board of Directors regularly considers opportunities to enhance value for its stockholders.

In response to an inquiry from Vista, the Board formed a special committee of the Board, comprised solely of independent directors, to engage with Vista and take other actions that it deems appropriate, with the assistance of independent financial and legal advisors.

Consistent with its mandate, and in consultation with its legal and financial advisors, the Special Committee will carefully review the Vista proposal and other potential value creation opportunities to determine the course of action that it believes is in the best interests of KnowBe4 and its stockholders.

KNBE is up 29% to $22.30.

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Spectrum Brands shares tumble on DOJ action

DOJ sues to block Assa Abloy deal to buy Spectrum Brands unit

On September 8th, 2021, 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. Click here to read our blog.

The U.S. Department of Justice filed a civil antitrust lawsuit today to block Assa Abloy’s (ASAZY) proposed $4.3B acquisition of the Hardware and Home Improvement division of its rival, Spectrum Brands Holdings (SPB).

Assa and Spectrum are two of the three largest producers of residential door hardware in the concentrated, $2.4 billion U.S. industry, the DOJ said.

The complaint, filed in the U.S. District Court for the District of Columbia, alleges that the merger would eliminate important head-to-head competition between ASSA ABLOY and Spectrum, risking higher prices, lower quality, reduced innovation and poorer service in the sale of at least two types of residential door hardware: premium mechanical door hardware and smart locks.

The complaint, which seeks to enjoin the transaction under Section 7 of the Clayton Act, alleges that ASSA ABLOY and Spectrum have competed for years to be leaders in the U.S. markets for premium mechanical door hardware and for smart locks.

The proposed transaction would transform these markets, giving Assa “a near-monopoly in premium mechanical door hardware and more than a 50% share in smart locks, leaving only one significant competitor,” the DOJ said.

SPB is down 10% to $52.85.

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Investor takes position in Disney, seeks changes

Third Point lays out case for Disney to spin off ESPN

Third Point’s Dan Loeb has sent a letter to Disney CEO Bob Chapek to outline recommendations.

ESPN

Third Point said, “ESPN is a great business that currently generates significant free cash flow, enabling the Company to pay down debt and increase strategic options down the line.

In addition, we realize ESPN content is part of the bundle being offered to subscribers of other products, both in Disney’s Linear and DTC businesses.

Despite these advantages, we believe that a strong case can be made that the ESPN business should be spun off to shareholders with an appropriate debt load that will alleviate leverage at the parent Company.

The important questions to ask before commencing a spinoff are: Will both companies be better off? Will the needs of customers be better served? Can any synergies that exist between the two companies be replicated by contractual arrangements? Will the transaction contribute to creating long-term value for Disney shareholders?

While acknowledging that broader capital structure considerations may be at issue, we believe that the answer to all four of these questions is affirmative.

Employees of ESPN could be compensated in a security directly tied to their performance.

ESPN would have greater flexibility to pursue business initiatives that may be more difficult as part of Disney, such as sports betting.

Customers of ESPN and sports leagues would be better served by a focused management team driving a leadership position in sports distribution. We believe that most arrangements between the two companies can be replicated contractually, in the way eBay spun PayPal while continuing to utilize the product to process payments.

Disney CEO Bob Chapek

Lastly, as a result of this transaction, both companies will attract shareholders seeking the respective qualities of each company, allowing the Disney parent multiple to expand as its earnings growth rate increases and the remaining business is no longer haunted by the specter of cord cutting. While I understand you have considered this idea in the past, we urge the Company to retain advisors to reassess the desirability of the transaction in the current environment, recognizing that a key determination would be the proforma capitalizations, cashflow and credit profile of both companies.”

HULU

Third Point said, “We believe that integrating Hulu directly into the Disney+ DTC platform will provide significant cost and revenue synergies, ultimately reigniting growth in the domestic market.

Daniel Loeb, Third Point

We urge the Company to make every attempt to acquire Comcast’s remaining minority stake prior to the contractual deadline in early 2024.

We believe that it would even be prudent for Disney to pay a modest premium to accelerate the integration but are cognizant that the seller may have an unreasonable price expectation at this time while noting the seller has already made the decision to prematurely remove their own content from the platform. We know this is a priority for you and hope there is a deal to be had before Comcast is contractually obligated to do so in about 18 months.”

COST CUTTING

Third Point said, “Disney’s costs are among the highest in the industry, and we believe Disney significantly underearns relative to its potential. We urge the Company to embark on a cost cutting program that addresses both margins and the disposal of excess underperforming assets.”

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JetBlue buys Spirit Airlines

JetBlue to acquire Spirit at $33.50 per share in cash or $7.6B enterprise value

JetBlue Airways (JBLU) and Spirit Airlines (SAVE) announced that their boards of directors have approved a definitive merger agreement under which JetBlue will acquire Spirit for $33.50 per share in cash, including a prepayment of $2.50 per share in cash payable upon Spirit stockholders’ approval of the transaction and a ticking fee of $0.10 per month starting in January 2023 through closing, for an aggregate fully diluted equity value of $3.8B and an adjusted enterprise value of $7.6B.

The transaction consideration of $33.50 per share implies an aggregate fully diluted equity value of approximately $3.8 billion and an adjusted enterprise value of $7.6 billion.

JetBlue expects to achieve $600M-700M in net annual synergies once integration is complete, driven in large part by expanded customer offerings resulting from the greater breadth and depth of the combined network.

The combined company is projected to have annual revenues of approximately $11.9 billion based on 2019 revenues. JetBlue expects the transaction to be significantly accretive to earnings per share in the first full year following closing.

JetBlue expects to maintain balance sheet flexibility with post-transaction leverage of 3.0-3.5x, well inside historical levels, and to continue its deleveraging trajectory as it captures synergies.”

“The completion of the acquisition is subject to customary closing conditions, including receipt of required regulatory approvals and approval of Spirit’s stockholders.

The companies expect to conclude the regulatory process and close the transaction no later than the first half of 2024.

The four largest carriers control more than 80% of the market. Creating a low-fare, customer-centric challenger with size and scale is the best opportunity to disrupt legacy carrier pricing in the current landscape.

Even as the fifth-largest carrier, JetBlue, with Spirit, would have only 9% market share, compared to 13% for the fourth-largest airline and 23% for the largest carrier.

After the combination and with its committed upfront divestitures, the largest seat share a combined JetBlue-Spirit will have in any of its largest metro areas is 40%, compared to the 57-91% share legacy carriers have in their largest metro areas.

The airlines will continue to operate independently until after the transaction closes and their respective loyalty programs remain unchanged and customer accounts will not be affected in any way.

Following completion of the acquisition, the combined airline will be based in New York and be led by Robin Hayes. As previously announced, Spirit has terminated its prior merger agreement with Frontier. JetBlue has terminated its previously announced all-cash tender offer to acquire Spirit common stock.”

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American Campus sold for $12.8B

American Campus to be acquired by Blackstone for $65.47 per share in cash

American Campus Communities (ACC) announced that it has entered into a definitive agreement under which Blackstone (BX) Core+ perpetual capital vehicles, primarily comprised of Blackstone Real Estate Income Trust, alongside Blackstone Property Partners, will acquire all outstanding shares of common stock of ACC for $65.47 per fully diluted share in an all-cash transaction valued at approximately $12.8B, including the assumption of debt.

American Campus Communities, Inc. is the largest owner, manager and developer of high-quality student housing communities in the United States. The company is a fully integrated, self-managed and self-administered equity real estate investment trust (REIT) with expertise in the design, finance, development, construction management and operational management of student housing properties.

The purchase price represents a premium of 22% to the 90-calendar day volume-weighted average share price ending April 18, a premium of 30% over the closing stock price of February 16, the date immediately prior to the company disclosing receipt of an indication of willingness to offer to acquire the company, and a 14% premium to yesterday’s closing price.

The transaction has been unanimously approved by ACC’s board of directors and the independent Special Committee of ACC’s board and is expected to close in the third quarter of 2022, subject to approval by ACC’s shareholders and other customary closing conditions.

As a condition to the transaction, ACC has agreed to suspend payment of its quarterly dividend, effective immediately.

ACC shares are up $7.25 to $64.83.

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Crane to split into two companies!

Crane plans to split into two independent public companies

Crane (CR) announced that its Board of Directors has unanimously approved a plan to pursue a separation into two independent, publicly-traded companies to optimize investment and capital allocation, accelerate growth, and unlock shareholder value.

Upon completion, Crane Co.’s shareholders will benefit from ownership in two focused and simplified businesses that are both leaders in their respective industries and well-positioned for continued success:

Crane Co. will be a leading global provider of mission-critical, highly engineered products and solutions, with differentiated technology, respected brands, and leadership positions in its markets.

After the separation, Crane Co. will include the Aerospace & Electronics and Process Flow Technologies businesses.

This year, these businesses are expected to generate approximately $1.9B in annual sales with a pre-corporate Adjusted EBITDA margin of approximately 18.5%.

The company will be well-positioned to accelerate organic growth in its large and attractive end markets, benefit from favorable secular trends, and apply its proven processes to drive growth through new product development and commercial excellence.

Richard Teller Crane, Founder of Crane Co.

Crane Co. is expected to have a strong, well-capitalized balance sheet underpinning a capital deployment strategy focused on supporting the company’s organic and inorganic strategic growth objectives, while providing a dividend in-line with peers.

Crane Co. will be led by Max Mitchell, who will continue to serve as President and Chief Executive Officer, with Rich Maue continuing to serve as Chief Financial Officer.

The company intends to continue to be listed on the NYSE under its current ticker symbol, “CR”.

Crane NXT will be a premier Industrial Technology business with substantial global scale, a best-in-class margin profile, and strong free cash flow generation.

This year, the Payment and Merchandising Technologies business that will become Crane NXT is expected to achieve approximately $1.4 billion in sales with a pre-corporate Adjusted EBITDA margin of approximately 28%.

In addition to its market leading brands, Crane NXT will differentiate itself through its technology leadership, positioning it to leverage long-term secular drivers including automation, security and productivity, across several high-growth adjacent markets.

After the separation, Crane NXT will be positioned to drive earnings growth through continued investment in the business and value-enhancing bolt-on acquisitions. Its balance sheet and strong free cash flow will also allow it to support a robust and differentiated level of capital return to shareholders that is expected to include a competitive dividend.

Crane NXT’s shares are expected to be listed on the NYSE under the ticker symbol “CXT”. A process is currently underway to identify Crane NXT’s chief executive, including evaluation of both internal and external candidates.

The executives currently leading Crane’s PMT business will continue to serve in senior positions with Crane NXT.

The separation is expected to occur through a tax-free distribution of the Aerospace & Electronics and Process Flow Technologies businesses to the Company’s shareholders.

Payment & Merchandising Technologies will be renamed Crane NXT concurrent with the separation, and the Aerospace & Electronics and Process Flow Technologies businesses will retain the Crane Co. name.

Upon completion of the separation, shareholders will own 100% of the equity in both of the publicly traded companies.

The separation is expected to be completed within approximately 12 months of this announcement, subject to the satisfaction of customary conditions and final approval of the separation by Crane Co.’s Board of Directors. Shareholder approval is not required.

Crane Co. will maintain its current capital deployment policies until the separation is completed.

CR is up $2.50 to $112.63.

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Nielsen sold for $16 billion

Brookfield Business Partners enters partnership to acquire Nielsen in $16B deal

Brookfield Business Partners (BBU) announced it has entered into a partnership to acquire Nielsen Holdings plc (NLSN) in an all-cash transaction valued at approximately $16B.

Nielsen Holdings operates as a measurement and data analytics company worldwide. The company provides viewership and listening data, and analytics principally to media publishers and marketers, and advertising agencies for television, computer, mobile, CTV, digital, and listening platforms. 

The companies said, investment highlights include, “Market-leading position. Nielsen is a global leader in audience measurement and a trusted partner to its customers across the entire media ecosystem.

The Company has more than 50 years of statistically significant historical data and its scale is unmatched by competitors.

Nielsen’s measurement data underpins the $100+ billion video and audio advertising markets and its measurement data is the established industry standard by which video and audio advertising spend transacts. Resilient performance and outlook.

The Company’s history of consistent growth is driven by its valued offering and longstanding customer relationships.

Nielsen’s scale and existing market position should support the Company’s ability to consistently grow its measurement business.

Value creation potential. Nielsen is well positioned to be the leader in cross-media measurement as audience viewership behavior continues to evolve.

The development and adoption of Nielsen ONE, Nielsen’s cross-media measurement service, will deliver a unified measure of consumer viewership across all media and support the Company’s growth strategy.”

Brookfield will invest approximately $2.65B by way of preferred equity, convertible into 45% of Nielsen’s common equity. Brookfield will be actively involved in the Company’s governance.

Brookfield Business Partners expects to invest approximately $600M, and the balance of Brookfield’s investment will be funded from institutional partners.

Prior to or following closing, a portion of Brookfield Business Partners’ commitment may be syndicated to other institutional investors.

The transaction is subject to customary closing conditions and is expected to close in the second half of 2022.

NLSN is up $4.58 to $26.81.

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Alleghany sold for $11.6 billion

Berkshire Hathaway to acquire Alleghany for $848.02 per share

Berkshire Hathaway (BRK.A) and Alleghany (Y) jointly announced they have entered into a definitive agreement under which Berkshire Hathaway will acquire all outstanding Alleghany shares for $848.02 per share in cash.

Alleghany Corporation provides property and casualty reinsurance and insurance products in the United States and internationally. 

The transaction, which was unanimously approved by both boards of directors, represents a total equity value of approximately $11.6B.

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Buffett buys Alleghany

The acquisition price represents a multiple of 1.26 times Alleghany’s book value at December 31, 2021, a 29% premium to Alleghany’s average stock price over the last 30 days and a 16% premium to Alleghany’s 52-week high closing price.

The transaction is expected to close in the fourth quarter of 2022, subject to customary closing conditions, including approval by Alleghany stockholders and receipt of regulatory approvals.

Alleghany will continue to operate as an independent subsidiary of Berkshire Hathaway after closing.

Chairman Jefferson Kirby, who controls 2.5% of Alleghany common shares, intends to vote his shares for the transaction.

Under the terms of the definitive merger agreement, Alleghany may actively solicit and consider alternative acquisition proposals during a 25-day “go-shop” period.

Alleghany has the right to terminate the merger agreement to accept a superior proposal during the go-shop period, subject to the terms and conditions of the merger agreement.

There can be no assurances that the “go-shop” process will result in a superior proposal, and Alleghany does not intend to communicate developments regarding the process unless and until Alleghany’s board of directors makes a determination requiring further disclosure.

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Investor demands replacing IAA CEO

Ancora urges IAA to replace CEO or run sale process

IAA, Inc. (IAA) operates a digital marketplace that connects vehicle buyers and sellers. The company’s platform facilitates the marketing and sale of total loss, damaged, and low-value vehicles for a range of sellers. It provides buyers with various bidding/buying digital channels, vehicle merchandising, evaluation services and online bidding tools, and replacement part inventory. 

IAA operates a car auction platform

Ancora Holdings Group, which beneficially owns approximately 2% of IAA’s outstanding common stock, sent a letter to the company’s board which stated in part,

“Given IAA’s underperformance and the fact that the Company’s market capitalization has plummeted by roughly 40% since reporting third quarter earnings in November 2021, the status quo cannot persist. We believe there are two strategic actions for the Board of Directors to consider at this point:

1. Replace Mr. Kett with a new CEO who is more dynamic and equipped to reinvigorate the organization. In our view, IAA needs a leader with a vision for achieving organic market share growth, improved margins and effective capital allocation.

2. If the Board is unwilling to act with urgency to improve leadership, it should run a formal sale process to sell the Company. ”

IAA salvage auction lot

The activist added, “In light of IAA’s attractive attributes and business model, we anticipate the Company would obtain a significant premium relative to its current share price if taken private by one of the many well-capitalized potential acquirers in the marketplace.

Ancora owns 5% of shares or $250M

We estimate a takeout price of $55 or more is achievable based on a trailing 12-month EBITDA of 15.5x and an analysis of peers’ valuations and precedent transactions.

2 At this point, a sale seems like the best risk-adjusted path forward for stockholders.”

IAA is up $2.51 to $38.83.

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Epam shares tumble on Ukraine exposure

 Epam Systems withdraws Q1, FY22 guidance due to events in Ukraine

EPAM Systems (EPAM) announced it is withdrawing its first quarter and 2022 financial outlook due to heightened uncertainties and regional impacts resulting from military actions in Ukraine.

EPAM Systems, Inc. provides digital platform engineering and software development services in North America, Europe, Russia, Belarus, Kazakhstan, Ukraine, Georgia, East Asia, Southeast Asia, and Australia. 

“EPAM’s highest priority is the safety and security of its employees and their families in Ukraine. The company is proactively working to relocate its employees to lower risk locations in Ukraine and neighboring countries.

The company is executing business continuity plans and accelerating hiring across multiple locations in Central and Eastern Europe, Latin America, and India.

EPAM continues to operate productively in more than 40 countries and is committed to providing consistent high-quality delivery in all our geographies around the world,” the company said.

Shares of the Newton Pennsylvania company are down 46% to $207.75. Stock has a 52-week trading range of $198.25 to $725.40. Today’s loss took the shares back to 2020 levels, wiping out two years of gains.

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U.S. Ecology sold for $2.2 billion

Republic Services to acquire US Ecology for $48.00 per share in cash

Republic Services (RSG) and US Ecology (ECOL) have entered into a definitive agreement under which Republic Services will acquire all outstanding shares of US Ecology for $48 per share in cash, representing a total value of approximately $2.2B including net debt of approximately $0.7B.

US Ecology, Inc. provides environmental services to commercial and government entities in the United States, Canada, Europe, the Middle East, Africa, Mexico, internationally. It operates through three segments: Waste Solutions, Field Services, and Energy Waste. It offers specialty waste management services, including treatment, disposal, beneficial re-use, and recycling of hazardous, non-hazardous, and other specialty waste at company-owned treatment, storage, and disposal facilities, as well as wastewater treatment services.

Republic Services, Inc. provides non-hazardous solid waste collection, transfer, disposal, recycling, and environmental services in the United States. 

The transaction is not subject to a financing condition.

Republic Services intends to finance the transaction using existing and new sources of debt.

Following completion of the transaction, Republic Services expects to maintain a strong balance sheet and solid investment-grade credit rating.

The company plans net debt-to-EBITDA, as defined in our credit agreement, to return back below 3x within 18 months of closing the transaction.

The transaction was unanimously approved by the boards of directors of both companies and is expected to close by the end of the second quarter, subject to the satisfaction of customary closing conditions, including receipt of regulatory approvals and approval by holders of a majority of the outstanding shares of US Ecology’s common stock.

ECOL is up $19.28 to $47.48. RSG is up 24 cents to $127.19.

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Frontier buys Spirit Airlines

Frontier, Spirit to combine in deal that implies $25.83 per Spirit share

Spirit Airlines (SAVE) and Frontier Group Holdings (ULCC) announced a definitive merger agreement under which the companies will combine, creating America’s most competitive ultra-low fare airline.

Under the terms of the merger agreement, which has been unanimously approved by the boards of directors of both companies, Spirit equity holders will receive 1.9126 shares of Frontier plus $2.13 in cash for each existing Spirit share they own.

This implies a value of $25.83 per Spirit share at Frontier’s closing stock price of $12.39 on February 4, 2022, representing a premium of 19% over the February 4, 2022, closing price of Spirit, and a 26% premium based on the 30 trading-day volume-weighted average prices of Frontier and Spirit.

The transaction values Spirit at a fully diluted equity value of $2.9B, and a transaction value of $6.6B when accounting for the assumption of net debt and operating lease liabilities.

Upon closing of the transaction, existing Frontier equity holders will own approximately 51.5% and existing Spirit equity holders will own approximately 48.5% of the combined airline, on a fully diluted basis, providing both Frontier and Spirit equity holders with substantial upside potential.

Spirit Route Map

The Board of Directors for the new airline will be comprised of 12 directors (including the CEO), seven of whom will be named by Frontier and five of whom will be named by Spirit.

Bill Franke, CEO of the Indigo Partners, will be Chairman of the Board of the combined company.

Frontier Route Map

The merger is expected to close in the second half of 2022, subject to satisfaction of customary closing conditions, including completion of the regulatory review process and approval by Spirit stockholders.

Frontier’s controlling stockholder has approved the transaction and related issuance of shares of Frontier common stock upon signing of the merger agreement.

The combined company’s management team, branding and headquarters will be determined by a committee led by Franke prior to close.

Separately, Spirit reported Q4 revenue $987.56M, consensus $963.15M.

“Our fourth quarter 2021 results came in better-than-expected, despite the negative impact from Omicron-related flight disruptions, primarily due to very strong demand over the peak December holiday period. I want to thank the entire Spirit team for their professionalism and commitment to providing excellent service to our Guests,” said Ted Christie, Spirit’s president and CEO.

Ted Christie, Spirit’s president and CEO

Spirit Airlines is up 15.9%, or $3.46 to $25.20. Frontier Group is up 14 cents to $12.81.

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Citrix Systems sold for $104 per share

Citrix to be acquired by Vista, Evergreen in $16.5B all-cash transaction

Citrix (CTXS) announced that it has entered into a definitive agreement under which affiliates of Vista Equity Partners, a global investment firm focused exclusively on enterprise software, data and technology-enabled businesses, and Evergreen, an affiliate of Elliott, will acquire Citrix in an all-cash transaction valued at $16.5B, including the assumption of Citrix debt.

Under the terms of the agreement, Citrix shareholders will receive $104.00 in cash per share.

The per share purchase price represents a premium of 30% over the company’s unaffected 5-day VWAP as of December 7, 2021, the last trading day before market speculation regarding a potential transaction, and a premium of 24% over the closing price on December 20, 2021, the last trading day prior to media reports regarding a potential bid from Vista and Evergreen.

In connection with the transaction, Vista and Evergreen intend to combine Citrix and Tibco Software, one of Vista’s portfolio companies.

Citrix makes software that workers use to log onto to their corporate programs virtually, a category of product extensively relied upon during the pandemic as businesses sought quick ways to keep remote workforces connected to central operations. Many are now planning permanent hybrid setups for home and office working, which is expected to grow the market for tools that help make this seamless.

As part of the transaction, Vista and Evergreen plan to combine Citrix with Tibco Software, an enterprise data management firm that’s one of Vista’s portfolio companies. The combination will create one of the world’s largest software providers, serving 400,000 customers, according to the statement.

Citrix shares are down 3.8% to $101.54.

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Kohl’s receives take over offer

The offer values the retailer at $9 billion

A group led by Acacia Research (ACTG), which is controlled by activist investor Starboard Value, offered to buy Kohl’s (KSS) for $64 per share in cash, a 37% premium to Friday’s closing price of $46.84 and an offer that values the department store operator at roughly $9B. There are no guarantees that the group will ultimately line up all the funding needed and make a firm offer, but the bidders told the company they have assurances from bankers about being able to get financing for the bid, sources added. 

Kohl’s (KSS) is fielding takeover offers from at least two suitors, CNBC’s Lauren Thomas and Leslie Picker reports. Sycamore is willing to pay at least $65 per share for Kohl’s, people familiar with the matter tell CNBC.

The offer from Sycamore came two days after Acacia Research (ACTG), which is backed by activist investment firm Starboard Value, offered to pay $64 a share for Kohl’s, sources said. According to the sources, Acacia and Starboard would likely partner with Oak Street Real Estate Capital to try and sell off Kohl’s real estate to raise more money.

Kohl’s confirmed that it has received letters expressing interest in acquiring the company. The Kohl’s board of directors will determine the course of action that it believes is in the best interests of the company and its shareholders. Shareholders are not required to take any action at this time. Kohl’s does not intend to further comment publicly on these matters unless it determines it is in the best interests of shareholders to do so.

Cowen

 Cowen analyst Oliver Chen raised the firm’s price target on Kohl’s to $75 from $73 and keeps an Outperform rating on the shares. The analyst said the potential bid implying 3.7x TTM EV/EBITDA appears very modest based on his leveraged buyout returns analysis. He said a transaction would likely require monetization of $3bn+ of real estate via a sale leaseback. He believes other strategic/financial bidders are possible.

Citi

Citi analyst Paul Lejuez keeps a Buy rating on Kohl’s with a $73 price target following reports that Starboard Partners and Acacia Capital made an unsolicited bid for the retailer at $64 per share. The analyst believes Kohl’s management is using appropriate strategies to drive value and that the Sephora partnership “is a game-changer.” However, he also believes Kohl’s is a “mispriced asset.” The company is a strong free cash flow generator, and it doesn’t seem to be getting credit by the market, “making it reasonable to consider offers,” says Lejuez.

Credit Suisse

Credit Suisse analyst Michael Binetti notes media reported that Starboard-backed activist Acacia (ACTG) has made a bid of $64/share for Kohl’s (KSS), and that other suitors are contacting Kohl’s as well. The focus seems aligned with another activist pushing Kohl’s to act more urgently to turnaround retail ops, but more importantly to significantly bolster shareholder cash returns via more aggressively exploring potential monetization of real estate assets, the analyst notes.

Binetti believes that the key question is whether Kohl’s will see a bidding war that could result in the stock running above the current activist’s bid at $64/share. Per conversations with real estate contacts, Kohl’s could certainly fetch higher valuations for its stores, the analyst contends. Activist plans typically focus on strategies like pulling forward monetization of real estate today, and Binetti does think there’s some merit to Kohl’s embracing a slightly more aggressive real estate strategy to bolster shareholder returns today. He has a Neutral rating and a price target of $70 on the shares.

KSS is up $15.84 to $62.68.

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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.

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