May’s Job Report Disappoints!

U.S. nonfarm payrolls rose only 138k in May, disappointing estimates for a near 200k gain

The unemployment rate dropped to 4.3% versus 4.4% previously

 

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U.S. nonfarm payrolls rose only 138k in May, disappointing estimates for a near 200k gain, following a downwardly revised 174k increase in April (was 211k) and a 79k gain in March.

The unemployment rate dropped to 4.3% versus 4.4% previously.

Average hourly earnings rose 0.2% as was the case in April (revised from 0.3%). The workweek was steady at 34.4.

For the internals, the labor force plunged 429k after April’s 12 rise, with household employment tumbling 233k from 156k.

Private payrolls were up 147k compared to the 253k jump in the ADP, while government subtracted 9k.

Jobs in the goods producing sector were up 16k, with construction increasing 11k and manufacturing falling 1k.

The service sector added 131k jobs, led by education/health with a 47k gain, while business services jobs were up 38k.

Declines were registered in trade/transport and information services.

The disappointing report will knock bond yields lower but shouldn’t seriously impact expectations for a Fed rate hike on June 14. The dollar is lower following the job report as some hope that FOMC may not raise interest rates at its next meeting.

Stocks to watch: MAN, RHIKELYATMH, ASGN, KFRC

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The 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.

Pinnacle Foods Could be Sold

Three years ago, Pinnacle Foods agreed to a takeover of $4.3 billion by Hillshire Brands. That deal was canceled after Hillshire agreed to sell itself to Tyson Foods.

 Hillshire was led at the time by Sean Connolly, who is now chief executive of Conagra. 

Reuters reports that ConAgra Brands (CAG) has approached Pinnacle Foods (PF) for a takeover.

Conagra’s approach to Pinnacle Foods took place in the last few weeks. There is no assurance that Pinnacle Foods will choose to walk down the alter, or that Conagra will pursue a potential deal further, the report said.

Pinnacle Foods operates through four segments: Frozen, Grocery, Boulder, and Specialty. The Frozen segment offers brands such as the Bird’s Eye,  Van de Kamp’s, Mrs. Paul’s, Lender’s, Celeste, Hungry-Man, and Aunt Jemima names. The Grocery segment brands include the Duncan Hines, Vlasic, Wish-Bone, and Mrs. Butterworth’s.

Conagra Brands, Inc. (CAG) operates as a food company in North America. It operates through five segments: Grocery & Snacks, Refrigerated & Frozen, International, Foodservice, and Commercial.  The company markets its products primarily under the Healthy Choice, Hunt’s, Slim Jim, Reddi-wip, Alexia, Blake’s, Frontera, Bertolli, P.F. Chang’s, and Marie Callender’s brands.

What Goes Around, Comes Around

Three years ago, Pinnacle Foods agreed to a takeover of $4.3 billion by Hillshire Brands. That deal was canceled after Hillshire agreed to sell itself to Tyson Foods Inc for $7.7 billion.  Hillshire was led at the time by Sean #Connolly, who is now chief executive of Conagra.

Connolly’s second attempt at an acquisition of Pinnacle Foods underscores the need for further consolidation in the frozen food and condiments sectors, as sales continue to decline with consumers opting for healthier choices.

Conagra has been seeking to reinvent itself since selling its private label unit for $2.7 billion in 2016 to focus on its branded food business. Last year it spun off its $6.9 billion frozen potato business, Lamb Weston Holdings Inc. This week it agreed to sell its Wesson oil brand to Folgers coffee maker J.M. Smucker for $285 million.

Conagra has a market cap of $17 billion while Pinnacle has a market cap of less than $8 billion.

Price Action

PF shares last traded at $62.31. It has a 52-week trading range of $42.09 – $66.50

CAG last traded at $39.78. CAG has a 52-week trading range of $33.08 – $41.68.

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Praxair to merge with Linde

Linde and Praxair produce and distribute industrial gases

The combined company is expected to benefit from approximately $1.2B in annual synergies and cost reductions

 

 

Linde (LNEGY) has signed a legally binding business combination agreement with Praxair (PX) governing the terms and conditions of a merger of equals between the two companies.

The agreement provides for a combination of the businesses of the Linde group and the Praxair group under a publicly traded new holding company, which will bear the Linde name.

The new holding company will be incorporated in Ireland while its principal governance activities, including board meetings, will primarily be based in the United Kingdom.

Group corporate functions will be appropriately split between Danbury, Connecticut and Munich, Germany.

The company will apply for an admission for the trading of its shares on the New York Stock Exchange and on the Frankfurt Stock Exchange and will seek inclusion in the S&P 500 and the DAX 30 indices.

Praxair will become a subsidiary of “New Holdco” through a merger and Linde will become a subsidiary of New Holdco through a public exchange offer to all shareholders of Linde.

Linde shareholders will be offered 1.54 shares in New Holdco for each Linde share and Praxair shareholders will receive one share in New Holdco for each Praxair share.

Upon completion, former Praxair shareholders and former Linde shareholders will each own approximately 50% of the outstanding shares of New Holdco. The membership in the board of directors of New Holdco will also be split 50:50.

Linde’s current Chairman of the Supervisory Board, Wolfgang Reitzle, will become Chairman of the new holding company’s board. Praxair’s current Chairman and CEO, Steve Angel, will become CEO and a member of the board of #NewHoldco.

The management team of New Holdco will also be appropriately split between #Linde and #Praxair executives.

The combined company is expected to benefit from approximately $1.2B in annual synergies and cost reductions, targeted to be achieved in approximately three years following closing. The figures include existing cost reduction programs already initiated by the two companies, including an amount of approximately $310 million from Linde’s existing LIFT program.

“Linde understands that the combined company intends to achieve the total amount of synergy and efficiency savings irrespective of the allocation to the respective underlying drivers,” the company noted.

The expected one-time costs of achieving these cost reductions and synergies are estimated to be approximately $1B including transaction costs. The consummation of the business combination is subject to certain conditions, including the acceptance of the exchange offer to Linde shareholders by a minimum of 75% of the outstanding Linde shares. Closing of the transaction is expected to occur in the second half of 2018.

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Deere to acquire Wirtgen Groupin for $5.2B cash

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Deere to Buy Wirten Group for $5.2B

Deere & Company $DE has signed a definitive agreement to acquire the #Wirtgen Group, a privately-held German company that is a manufacturer worldwide of road construction equipment.

The purchase price for the equity is EUR 4.357 billion in an all-cash transaction. The total transaction value is approximately EUR 4.6 billion, or $5.2 billion based on current exchange rates, including the assumption of net debt and other consideration.

The Wirtgen Group had sales of EUR 2.6 billion in the year ending December 31, 2016.

Deere expects the transaction to be accretive to earnings per share and currently expects to fund the acquisition from a combination of cash and new equipment operations debt financing.

The Wirtgen Group has a global footprint with approximately 8,000 employees and sells products in more than 100 countries through a large network of company-owned and independent dealers.

Deere (DE) plans to maintain the Wirtgen Group’s existing brands, management, manufacturing footprint, employees and distribution network.

The combined business is expected to benefit from sharing best practices in distribution, customer support, manufacturing and technology as well as in scale and efficiency of operations. The transaction has been approved by Deere’s Board of Directors.

The purchase is subject to regulatory approval in several jurisdictions as well as certain other customary closing conditions.

The companies said they expect to close on the transaction in the first quarter of Deere’s 2018 fiscal year.

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Crude Oil Higher on Supplies Drawdown

API reported a draw of 8.67 million barrels in U.S. crude oil inventories for last week

Gasoline inventories fell by 1.726 million barrels, Distillate inventories rose by 124,000 barrels

 

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Crude oil is higher following inventory data

For the week ending May 26, the American Petroleum Institute ( #API ) reported a draw of 8.67 million barrels in United States crude oil inventories, compared to analyst expectations of a draw of 2.8 million barrels.  Gasoline inventories fell by 1.726 million barrels, according to the API. #Distillate inventories rose this week by 124,000 barrels, while inventories at the Cushing, Oklahoma, site fell by 753,000 barrels.

It appears that refiners have been making gasoline in anticipation of the summer driving season. Whatever the reason for the drawdown, it is welcomed by producers. Oil prices have fallen this week, from WTI at $51.41 last week to $48.24 on Wednesday ahead of the API report. Brent traded at $50.68 ahead of the report—off from $54.11 this time last week.

WTI = West Texas Intermediate

The Vienne Group Decision

Last week, the Organization of Petroleum Exporting Countries, #OPEC, ministers meeting in Vienna produced an agreement to maintain production reduction of 1.8 million barrels per day for another nine months. The so-called Vienne Group, which is OPEC nations plus allied oil producing nations, most notably Russia, are hoping the move would support prices.  Saudi Arabia last week announced it would reduce oil exports by 15% to the US to manually adjust the inventory equation, in hopes of lifting prices.

Rig Counts Rise

Prices are pushed lower by continued rise in the domestic production and a rise in rig counts in the U.S. and Canada. The U.S. rig count rose 7 rigs last week to 915, with oil rigs up 2 to 722, gas rigs up 5 to 185, and miscellaneous rigs unchanged at 1. The U.S. Rig Count is up 511 rigs from last year’s count of 404, with oil rigs up 406, gas rigs up 98, and miscellaneous rigs unchanged. The Canadian Rig Count rose 8 rigs last week to 93, with oil rigs up 4 to 40 and gas rigs up 4 to 53. The Canadian Rig Count is up 50 rigs from last year’s count of 43, with oil rigs up 26, gas rigs up 25, and miscellaneous rigs down 1 to 0.

Five Weeks Drawdown

This week inventory number showed a significant draw in itself. The last five reporting weeks has seen a reduction of 19.277 million barrels, according to API data, and 15.9 million barrels using the Energy Department’s Energy Information Agency’s #EIA numbers. While the draw doesn’t offset the builds we saw in Q1 but drawdown trends from Q1 to Q2 cannot be ignored, and should be a positive sign for the industry.

EIA reports its inventory data on Thursday morning, delayed one day due to the Memorial Day holiday.

At last check, WTI was trading at $48.72 per barrel, up 42 cents. WTI has a 52-week trading range of $44.13 – $58.15. Brent last traded at $51.20 per barrel, up 44 cents. Brent has a 52-week trading range of $46.47 – $60.21 per barrel.

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Avoid Bank Stocks, JP Morgan Chart Signals Sell

Bank stocks rose on prospects of tax-cuts but Trump’s problems have sidelined his agenda

Yield Curve is now Flattest since the Election rally began

 

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Head and Shoulders pattern on JP Morgan (JPM)

JP Morgan (JPM), the DJIA component, shares rose along with the rest of the market  following last year’s election on expectation of tax cuts and other pro-growth measures. But Trump has been embroiled in troubles, distracting him from his legislative agenda. Republicans are divided on key issues, including how much to cut and how to offset the lost revenue, if at all. Easing of bank regulations and oversight imposed by the Frank-Dodd Law appear to have taken backseat to the Russian and Comey investigations.

On a 1-year daily chart of  JPM stock chart there is a clear active bearish head and shoulders pattern that became active when price broke below the neckline at the $82 area.

Rising Rates

Economic growth spurs demand for loans, but it also encourages higher interest rates and wider spreads between banks’ short-term funding costs and long-term lending rates. Yield spreads widened after the election. But with the Federal Reserve raising short-term interest rates and the 10-year Treasury yield sliding toward 2017 lows, the yield curve is the flattest since the 2016 election. That’s bad news for banks’ net margins and not a comforting sign for the economy as a whole. It is widely expected that the FOMC will raise its key lending rate by 25 bp on June 9th.

Sector Troubles

JP Morgan is considered as one of the best operated large banks. If you add impact of other not-so-well-managed banks to the sector, you will realize that the Financial Select Sector ETF ( $XLF ) is heading lower.

This morning New York City Mayor Bill de Blasio and Comptroller Scott M. Stringer jointly announced that they will vote to prohibit New York City from entering into new contracts for deposits with Wells Fargo ( $WFC ). The beleaguered bank has lost many executives and customer over its various marketing schemes.  Shares of WFC are now in a well defined bearish downward pattern. Shares are trading well below their 200-day moving average #MA .

Bank of America ( $BAC ) announced that it expects to complete the sale of its consumer credit card business in the United Kingdom, #MBNA Ltd., to #Lloyds Banking Group (LYG). The sale is expected to improve #Basel 3 risk-based capital ratios by approximately 11 basis points under the Advanced approaches and 15 basis points under the Standardized approach in the second quarter ending June 30, 2017. The U.K. consumer credit card portfolio had approximately $9.4B in credit card receivables and earned $211M in interest income in the first quarter of 2017. This type of news should send BAC shares higher but BAC is down 2.7% and has broken below its support level of $23.

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McDonald’s to Offer Delivery

Delivery is now available at more than 2,000 McDonald’s locations

In June, 3500 MCD stores will offer delivery

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MCD to expand its delivery business

#McDonald’s ($MCD) will expand delivery of its food to 3500 stores in the U.S. by June. McDonald’s already has well-established delivery services in Asia and the Middle East, where for some restaurants delivery is 40 percent of sales. Last year, the DJIA component garnered nearly $1 billion in delivery sales globally.  McDonald’s CEO Steve Easterbrook said delivery will be available in 3,500 locations by June, up from the more than 2,000 locations that currently offer delivery.

In the U.S., 60 percent of delivery orders were placed in the evening or late at night, and arrived, on average, within 30 minutes, he said.

“We are encouraged by early results in the U.S. where delivery is resonating well, particularly with our younger customers,” Easterbrook said.

Delivery has become a key priority in fast food, but hiring a fleet of drivers can be a huge undertaking for chains. Companies like Uber and GrubHub ($GRUB) can help ease the financial burden on restaurants by acting as a third-party delivery service. The trade-off is the chain doesn’t have direct control over the employees making the deliveries.

Other fast food restaurants have adopted various ways to increase their sales. Domino’s Pizza (DPZ), the king of pizza delivery business, has been remodeling its stores to encourage diners to dine in its restaurants. It is expected that other fast food chains will join the delivery craze. Companies that are expected to offer delivery include Burger King (QSR) and Jack In the Box (JACK).

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Alnylam’s Givosiran receives FDA’s Breakthrough Therapy

Porphyria is a group of diseases in which substances called porphyrins build up, affecting the skin or nervous system

Givosiran was found to be generally well tolerated with no drug-related serious adverse events

ALNY-LOGO

Alnylam Pharmaceuticals $ALNY announced that it has received Breakthrough Therapy designation from the U.S. Food and Drug Administration for #givosiran, an investigational RNAi therapeutic targeting aminolevulinic acid synthase 1 for the prophylaxis of attacks in patients with acute hepatic porphyria.

“Promising results from the ongoing Phase 1 study of #givosiran demonstrating meaningful reductions in the occurrence of porphyria attacks formed the basis of the Breakthrough application,” the company says Updated results from this trial will be provided in an oral presentation on June 26 at the International Congress on Porphyrins and Porphyrias being held in Bordeaux, France.

The ongoing portion of the Phase 1 study of givosira is being conducted as a randomized, double-blind, placebo-controlled study.

Data presented at the 2016 American Society of Hematology meeting held in Atlanta demonstrated initial evidence for clinical activity with givosiran including meaningful reductions in both the number and frequency of porphyria attacks, as well as meaningful reductions in annualized hemin doses required in patients with acute intermittent porphyria, the most common and severe form of AHP.

In the first two dose cohorts, givosiran was found to be generally well tolerated with no drug-related serious adverse events. In the third dose cohort, which remains blinded, one death due to acute pancreatitis, considered unlikely related to givosiran or placebo, was reported after the data transfer date.

Porphyria is a group of diseases in which substances called porphyrins build up, affecting the skin or nervous system. The types that affect the nervous system are also known as acute #porphyria. Symptoms of acute porphyria include abdominal pain, chest pain, vomiting, confusion, constipation, fever, and seizures. These symptoms typically come and go with attacks that last for days to weeks. Attacks may be triggered by alcohol, smoking, stress, or certain medications. If the skin is affected, blisters or itching may occur with sunlight exposure.

The disease is usually inherited from a person’s parents and is due to a mutation in one of the genes that make heme. Some types are autosomal dominant and others are autosomal recessive. One type, porphyria cutanea tarda, may also be due to increased iron in the liver, hepatitis C, alcohol, or HIV/AIDS. The underlying mechanism results in a decrease in the amount of heme produced and a build-up of substances involved in making heme. Porphyrias may also be classified by whether the liver or the bone marrow is affected.  About 1 in 75,000 people have acute porphyria attacks. They may either have one of the acute porphyrias or they may have a mixed porphyria.

Separately,  the company announced that management will present a company overview at the #Jefferies 2017 Healthcare Conference on Tuesday, June 6, 2017 at 9:00 am ET in New York City.

PRICE ACTION:  ALNY closed at $64.09. The stock has a 52-week trading range of $31.38 – $80.11. Other stocks to watch: ICPT, AZN, INCY, BIIB.

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Deutsche Bank Fined $41 million by the Feds

The Federal Reserve Board announced a $41 million penalty against Deutsche Bank AG for anti-money laundering deficiencies

Deutsche Bank CEO encourages Europeans not to follow U.S. Mortgage Regulations

DB-LOGO

The Federal Reserve Board announced a $41M penalty and consent cease and desist order against the U.S. operations of #DeutscheBank $DB for anti-money laundering deficiencies. “The actions were taken by the Board to address unsafe and unsound practices at the firm’s domestic banking operations.

The Board identified failures by Deutsche Bank’s U.S. banking operations to maintain an effective program to comply with the Bank Secrecy Act and anti-money laundering laws,” the Federal Reserve said.

The consent order requires Deutsche Bank to improve its senior management oversight and controls related to compliance by the U.S. banking operations with anti-money #laundering laws.

Meanwhile, Deutsche Bank CEO John #Cryan pressured regulators in Europe to dismiss the same kind of rules for lenders’ mortgage holdings that have been adopted by their U.S.-based counterparts, Bloomberg reports, citing comments from Cryan at an investor conference in New York.

“By and large, Germans pay their debts” and aren’t close to as a risky as U.S. banks and home-buyers have been in the past, Cryan said, according to Bloomberg.

“For Europe to surrender, to accept U.S. mortgage capitalization rules, I think would be inappropriate,” the Deutsche Bank CEO said. “So to price them as though they were Californian subprime mortgages from 10 years ago is not appropriate.”

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Blackstone to sell Logicor to China Investment

China Investment Corporation (CIC) is in advanced negotiations to acquire Blackstone’s European logistics platform for over $13.4 billion.

Blackstone originally considered steering Logicor to an IPO, Deal could be announced this week

If completed, the transaction would mark Europe’s largest-ever real estate deal. 

 

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China Investment Corporation (CIC) is in advanced negotiations to acquire Blackstone’s European logistics platform for over $13.4 billion.

China’s sovereign wealth fund has reportedly moved ahead of rivals in the pursuit of the Logicor warehouse portfolio, after formal bids having been submitted by last Thursday.

CIC is now said to be scheduled to sign a deal for Blackstone’s (BX) giant’s 630 European distribution centers within the next two to three days. If completed, the transaction would mark Europe’s largest-ever real estate deal.

In March, Blackstone began shopping Logicor to institutional investors including CIC, #Singaporean warehouse group Global Logistics Properties (GLP), and a joint venture between Singapore’s #Mapletree Investments and #Temasek Holdings. The sale of the 146.4 million square foot warehouse platform would mark the biggest logistics property deal in history.

CIC is said to benefit from its close relationship with #Blackstone.  In January 2014, CIC purchased London’s Chiswick Park office complex from Blackstone for over $1.28  billion.

Blackstone originally considered steering Logicor to an IPO, but is reported to have shelved that option in favor of a trade sale, aggressively driving the bidding process forward over the past few weeks. A trade sale would potentially achieve a higher price while allowing Blackstone to dispose of the business in a faster and more efficient manner than an #IPO.

Logicor was founded by Blackstone’s real estate business in 2012 and has rapidly grown into one of Europe’s largest warehousing specialists, with modern logistics facilities in 17 countries across the continent. Investors continue to pile into the logistics real estate sector amidst a boom in online retail, soaring prices and relatively high yields compared to other property asset classes.

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The 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.

Novartis could sell $50 billion of Assets

Novartis investors are concerned that assets sales that could raise roughly $50B may be used in another “unsuccessful mega deal”

A list of potential take over targets could also emerge from ASCO meeting being held in Chicago from June 2-June 6. We will keep an eye on CHRS, PBYI, ICPT, CLVS and NKTR

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#Novartis $NVS investors are concerned that assets sales that could raise roughly $50B may be used in another “unsuccessful mega deal,” like that of eye care giant Alcon, which the company bought for $52B in 2011, as Novartis seeks to fill holes in its cancer portfolio, Reuters reports, citing shareholders.

Novartis CEO Joe Jimenez said he is currently reviewing a sale of Alcon’s surgical devices and contact lens units, valuing the businesses at $25B-$35B, as well as disposing of a roughly $14B stake in Roche (RHHBY) and an over-the-counter venture with GlaxoSmithKline (GSK), worth $10B.

The American CEO is also considering disposal of a roughly $14 billion stake in cross-town rival Roche, as well as his over-the-counter (OTC) drugs venture with GlaxoSmithKline , worth some $10 billion.

To be sure, Jimenez has said Novartis’s M&A focus remains on smaller transactions, including lower-risk drug licensing deals, ranging up to $5 billion.

When Jimenez began his strategic review this year, he said “all options were on the table”. Sales have fallen nine quarters, necessitating a costly programme to arrest the fall.

Where rivals including Roche, Merck and Bristol-Myers Squibb have immuno-oncology drugs on the market for a range of cancers, Novartis has only investigational molecules in this hot new therapy area.

Speculation that Novartis might buy AstraZeneca $AZN sparked a brief jump in the AZN’s stock last year. There has also been talk of its interest in Bristol-Myers $BMY .

A list of potential take over targets could also emerge from ASCO meeting being held in Chicago from June 2-June 6. We will keep an eye on CHRS, PBYI, ICPT, CLVS and NKTR.

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The 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.

CardConnect Sold for $15 per share

Payments solution company #CardConnect $CCN agreed to be acquired by #FirstData $FDC for $15.00 per share in cash.

The transaction is expected to be modestly accretive to First Data’s EPS in the first full year post-closing

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CardConnect to be acquired by First Data

CardConnect CCN is a provider of payment processing and technology solutions and is one of First Data’s largest distribution partners. It processes approximately $26 billion of volume annually from about 67,000 merchant customers which are served by CardConnect’s large base of distribution partners. CCN closed at $13.65. FDC closed at $16.64.

First Data FDC will commence a tender offer to acquire all of the outstanding CardConnect common stock for a purchase price of $15.00 per share in cash. The aggregate transaction value is approximately $750 million, including repayment of CardConnect’s outstanding debt and the redemption of CardConnect’s preferred stock. First Data intends to fund the transaction with a combination of cash on hand and funds available under existing credit facilities.

First Data Corporation provides electronic commerce solutions for merchants, financial institutions, and card issuers worldwide. It operates through three segments: Global Business Solutions, Global Financial Solutions, and Network & Security Solutions. The Global Business Solutions segment offers retail point-of-sale merchant acquiring and e-commerce services; and mobile payment services and Webstore-in-a-box solutions, as well as its cloud-based Clover point-of-sale operating system. FDC has a market capitalization of $15.3 billion.

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Canada Health approves Intercept’s Ocaliva

Ocaliva represents the first new treatment option in over 20 years for PBC

PBC is a chronic liver disease that causes the small bile ducts in the liver to become inflamed

 

stockwinners.com ICPT

Intercept Pharmaceuticals $ICPT announced that Health Canada has granted a conditional approval for #Ocaliva for the treatment of primary biliary cholangitis, or PBC, when used in combination with ursodeoxycholic acid, or #UDCA, in adults with an inadequate response to UDCA or as monotherapy in adults unable to tolerate UDCA.

In May 2016, the U.S. Food and Drug Administration (FDA) granted accelerated approval for Ocaliva for the treatment of primary biliary cholangitis (PBC) in combination with ursodeoxycholic acid (UDCA).

Intercept is actively pursuing reimbursement of Ocaliva with private insurance carriers and public drug plans across Canada. The firm is pursuing the same across Europe and U.S.

PBC is a chronic, or long lasting, disease that causes the small bile ducts in the liver to become inflamed, damaged and ultimately destroyed. This causes bile to remain in the liver, which damages the liver cells over time, and results in cirrhosis, or scarring of the liver. As #cirrhosis progresses, and the amount of scar tissue in the #liver increases, the liver loses its ability to function.

#Obeticholic acid (abbreviated to OCA, trade name Ocaliva), is a semi-synthetic bile acid analogue. It is used as a drug to treat primary biliary cholangitis, and is undergoing development for several other liver diseases and related disorders. Intercept Pharmaceuticals Inc. holds the worldwide rights to develop OCA outside Japan and China, where it is licensed to Dainippon Sumitomo Pharma.

Ocaliva, given orally, binds to the farnesoid X receptor (FXR), a receptor found in the nucleus of cells in the liver and intestine. #FXR is a key regulator of bile acid metabolic pathways. Ocaliva increases bile flow from the liver and suppresses bile acid production in the liver, thus reducing the exposure of the liver to toxic levels of bile acids.

STICKER SHOCK:  It has been a year since FDA approved Ocaliva but its use has been slow. The drug’s price tag–almost $70,000 a year- has many insurance companies reluctant to approve its use and physicians from prescribing the drug. A group of researchers believe that cost of the drug needs to be around $20,000 per year in order for its use to become popular with patients, physicians and insurance companies. It is doubtful that Intercept is willing to lower its price given the cost involved with developing a new drug. We expect ICPT will be taken over by a larger pharmaceutical company such as NVS, BIIB or AMGN.

COST JUSTIFICATION

“When establishing the price for Ocaliva, we considered several factors, including the benefit that Ocaliva offers to people living with PBC, which of course is an orphan disease for which there have been no new treatments in nearly 20 years,” said the company’s chief commercial and corporate affairs officer, Lisa Bright recently. “We consider the consequences of an inadequate treatment in a progressive liver disease, including . . . liver transplants and death and the savings associated with slowing disease progression.”

STOCK PRICE: ICPT closed at $115.26. Shares have a 52-week trading range of $96.63 – $177.93. Others to watch in the sector: ARWR, ASMB, FGEN.

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Web.com is For Sale

Web.com has held early stage talks with private equity groups

The takeover interest in the company comes as its sector has become crowded

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Web.com is for sale

#Web.com (WEB) is in discussions with private equity firms after drawing takeover approaches, Reuters reports, citing people familiar with the matter.

The takeover interest in the company comes as its sector has become crowded, with competitors such as Wix.com (WIX), Weebly, GoDaddy (GDDY), and Squarespace trying to gain market share, the report notes.

Web.com $WEB has held early stage talks with private equity groups in response to approaches over a possible leveraged buyout, the report says. The company is not actively soliciting bids, the report notes.

Web.com generated $710.5 million in revenue in 2016, compared to $543.5 million the year before. It reported adjusted earnings before interest, tax, depreciation and amortization in 2016 of $179.5 million, up from $155.8 million the year before.

Web.com has been trying to expand into new areas, buying local marketing services firm Yodle last year for more than $300 million.

Web.com’s top shareholder is New York-based hedge fund Okumus Fund Management, which owned 18.64 percent of the company as of March 31. In 2015, the company reached an agreement with Okumus to add two independent directors to its board.

The market for web services to small and medium size businesses remains fiercely competitive, as low barriers to entry and downward pressure on prices have weighed on the profitability of many companies in this space.

GoDaddy, Web.com competitor, has been pursuing acquisitions following its initial public offering in 2015. Private equity firms KKR & Co LP and Silver Lake Partners LP had acquired GoDaddy in 2011 for $2.25 billion before taking it public.

Last year, GoDaddy spent $1.82 billion on buying Host Europe, a company that provides similar web services, in a bid to expand its international expansion.

PRICE ACTION: WEB closed at $21.20. The stock has a 52-week trading range of $12.90 – $22.50.

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The 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.

Tegna may be a takeover target

Consolidation in Media Companies is underway

Tegna recently spun off Cars.com, CareerBuilder might be next

 

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Tegna (TGNA) may be a takeover target of Nexstar (NXST), Dealreporter says.

#Tegna, formerly known as Gannett, engages in media and digital businesses in the United States.

The company operates in two segments, Media and Digital. It operates 46 television stations that produce local programming, such as news, sports, and entertainment. The company also operates Cars.com, an online destination for automotive consumers that offers information about car shopping, selling, and servicing; CareerBuilder, which provides human capital solutions. The company has a market capitalization of $5.1 billion.

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#Nexstar Media Group $NXST operates as a television broadcasting and digital media company in the United States. It focuses on the acquisition, development, and operation of television stations and interactive community Websites in medium-sized markets. The company offers free over-the-air programming to television viewing audiences. It also provides sales, programming, and other services through various local service agreements to 30 power television stations owned and/or operated by independent third parties. The company has a market capitalization of $2.7 billion.

Media companies in recent months have been looking for mergers to improve their earnings and competition from various internet based media compete for advertisers dollars. YouTube (GOOG) has recently offered a service similar to cable companies for $35 per month. YouTube will take a cut from advertising dollars that are sold on its network.

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The 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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