Rig counts rise!

Baker Hughes reports U.S. rig count up 2 to 1,051 rigs

The international offshore rig count for April 2018 was 194. Stockwinners
The U.S. rig count rises to 1,051

Baker Hughes (BHGE) reports that the U.S. rig count is up 2 rigs from last week to 1,051 rigs, with oil rigs up 3 to 857 and gas rigs down 1 to 194.

The U.S. Rig Count is up 76 rigs from last year’s count of 975, with oil rigs up 59 and gas rigs up 17.

The U.S. Offshore Rig Count is up 2 rigs to 21 and up 3 rigs year-over-year.

The Canada Rig Count is down 16 rigs from last week to 224, with oil rigs down 6 to 152 and gas rigs down 10 to 72.

The Canada Rig Count is down 94 rigs from last year’s count of 318, with oil rigs down 66 and gas rigs down 28.

USO is up 12 cents to $11.60.

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Altria to buy stake in Juul Labs

Altria, under pressure from FDA, said in talks to buy stake in Juul Labs

 

Altria to buy stake in Juul Labs, Stockwinners
Altria to buy stake in Juul Labs, Stockwinners

Following a report that Altria Group (MO) is in talks to take a “significant” stake in Juul Labs, an analyst said that an agreement could make strategic sense for the tobacco giant to gain exposure to a fast-growing product that poses a threat to its cigarette business.

The Wall Street Journal said Altria is in talks to take a “significant” minority interest in Juul Labs, a controversial e-cigarette startup.

According to people familiar with the matter, any deal is likely several weeks away. Juul was last valued at $16B in a private fundraising round this summer.

Altria has an agreement with Philip Morris (PM) to market IQOS, subject to regulatory approval. Philip Morris is already selling it in 43 countries and has said it could get approved for the U.S. by the end of the year.

Juul has drawn criticism over its products’ popularity with teens.

Juul, whose products are sold online and in convenience stores, gas stations and vape shops, accounted for about three-quarters of the U.S. e-cigarette market in the four-week period ended November 17, according to the Wells Fargo analysis of Nielsen data.

Earlier this month, the U.S. Food and Drug Administration announced plans to place restrictions on sales of flavored e-cigarettes.

Juul also said it would restrict sales of nearly all its flavored pods to the internet, and stop most social media promotion to combat youth vaping.

“More than 99% of all social media content related to JUUL Labs is generated through third-party users and accounts with no affiliation to our company. Nevertheless, we understand that many young people get their information from social media. To remove ourselves entirely from participation in the social conversation, we have decided to shut down our U.S.-based social media accounts on Facebook (FB) and Instagram. We have never used Snapchat (SNAP),” the company stated.

WHAT’S NOTABLE

Following the FDA statement on the agency’s proposed steps against underage smoking, Altria General Counsel Murray Garnick said it “welcomed” the FDA’s efforts to address the underage use of e-vapor products and said it believes Congress should raise the legal age of purchase for all tobacco products to 21.

Last month, Altria said it would pull its pod-based e-vapor products from the market until approved by FDA.

The company said Nu Mark will remove MarkTen Elite and Apex by MarkTen pod-based products from the market “until these products receive a market order from the FDA or the youth issue is otherwise addressed,” and that for the remaining MarkTen and Green Smoke cig-a-like products, Nu Mark will sell only tobacco, menthol and mint varieties.

Nu Mark will discontinue the sale of all other flavor variants of our cig-a-like products until these products receive a market order from the FDA.

The FDA is also pursuing a ban on menthol cigarettes, which could remove nearly a third of the roughly 250B cigarettes sold annually in the U.S., The Wall Street Journal said.

A rule could take a year or more to finalize, the FDA said. The FDA concluded in 2013 that menthols are harder to quit and likely pose a greater health risk than regular cigarettes.

ANALYST COMMENTARY

Morgan Stanley analyst Pamela Kaufman said she has no knowledge of a potential deal between Altria and Juul but that taking such a stake could make strategic sense for Altria to gain exposure to a fast growing product that poses a threat to its cigarette business.

Altria does not have a robust reduced risk product portfolio and Juul’s e-cigs could significantly enhance its competitive position, stated Kaufman, who also believes Altria would likely be buying in at a lower valuation than the previously reported $15B given the FDA recently prohibited flavored pods sales in convenience stores.

 OTHERS TO WATCH

Publicly traded companies in the tobacco products space also include Philip Morris and British American Tobacco (BTI).


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Cinedigm to acquire ComicBlitz 

Cinedigm to acquire ComicBlitz 

 

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

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

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

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

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

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

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

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

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

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


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Finisar sold for $3.2 billion

II-VI to acquire Finisar for $26 per share in cash/stock deal

Finisar sold for $3.2 billion, Stockwinners
Finisar sold for $3.2 billion, Stockwinners

II-VI (IIVI) and Finisar (FNSR) announced that they have entered into a definitive merger agreement under which II-VI will acquire Finisar in a cash and stock transaction with an equity value of approximately $3.2B.

Under the terms of the merger agreement, which has been unanimously approved by the Boards of Directors of both companies, Finisar’s stockholders will receive, on a pro-rated basis, $15.60 per share in cash and 0.2218x shares of II-VI common stock, valued at $10.40 per share based on the closing price of II-VI’s common stock of $46.88 on November 8, 2018.

The transaction values Finisar at $26.00 per share, or approximately $3.2B in equity value and represents a premium of 37.7% to Finisar’s closing price on November 8, 2018. Finisar shareholders would own approximately 31% of the combined company.

The combination of II-VI and Finisar would unite two innovative, industry leaders with complementary capabilities and cultures to form a formidable industry leading photonics and compound semiconductor company capable of serving the broad set of fast growing markets of communications, consumer electronics, military, industrial processing lasers, automotive semiconductor equipment and life sciences.

Together, II-VI and Finisar will employ over 24,000 associates in 70 locations worldwide upon closing of the transaction. On a pro forma basis, the combined company had approximately $2.5B of annual revenue.

The combined broad base of talent, technology and manufacturing is expected to enhance the ability to better address near-to medium-term opportunities and accelerate revenue growth.

The combined company expects to realize $150M of run-rate cost synergies within 36 months of closing. Synergies are expected to be achieved from procurement savings, internal supply of materials and components, efficient research and development, consolidation of overlapping costs and sales and marketing efficiencies.

The transaction is expected to drive accretion in Non-GAAP earnings per share for the first full year post close of approximately 10% and more than double that thereafter.

II-VI intends to fund the cash consideration with a combination of cash on hand from the combined companies’ balance sheets and $2 billion in funded debt financing.

The transaction is expected to close in the middle of calendar year 2019, subject to approval by each company’s shareholders, antitrust regulatory approvals and other customary closing conditions.Upon closing of the transaction, Dr. Mattera will continue to serve as President and CEO of the combined company.

In addition, in connection with the closing of the transaction, three Finisar board members will be appointed to the II-VI board, which will be expanded to 11 directors.


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JetPay sold for $184 million

NCR Corp. to acquire JetPay for $5.05 per share

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

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

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

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

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

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

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

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

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


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L3 Technologies and Harris to merge

Harris, L3 Technologies to combine in merger of equals

L3 Technologies and Harris to merge, Stockwinners
L3 Technologies and Harris to merge, Stockwinners

L3 Technologies and Harris to merge, Stockwinners
L3 Technologies and Harris to merge, Stockwinners

Harris Corporation (HRS) and L3 Technologies (LLL) have agreed to combine in an all stock merger of equals.

Under the terms of the merger agreement, which was unanimously approved by the boards of directors of both companies, L3 shareholders will receive a fixed exchange ratio of 1.30 shares of Harris common stock for each share of L3 common stock, consistent with the 60-trading day average exchange ratio of the two companies.

Upon completion of the merger, Harris shareholders will own approximately 54% and L3 shareholders will own approximately 46% of the combined company on a fully diluted basis.

The combined company, L3 Harris Technologies, will be the 6th largest defense company in the U.S. and a top 10 defense company globally, with approximately 48,000 employees and customers in over 100 countries.

For calendar year 2018, the combined company is expected to generate net revenue of approximately $16B, EBIT of $2.4B and free cash flow of $1.9B.

The combination is expected to generate approximately $500M of annual gross pre-tax cost synergies, or $300M net of savings returned to customers, in year 3.

The savings will come from reducing direct and indirect spend, rationalizing footprint, consolidating corporate and segment headquarters, establishing a common shared services platform for IT and finance and reducing other overhead costs.

The company is expected to invest approximately $450M cash to achieve the synergies over the next 3 years.

The combined company will target $3B in free cash flow by year 3, driven by organic growth, cost synergies, working capital improvements and capital expenditure efficiencies. L3 Harris Technologies will be well capitalized with a strong balance sheet and a leverage ratio of 2.2 times net debt to trailing twelve months EBITDA.

The combined company will remain committed to maintaining an investment grade credit rating and a dividend payout consistent with each company’s current practice and deploying excess cash toward share repurchases, including up to $2B in share repurchases in the 12 months post-closing.

L3 Harris Technologies will be headquartered in Melbourne, Florida.

The combined company’s Board of Directors will have 12 members, consisting of six directors from each company. William Brown will serve as chairman and CEO, and Christopher Kubasik will serve as vice chairman, president and COO for the first two years following the closing of the transaction. For the third year, Brown will transition to executive chairman and Kubasik to CEO, after which Kubasik will become chairman and CEO.

The merger is expected to close in mid-calendar year 2019, subject to satisfaction of customary closing conditions, including receipt of regulatory approvals and approval by the shareholders of each company.


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Musk’s tweet sends Tesla shares lower

Tesla slides after Elon Musk mocks SEC on Twitter

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

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

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

MUSK MOCKS SEC

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

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

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

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

SEC SETTLEMENT

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

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

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

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

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

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

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

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

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

PRICE ACTION

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


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J.C. Penney names new CEO, Shares rise

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

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

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

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

J.C. PENNEY GETS ITS CEO

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

Her appointment is effective on October 15.

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

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

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

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

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

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

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

WHAT’S NOTABLE

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

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

ANALYST COMMENTARY

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

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

PRICE ACTION

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


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Sonic sold for $2.3 billion

Sonic to be acquired by Inspire Brands for $43.50 per share in $2.3B deal

https://stockwinners.com/blog
Sonic sold for $2.3 billion, Stockwinners

Sonic (SONC) and Inspire Brands announced that they have entered into a definitive merger agreement under which Inspire will acquire Sonic for $43.50 per share in cash in a transaction valued at approximately $2.3B including the assumption of Sonic’s net debt.

Inspire is a multi-brand restaurant company whose portfolio includes more than 4,700 Arby’s, Buffalo Wild Wings, and Rusty Taco locations worldwide.

Following the completion of the transaction, Sonic will be a privately-held subsidiary of Inspire and will continue to be operated as an independent brand.

The agreement, which has been unanimously approved by Sonic’s board, represents a premium of approximately 19% per share to Sonic’s closing stock price on September 24, 2018 and a premium of approximately 21% to Sonic’s 30-day volume-weighted average price.

The transaction is subject to the approval of Sonic shareholders and the satisfaction of customary closing conditions, including applicable regulatory approvals, and will close by the end of the year.


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Pandora sold for $3.5 billion

Sirius XM to acquire Pandora in all-stock deal valued at about $3.5B

Pandora sold for $3.5 billion, Stockwinners
Pandora sold for $3.5 billion, Stockwinners

Sirius XM Holdings (SIRI) and Pandora Media (P) announced a definitive agreement under which SiriusXM will acquire Pandora in an all-stock transaction valued at approximately $3.5B.

The combination creates the world’s largest audio entertainment company, with more than $7B in expected pro-forma revenue in 2018 and strong, long-term growth opportunities.

Pursuant to the agreement, the owners of the outstanding shares in Pandora that SiriusXM does not currently own will receive a fixed exchange ratio of 1.44 newly issued SiriusXM shares for each share of Pandora they hold.

Based on the 30-day volume-weighted average price of $7.04 per share of SiriusXM common stock, the implied price of Pandora common stock is $10.14 per share, representing a premium of 13.8% over a 30-day volume-weighted average price.

The transaction is expected to be tax-free to Pandora stockholders. SiriusXM currently owns convertible preferred stock in Pandora that represents a stake of approximately 15% on an as-converted basis.

The merger agreement provides for a “go-shop” provision under which Pandora and its Board of Directors may actively solicit, receive, evaluate and potentially enter negotiations with parties that offer alternative proposals following the execution date of the definitive agreement.

There can be no assurance this process will result in a superior proposal. Pandora does not intend to disclose developments about this process unless and until its Board of Directors has made a decision with respect to any potential superior proposal.

The transaction has been unanimously approved by both the independent directors of Pandora and by the board of directors of SiriusXM.

The transaction is expected to close in the first quarter of 2019.


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Incyte reports positive data

Incyte announces Phase 2b trial of ruxolitinib cream met primary endpoint

Incyte says REACH1 trial met primary endpoint, Stockwinners
Incyte reports positive data, Stockwinners

Incyte Corporation (INCY) announced positive results from its randomized, dose-ranging, vehicle- and active-controlled Phase 2b study evaluating ruxolitinib cream in patients with atopic dermatitis who are candidates for topical therapy.

The study, part of the True-AD clinical trial program, met its primary endpoint, demonstrating that ruxolitinib cream 1.5% administered twice daily significantly improved Eczema Area and Severity Index scores – a measurement of the extent and severity of AD – from baseline versus vehicle control at Week 4.

Additionally, treatment with ruxolitinib cream 1.5% BID resulted in a rapid and sustained reduction in itch versus vehicle, a key secondary endpoint.

These results were shared in an oral presentation today at the 27th European Academy of Dermatology and Venerology Congress in Paris, France.

Key study results included: Significantly improved EASI score in the ruxolitinib cream 1.5% BID arm versus vehicle at Week 4, the primary endpoint, and improvement in EASI score versus the active control, triamcinolone 0.1% cream, at Week 4, a secondary endpoint.

Significantly improved EASI scores in the ruxolitinib cream 1.5% BID arm versus vehicle at Weeks 2 and 8. Significantly greater changes in EASI score in the once daily ruxolitinib cream 1.5% and 0.5% arms versus vehicle at Week 4.

Significantly more Investigator’s Global Assessment responders – a measure of disease severity – in the ruxolitinib cream 1.5% BID arm versus vehicle at Week 4, and greater IGA response rates across other ruxolitinib arms versus vehicle.

Rapid and sustained reductions in itch numerical rating scale score observed as early as within two days from the initiation of therapy, and a more pronounced reduction in itch with ruxolitinib cream 1.5% BID and QD than with triamcinolone cream 0.1% BID.

Ruxolitinib cream was well-tolerated at all dosage strengths and was not associated with clinically-significant application site reactions.

All treatment-related adverse events were Grade 1 or Grade 2 in severity. Ruxolitinib cream is the first JAK1/JAK2 inhibitor to exhibit positive results as a topical monotherapy in the AD patient population.

Over-activity of the JAK signaling pathway has been shown to drive inflammation involved in the pathogenesis of AD.

These data support the planned initiation of a global, pivotal Phase 3 program, for which preparations are already underway.

INCY closed at $66.51.


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Integrated Device Technology sold for $6.7 billion

Renesas acquires Integrated Device for $49 per share or $6.7B

 

Integrated Device Technology sold for $6.7 billion, Stockwinners
Integrated Device Technology sold for $6.7 billion, Stockwinners

Renesas Electronics (RNECY) and Integrated Device Technology (IDTI) announced they have signed a definitive agreement under which Renesas will acquire IDT for $49.00 per share in an all-cash transaction representing an equity value of approximately $6.7B.

The stock closed yesterday down 58c to $42.08. Closing of the transaction is expected to occur in the first half of 2019, following approvals by IDT shareholders and the relevant regulatory authorities.

Renesas anticipates near- and long-term revenue growth from “expanded opportunities and access to fast-growing industries, and cost savings from a greater scale business platform to bring innovation and improvements” with an expected financial impact of approximately over $250M.

The transaction is expected to be accretive to Renesas’ non-GAAP gross margin and non-GAAP earnings per share by approximately 1.6%pts and 18%, respectively, immediately after closing.

Renesas plans to finance the transaction with cash reserves and approximately 679B yen of bank loans. Renesas does not intend to raise equity financing for this transaction. T

he companies said, “The acquisition combines two recognized leaders in embedded processors and analog mixed-signal semiconductors, each with unique strengths in delivering products to improve performance and efficiency in high-computing electronic systems. The boards of directors of both companies have unanimously approved the transaction.”


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Engility Holdings sold for $2.5 billion

SAIC to acquire Engility in all-stock deal valued at $2.5B

Engility Holdings sold for $2.5 billion, Stockwinners
Engility Holdings sold for $2.5 billion, Stockwinners

SAIC (SAIC) and Engility Holdings (EGL) announced that they have entered into a definitive agreement under which SAIC will acquire Engility in an all-stock transaction valued at $2.5B, $2.25B net of the present value of tax assets, creating the second largest independent technology integrator in government services with $6.5B of pro-forma last 12 months’ revenue.

The combination of these two complementary businesses will accelerate SAIC’s growth strategy into key markets, enhance its competitive position and provide significant financial benefits.

The transaction will create market sub-segment scale in strategic business areas of national interest, such as defense, federal civilian agencies, intelligence, and space.

In addition, it expands the capabilities of both companies, bringing additional systems engineering, mission, and IT capabilities to a broader base of customers.

Under the terms of the merger agreement, Engility stockholders will receive a fixed exchange ratio of 0.450 shares of SAIC common stock for each share of Engility stock in an all-stock transaction.

Based on an SAIC per share closing price of $89.86 on September 7, 2018, the transaction is valued at $40.44 per share of Engility common stock or $2.5B in the aggregate, including the repayment of $900M in Engility’s debt.

SAIC has obtained a financing commitment letter from Citigroup Global Markets Inc. for a new seven-year senior secured $1.05B term loan facility under our existing credit agreement.

The proceeds will be used to repay Engility’s existing debt and associated fees. SAIC expects no immediate change to its quarterly cash dividend as a result of this transaction.

The transaction is expected to close by the end of the fiscal fourth quarter ending February 1, 2019, following customary closing conditions, including regulatory and SAIC and Engility shareholder approvals.

The transaction has been unanimously approved by both boards.

The businesses will continue to operate separately until the transaction closes. The combined company will retain the SAIC name and continue to be headquartered in Reston, Virginia.

Following closing, Tony Moraco will continue as CEO and as an SAIC board member. SAIC will expand its board to include two additional members from Engility’s board.


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Coca-Cola to acquire Costa for $5.1B

Coca-Cola to acquire Costa in deal valued at $5.1B

Coca-Cola to acquire Costa for $5.1B, Stockwinners
Coca-Cola to acquire Costa for $5.1B, Stockwinners

Coca-Cola (KO) announced that it has reached a definitive agreement to acquire Costa Limited.

The acquisition of Costa from parent company Whitbread PLC is valued at $5.1B and will give Coca-Cola a strong coffee platform across parts of Europe, Asia Pacific, the Middle East and Africa, with the opportunity for additional expansion.

Costa operations include a leading brand, nearly 4,000 retail outlets with highly trained baristas, a coffee vending operation, for-home coffee formats and Costa’s state-of-the-art roastery.

For Coca-Cola, the expected acquisition adds a scalable coffee platform with critical know-how and expertise in a fast-growing, on-trend category. Costa has a solid presence with Costa Express, which offers barista-quality coffee in a variety of on-the-go locations, including gas stations, movie theaters and travel hubs.

Costa, in various formats, has the potential for further expansion with customers across the Coca-Cola system. The acquisition will expand the existing Coca-Cola coffee lineup by adding another leading brand and platform. The portfolio already includes the market-leading Georgia brand in Japan, plus coffee products in many other countries.

The purchase price is approximately $5.1B.

Upon the closing, Coca-Cola will acquire all issued and outstanding shares of Costa Limited, a wholly owned subsidiary of Whitbread. This subsidiary contains all of the existing operating businesses of Costa.

Whitbread will be seeking shareholder approval for the transaction, which is expected to take place by mid-October.

The deal is subject to customary closing conditions, including antitrust approvals in the European Union and China.

It is expected to close in the first half of 2019. Coca-Cola expects the transaction to be slightly accretive in the first full year, not taking into account any impact from purchase accounting.

For FY18, Costa generated revenue and EBITDA of roughly $1.7B in revenue and $312M in EBITDA.

Because Coca-Cola expects the transaction to close in the first half of 2019, there is no change to 2018 guidance.

The company’s long-term targets also remain unchanged.


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Yum China receives takeover offer

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

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

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

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

BUYOUT OFFER REPORTEDLY REJECTED

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

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

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

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

CHINA INVESTMENT PART OF CONSORTIUM

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

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

PRICE ACTION

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


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