The Daily Call

Morning Summary | Consumer Discretionary and Consumer Staples | Energy and Utilities | Industrials and Materials | Financials and Real Estate | Health Care | Info. Tech. and Communication Services | M&A and Corporate Action

Morning Summary

Jayme Casey, Gregory Martino (203) 861-7650 | 3.26.2019

 

Asian markets ex China finished mostly higher today, led by a 2.2% gain in Japan’s. Shanghai dropped 1.5%, while Hong Kong gained 20bps and Taiwan rose 80bps. Elsewhere, South Korea added 20bps despite Samsung Electronics’ warning that Q1 earnings will fall short of expectations, and the ASX finished little changed.  Regional turnover ran ~25% below avg outside of Japan when volumes jumped 50%.

European markets currently trade at the best levels of the session with France up 60bps among the outperformers in the region. The UK adds 30bps digesting last night’s defeat for PM May with MP’s voting to seize control of Brexit. Germany’s DAX adds 10bps with most other markets in the region seeing similar results. Following yesterday's unexpected pickup in the German Ifo, the latest GfK consumer confidence reading fell back to 10.4 versus consensus 10.8 (still a historically strong value). French business confidence improved to 104 in March from prior 103. French Q4 Final GDP +0.3% q/q inline.

US futures (+50bps) extend gains out of Asia and Europe ahead of economic data that includes Housing Starts and Building Permits at 8:30am, S&P CoreLogic data at 9am, and Richmond Fed at 10am. Crude rose more than 1% helped by reports of uncertainty among Trump’s national security team on whether to extend Iranian oil waivers beyond May, and, to a lesser extent, following Pompeo’s warnings to Russia over intervention in Venezuela. API weekly inventories come at 4:30pm. In M&A news, it was reported shortly after the close Monday that Paulson no longer opposes the Newmont (NEM)/Goldcorp (GG) merger citing the 88c/sh special dividend announcement as the catalyst for his change of opinion. The NYP reported that CBS’s (CBS) independent directors are expected to approach the board in the near future to resume merger talks with Viacom (VIAB) after it resolved contract disputes with AT&T (T) yesterday. The WSJ reported that an activist group comprised of Legion Partners, Macellum Advisors, and Ancora Advisors with a combined 5% stake in Bed Bath and Beyond (BBBY) are preparing to launch a proxy fight to replace the company’s entire board. Finisar (FNSR) and II-VI (IIVI) shareholders will vote this afternoon on their pending merger. Uber confirmed reports that it agreed to acquire Careem Networks for $3.1bn. McDonald’s (MCD) will buy closely-held decision-logic tech company, Dynamic Yield for $300mm, its largest acquisition in 20 years. Finally, Liberty LatAm (LILA) will buy an 87.5% stake in Telecommunication Services N.V. for EV of $189mm in cash. In other news, the DOJ is siding with the December Texas 5th circuit court of appeals ruling that the Affordable Care Act is unconstitutional following the elimination of the individual mandate, however it is unclear what next steps the Trump Administration will take with respect to the law’s future. Weatherford (WFT) announced Monday after the close that it completed the sale of 2 land rigs in Algeria and 2 rigs in Iraq for aggregate consideration of $32mm. The sale was the last in a series of approved transactions that netted Weatherford $287.5mm which it will use to reduce debt. McDermott (MDR) received an EPCM contract with a Unipetrol refinery in the Czech Republic. Amazon (AMZN) announced plans to open more than 100 kiosks in Indian malls to sell Kindle, Echo and other products. Aldeyra (ALDX) reported positive study results. TCR2 Therapeutics (TCRR) announced a collaboration with Cell and Gene Therapy Catapult to manufacture its T cell therapies. A unit of Wabco (WBC) entered a $180mm agreement with a manufacturer to supply power steering gears. Finally, The Trade Desk (TTD) launched its programmatic ad buying platform in China.

Earnings: IHS Markit (INFO) beat EPS estimates, but missed revenue expectations, while guidance was in-line. McCormick (MKC) beat EPS estimates and reaffirmed FY guidance. Carnival Cruise (CCL) will report at 9:15am. Companies releasing earnings after the close include KB Home (KBH) and Shoe Carnival (SCVL).

Analyst Actions: BB&T (BBT) raised to buy at DB

Syndicate:

    • CCXI - ChemoCentryx discloses sale of 4.8M shares at $11.40 per share through equity distribution agreement with Piper Jaffray
    • NBLX - Noble Midstream Partners secures $200M equity commitment from Global Infrastructure Partners
    • IQ - Iqiyi, Inc. announces $1.05B convertible note offering
    • KNDI - Kandi Technologies registers 7.6M shares for holders
    • MDWD - MediWound Ltd. files $125M mixed shelf; also files to register 11.2M shares for holders
    • NSTG - NanoString Technologies discloses termination of $40M equity sales agreement with Cowen
    • MYOK - MyoKardia commences $200M common stock secondary offering through BofA Merrill Lynch, Credit Suisse, Cowen and Wells Fargo

Consumer Discretionary and Consumer Staples

Jared Mancuso (203) 861-7650 | 3.26.2019

 

Notable Headlines:

    • BBBY- (bid up 17%) Activist group said to be planning campaign to oust entire Bed Bath & Beyond board – WSJ. 
    • MKC- McCormick reports Q1 EPS $1.12 ex-items vs FactSet $1.04.  Reports Q1: Revenue $1.23B vs FactSet $1.24B. FY Guidance (Nov 2019): Reaffirms adj EPS $5.17-5.27 vs FactSet $5.23. Reaffirms revenue growth +1% to +3% vs FactSet +0.9%. Reaffirms adj operating income +7% to +9%.
    • CONN- Conn's reports Q4 EPS $0.96 vs FactSet $0.76.  Reports Q4: Revenue $433.0M vs FactSet $438.0M. Adjusted EBITDA $67.7M vs FactSet $57.6M. Q1 Guidance: Change in same store sales between (5%) and (1%).  Retail gross margin between 39.5% and 40.0% of total net retail sales.  Selling, general and administrative expenses between 32.5% and 33.5% of total revenues.

Analyst Actions:

    • BBBY- Bed Bath & Beyond upgraded to strong buy from market perform at Raymond James
    • DNKN- Dunkin’ Brands initiated perform at Oppenheimer

Syndicate:

    • MCD- McDonald's to pay more than $300M for Dynamic Yield.  Dynamic Yield is a leader in personalization and decision logic technology.  McDonald's will utilize this decision technology to provide an even more personalized customer experience by varying outdoor digital Drive Thru menu displays to show food based on time of day, weather, current restaurant traffic and trending menu items.  Terms were not disclosed.
    • TWI- Titan International, Inc. announces $25M share repurchase program
    • OBCI- Ocean Bio-Chem declares a special cash dividend of $0.05 per share - 8-K.  Payable on 19-Apr-19 to all shareholders of record on 05-Apr-19.

Energy and Utilities

Gregory Martino (203) 861-7650 | 3.26.2019

 

Summary: Crude rose more than 1.5% helped by reports of uncertainty among Trump’s national security team on whether to extend Iranian oil waivers beyond May, and, to a lesser extent, following Pompeo’s warnings to Russia over intervention in Venezuela. API weekly inventories come at 4:30pm. In company news, Weatherford (WFT) announced Monday after the close that it completed the sale of 2 land rigs in Algeria and 2 rigs in Iraq for aggregate consideration of $32mm. The sale was the last in a series of approved transactions that netted Weatherford $287.5mm which it will use to reduce debt. Noble Midstream (NBLX) announced a $200mm equity investment by Global Infrastructure Partners to its Dos Rios Crude Intermediate subsidiary which holds NBLX’s interest in the EPIC pipeline. Magellan Midstream (MMP) cut capex Monday after the close relating to its pipeline JV with Energy Transfer (ET), Delek (DK) and MPLX (MPLX). The company expressed concerns with potential overcapacity that would be created by the proposed merger of the Permian pipeline with Exxon (XOM) and Plains All American’s (PAA) similarly large pipeline project. Reuters reported Monday that Enbridge (ENB CN, ENB US) will buy Kinder Morgan’s (KMI) interest in the Texas COLT deepwater crude export venture. Finally, McDermott (MDR) received an EPCM contract with a Unipetrol refinery in the Czech Republic.

Earnings:

    • KRP - Kimbell Royalty Partners LP closes previously announced purchase of certain oil and gas royalty assets from EnCap Investments L.P; provides FY19 guidance. Revenues and certain other operating statistics under generally accepted accounting principles will be recorded for the Acquisition beginning on the closing date of 25-Mar-19. FY19 guidance: Q1 2019: Net Production - Mboe/d (6:1) 9.60 - 10.20; Oil Production - % of Net Production 22% - 26%; Natural Gas Production - % of Net Production 60% - 64%; Natural Gas Liquids Production - % of Net Production 12%- 16%. Q2 - Q4 2019: Net Production - Mboe/d (6:1) 11.00 - 12.20; Oil Production - % of Net Production 24% - 28%; Natural Gas Production - % of Net Production 59% - 63%; Natural Gas Liquids Production - % of Net Production 11% - 15%

Notable Headlines:

    • MMP - Magellan Midstream Partners provides capital spending update - 8-K. In September 2018, Magellan Midstream Partners, L.P. announced plans to jointly develop a new crude oil pipeline with Energy Transfer LP, MPLX LP and Delek US Holdings, Inc. to deliver crude oil from the Permian Basin to the Partnership’s terminal in the Houston area and Energy Transfer’s terminal in Nederland, Texas. Due to recent developments, it is unlikely that the Permian Gulf Coast or PGC pipeline project as initially announced will proceed, and, therefore, the Partnership is decreasing its expansion capital spending projections by approximately $200M for 2019 and $250M for 2020 to reflect its previously expected share of the project. As a result, the Partnership’s spending estimates are now approximately $1.1B for 2019 and $150M for 2020 to complete its expansion capital projects currently underway. The Partnership continues to actively develop a crude oil pipeline project in the Permian Basin, but the probability of success is unknown at this time.
    • NBLX - Noble Midstream Partners secures $200M equity commitment from Global Infrastructure Partners. NBLX announced it has secured a $200M equity commitment from Global Infrastructure Partners Capital Solutions Fund to fund capital contributions to Dos Rios Crude Intermediate, a newly-formed subsidiary holding Noble Midstream’s 30% equity interest in the EPIC Crude Pipeline. Of the $200M total commitment, $100M will be funded during Q1 of 2019, with the remaining $100M available for a one-year period, subject to certain conditions precedent. The Preferred Equity is perpetual and has a 6.5% annual dividend rate, payable quarterly in cash, with the ability to defer payment during the first two years following the closing. In addition, Noble Midstream can redeem the Preferred Equity in whole or in part at any time for cash at a predetermined redemption price. GIP can request redemption of the Preferred Equity following the later of the sixth anniversary of the Preferred Equity closing or the fifth anniversary of the EPIC Crude Pipeline completion date at a pre-determined base return. The 30-inch EPIC Crude Pipeline is being designed with an initial capacity of 590 MBbl/d from the Permian Basin and Eagle Ford to the Gulf Coast. With the installation of additional pumps and storage, EPIC can increase the 30-inch capacity to approximately 900 MBbl/d. Interim service remains on track for startup in Q3 of 2019 and permanent service is anticipated in January of 2020.

Conferences:

    • Scotia Howard Weil Energy Conference: CRC, CRZO, HLX, MRC, PDCE, PE, SRCI

Industrials and Materials

Gregory Martino (203) 861-7650 | 3.26.2019

 

Notable Headlines:

    • NEM- Newmont announced that independent proxy advisory firm Institutional Shareholder Services Inc. (ISS), has recommended that Newmont shareholders vote "FOR" each of the company's resolutions in connection with the proposed combination with Goldcorp Inc. at the special shareholder meeting scheduled for 11-Apr-19.  The company offers a sound strategic rationale, as the combination is expected to create the world's largest gold miner with a diverse asset portfolio in favorable mining geographies.  vote FOR this proposal is warranted given the solid strategic rationale and expected financial benefits, which are bolstered by the recent addition of a special dividend to NEM shareholders.
    • AMSC- American Superconductor announces four new D-VAR STATCOM system orders valued at over $10M.  These D-VAR systems are expected to provide voltage regulation by dynamically responding to varying load conditions and connect wind power plants to the electric grid.
    • CMCO- Columbus McKinnon increases quarterly dividend by 20.0% to $0.06 from $0.05; new $20M stock repurchase program.
    • BECN- Beacon Roofing guides Q2 adjusted EPS of ($0.45) to ($0.55) vs FactSet ($0.25).  Beacon Roofing Supply, Inc. (BECN) announced that results for Q2 ended 31-Mar-19 will be impacted by unfavorable weather conditions.  The company is estimating a Q2 Adjusted Net Income (Loss) per share of between $(0.45) and $(0.55).  Despite Q2 being heavily impacted by harsh weather, Adjusted EPS for the full fiscal year ending 30-Sep-19 is anticipated to be within the lower-end of the company’s previously provided range of $2.90 to $3.35.
    • AVAV- AeroVironment provides update on Design and Development agreement with HAPSMobile.  Under the Amendment, the maximum net value of the Design and Development agreement increased by $17.2M, for a total maximum net value of $87.0M.
    • VALE- Vale S.A. informs on the decision by the Court of Barão de Cocais on 25-Mar 2019, regarding the request for a preliminary injunction within the scope of the Public Civil Action 5000045-50.2019.8.13.0054 proposed by the Public Prosecution Office of the State of Minas Gerais and the Public Defender’s Office of the State of Minas Gerais, that determined the freezing of Vale's funds on the amount of BRL 2.95B, aiming to ensure the reimbursements of any potential losses suffered by the people affected by removal that occurred or that may occur in relation to Sul Superior dam, of the Gongo Soco mine, in Barão de Cocais.  Vale was not formally notified of the decision and will take the appropriate measures in due course.
    • BA- China suspends airworthiness certificate for Boeing 737 Max
    • GORO- The company announced today its Nevada Mining Unit’s exploration plans include targeted expansion of the Isabella Pearl (IP) open pit deposit by testing the adjacent Civit Cat North.  Additional nearby targets with open pit potential include “Scarlet”, where numerous high-grade surface samples are situated over historic drill intercepts including 70.1 meters of 1.02 grams per tonne (g/t) gold, and the “Civit Cat North West” target also along trend, where historic surface samples have reported grades as high as 9.70 g/t gold.

Analyst Actions:

    • MOS- Mosaic initiated hold at Berenberg
    • ALGT- Allegiant Travel upgraded to outperform from neutral at Macquarie

Financials and Real Estate

Brad Berger (203) 861-7650 | 3.26.2019

 

Notable Headlines:

    • C-Citigroup to Start New Consumer-Payments Unit: WSJ Citigroup will start a unit that will enable big merchants to use consumer-payment options such as credit cards, digital wallets and direct bank-account transfers, WSJ reports, citing an interview with co.’s Global Head of Payments and Receivables Manish Kohli.
    • Rees-Mogg Offers May Hope in Showdown Over Deal: Brexit Update  Brexit hardliner Jacob Rees-Mogg indicated he’s willing to back Theresa May’s Brexit deal, in what could prove a game-changer for the prime minister. The race is now on between May and pro-EU members of Parliament trying to force a softer Brexit and a long delay. Key Developments: Parliament will vote on alternatives to May’s Brexit deal Wednesday after government suffers defeat last night. Focus on Conservative MP Oliver Letwin, who will lead cross-party process to decide which options will be up for debate. Brexiteer Jacob Rees-Mogg says May’s deal “better than not leaving at all” if it comes down to that choice;
    • Euro-Area Banks Can Expect ECB Loan Details by June, Rehn Says Euro-area banks will know by June how generous the terms of the European Central Bank’s new loans are going to be, according to Governing Council member Olli Rehn.Policy makers have yet to pass judgment on the severity of the current slowdown that prompted that measure, the Finnish central bank governor told Bloomberg in an interview. They are determined to keep lending conditions favorable with record-low interest rates and the new round of long-term funding announced earlier this month. “We will take the decisions in due time, well in advance of the start of the operations, so that the general public and the banks are early enough aware of their precise nature,” he said, when asked about details of the ECB’s so-called TLTRO-3 program. “We have the next meetings in April and June.”
    • SLF-Sun Life 'reaffirms its medium-term financial objectives' at Investor Day Its medium-term financial objectives, which include annual underlying EPS growth of 8-10%, underlying ROE in the range of 12-14% and a common share dividend payout ratio of 40-50% of underlying net income.

Analyst Actions:

    • BBT-BB&T Corp upgraded to Buy from Hold at Deutsche Bank
    • PSA-Public Storage  downgraded to Underweight from Equal Weight at Barclays; tgt lowered to $211
    • SUI-Sun Communities downgraded to Market Perform from Outperform at Wells Fargo; tgt $118
    • ELS-Equity Lifestyle Properties downgraded to Market Perform from Outperform at Wells Fargo; tgt $112

Syndicate:

    • GSBD-Goldman Sachs BDC delivered capital drawdown notice relating to the sale of approximately 455,946 Common Units for offering price of approximately $43.9 million. The sale is expected to close on or around March 28, 2019.

Health Care

Tyler Nugent (203) 861-7650 | 3.26.2019

 

Notable Headlines:

    • BMY, CELG - Bristol-Myers and Celgene receive second request from FTC regarding proposed transaction. The parties understand that the FTC’s review is focused on marketed and pipeline products for the treatment of psoriasis. The previously communicated transaction timing is not affected by the Second Request.
    • CELG - Celgene submits NDA to FDA for ozanimod for the treatment of adults with relapsing forms of multiple sclerosis.
    • AGN - Allergan Says Appaloosa Pushing for 'Firesale' of Company.  Allergan says in filing that Appaloosa is attempting to undermine its CEO and "pushing for a firesale of the company for a short-term bump in stock price."  "We believe that it will be transparent to investors that Appaloosa’s short-term interests are not the same as those of long-term shareholders," the company said in filing.  Says its "highly engaged, refreshed and independent" board is "focused on doing what is in the best interests of all shareholders."
    • ALDX (trading up 50%) - Aldeyra announces positive top-line results from ph.3 ALLEVIATE trial in allergic conjunctivitis. The clinical trial met the primary endpoint and the key secondary endpoint for both concentrations of reproxalap.
    • CALA - Calithera Biosciences initiates Phase 1/2 trial of telaglenastat in combination with the PARP inhibitor talazoparib.
    • MBRX - Moleculin Biotech announces positive interim results in first cohort of Phase 1/2 clinical studies of Annamycin in acute myeloid leukemia.  Secondary outcomes of the original study included findings that Vapotherm’s Hi-VNI Technology was superior or equivalent to NiPPV in the physician perception of patient comfort and tolerance, and the clinical use of the technology.
    • VAPO - Vapotherm announces paper published in the American Journal of Emergency Medicine shows similar outcomes with Hi-VNI Technology to non-invasive positive pressure ventilation. Secondary outcomes of the original study included findings that Vapotherm’s Hi-VNI Technology was superior or equivalent to NiPPV in the physician perception of patient comfort and tolerance, and the clinical use of the technology.
  • NNVC - NanoViricides announces it has requested pre-IND meeting with FDA for NV-HHV-101.  The company recently reported that its first broad-spectrum drug candidate in the HerpeCide program, namely, NV-HHV-101, has successfully completed the non-GLP portion of the Safety/Toxicology studies that are required for filing an IND in order to initiate human clinical trials. The company is now in the process of manufacturing a large batch of the drug as needed for the GLP portion of the Safety/Toxicology studies.
    • TCRR - TCR2 Therapeutics announces collaboration with Cell and Gene Therapy Catapult for the manufacturing of its novel T cell therapies for cancer.  TCR2 will work with Cell and Gene Therapy Catapult (CGT Catapult) at their Stevenage manufacturing center to produce its novel TCR therapies based on the company's proprietary TRuC (TCR Fusion Construct) T cells.
    • AUTL - Autolus unveils expanded next generation technology; provides key update on AUTO3 program in pediatric ALL at R&D Day.  Updated data from the ongoing AMELIA Phase 1/2 study in pALL demonstrates that 6 out of 6 (100%) patients treated at the highest dose (≥3 x106/kg) achieved minimal residual disease (MRD) negative complete responses (CR).  Ongoing MRD negative CR remissions were noted in 4 out of 6 (67%) patients, with duration of up to 10 months as of February 2019, the date of latest data follow-up. There have been no reported CD19 or CD22 negative relapses in CAR T naïve patients. Data also showed that AUTO3 continues to be generally well tolerated with no ≥ Grade 3 CRS, no ICU admission, and no pressors or critical care support for CRS required.
    • EYEG - EyeGate confirms path to de Novo filing with FDA. The FDA has agreed that based on the strength of data from the photorefractive keratectomy pilot study, EyeGate is ready to move forward with a pivotal study, which will allow for a de novo filing. The company plans to file the Investigational Device Exemption for initiation of the study in Q2 2019 and to complete the study in Q3 2019 with the de novo being filed soon thereafter.
    • ABBV - Japanese Ministry of Health approves AbbVie's SKYRIZI (risankizumab). Japanese Ministry of Health, Labour and Welfare has approved SKYRIZI (risankizumab), an interleukin-23 (IL-23) inhibitor, for the treatment of plaque psoriasis, generalized pustular psoriasis, erythrodermic psoriasis and psoriatic arthritis in adult patients who have an inadequate response to conventional therapies
    • BLUE - bluebird bio issues statement on European regulatory status of LentiGlobin. A third party press release was issued today stating that the EMA (European Medicines Agency) issued an approval for the conditional Marketing Authorization Application (MAA) for LentiGlobin, bluebird bio’s investigational gene therapy for the treatment of transfusion dependent β-thalassemia.  LentiGlobin for TDT is scheduled to be reviewed as part of the CHMP meeting from 25 - 28 March, however no opinion has been issued by the CHMP
    • LPCN - Lipocine announces late-breaker presentation at EASL meeting on LPCN 1144 MRI-PDFF clinical results.  The presentation will detail LPCN 1144 clinical results with respect to post-treatment changes in liver fat assessed using magnetic resonance imaging, proton density fat fraction technique, as well as changes in key serum biomarkers typically associated with non-alcoholic steatohepatitis.
    • NTRA - Natera partnering with AMAL Therapeutics using Signatera MRD test on colorectal cancer vaccine. The AMAL Therapeutics prospective clinical trial, referred to as KISIMA-01, will assess the safety, tolerability, and preliminary efficacy of ATP128, the company's leading therapeutic cancer vaccine, in combination with a PD1 blockade in defined patient populations with stage IV colorectal cancer.
    • CTMX - announces CFO has stepped down to become CEO of newly-formed private biotech company.
    • NSTG - NanoString Technologies discloses termination of $40M equity sales agreement with Cowen

Analyst Actions:

    • INO – rated new overweight at Cantor, PT $12.
    • TMO – PT raised to street-high $310 from $290 at BTIG.
    • XCUR – initiated buy at Chardan Capital, PT $5.
    • BIOC – initiated buy at Maxim Group, PT $3.
    • VRTX upgraded to outperform at William Blair, PT raised to $222 from $178.
    • CNAT – downgraded to neutral from buy at Roth Capital, PT $1.70.

Syndicate:

    • MYOK - MyoKardia commences $200M common stock secondary offering through BofA Merrill Lynch, Credit Suisse, Cowen and Wells Fargo, to trade 3/27/19.
    • MDWD - MediWound Ltd. files $125M mixed shelf; also files to register 11.2M shares for holders - F-3.

Info. Tech. and Communication Services

Sean Greeley (203) 861-7650 | 3.26.2019

 

Notable Headlines:

    • SAMSUNG – The world’s biggest chipmaker on Tuesday said first-quarter results will fall short of estimates as prices for memory chips and displays slid more than expected, just days ahead of releasing preliminary earnings. That came after Apple Inc., which buys smartphone screens from Samsung, cut its revenue outlook in January for the first time in almost two decades.While Samsung’s disappointing outlook underscored a global economic slowdown and stagnant PC and smartphone markets, expectations are mounting that chip demand -- the main source of Samsung’s profits -- will bottom out soon. Samsung and competitors such as Micron Technology Inc. have said the current weakness is a low point for the memory industry and that, once the inventory has been worked through, demand and pricing will improve in the second half of 2019.”The inventory correction will last until the end of 2Q or early 3Q. We are already seeing signs of inventory consumption by hyperscale and smartphone customers,” Sanjeev Rana, an analyst with CLSA Securities Korea, told Bloomberg Television. Hyperscale refers to large-volume server clients. “Inventories are gradually starting to come down.”
    • NOK ERIC WASHINGTON (Reuters) - As the U.S. further pushes to separate itself from Chinese telecommunications equipment maker Huawei Technologies, the Pentagon is laying the groundwork to use technology from rivals Nokia and Ericsson in its 5G development plans, a Pentagon official said on Monday. “I am not sure we are going to have a total U.S. solution,” Ellen Lord, the Department of Defense’s under secretary of defense for acquisition and sustainment said. “We are talking to Ericsson, we are talking to Nokia quite a bit.” WASHINGTON (Reuters) - As the U.S. further pushes to separate itself from Chinese telecommunications equipment maker Huawei Technologies, the Pentagon is laying the groundwork to use technology from rivals Nokia and Ericsson in its 5G development plans, a Pentagon official said on Monday. “I am not sure we are going to have a total U.S. solution,” Ellen Lord, the Department of Defense’s under secretary of defense for acquisition and sustainment said. “We are talking to Ericsson, we are talking to Nokia quite a bit.”
    • RHT - Red Hat reports Q4 EPS $1.16 ex-items vs FactSet $1.01  Reports Q4 Revenue $879.0M vs FactSet $883.9m Outlook: Due to the pending transaction with International Business Machines Corporation, Red Hat will not be hosting a conference call for its Q4 2019 business results and will not be providing an outlook for its FY20.
    • ROKU - Roku faces "a slight incremental negative" from Apple’s recently-announced suite of services, according to Citi (neutral, PT $53), which said the company wouldn’t see much revenue upside from the company’s move into streaming video. "The inclusion of the Apple TV app on Roku devices alone will not drive meaningful incremental direct ad revenue," wrote analyst Mark May, who noted that other popular apps have "historically not driven material direct ad revenue for Roku"
    • UBER - Uber confirms it has agreed to acquire Careem Networks for $3.1B
    • FDS- FactSet reports Q2 adjusted EPS $2.42 vs FactSet consensus $2.34  Reports Q2 (Feb): Revenue $354.9M vs FactSet $356.2M Organic revenue +5.7% y/y vs prior quarter’s +6.4% Metrics: ASV plus professional services $1.44B at 28-Feb vs consensus $1.43B Organic ASV plus professional services +$21.0M q/q

Analyst Actions:

    • AAPL – Apple price target raised to $215 from $185 at UBS
    • NVDA - NVIDIA initiated overweight at Piper Jaffray
    • AAPL - Apple target increased to $230 from $185 at Canaccord Genuity
    • CMCM - Cheetah Mobile downgraded to neutral from buy at Nomura/Instinet 
    • CRTO - Criteo downgraded to hold from buy at SunTrust Robinson Humphrey

Syndicate:

    • IQ - Iqiyi, Inc. announces $1.05B convertible note offering

M&A and Corporate Action News

Chris Swann (203) 861-7650 | 3.26.2019

 
    • VSM – Merck has launched its formal $48 tender offer for Versum. The offer is subject to a minimum tender condition of a majority, the termination of the Entegris transaction, No Versum shareholder approval for the Entegris transaction, HSR, CFIUS and all other foreign regulatory and antitrust approvals. The offer will expire on 6/7.
    • CELG/BMY – AN HSR 2nd request has been issued. “Both parties will continue to work cooperatively with the FTC to show that the Merger will not harm competition and that the FTC should conclude its investigation. The effect of the Second Request is to extend the waiting period imposed by the HSR Act until 30 days after Bristol-Myers Squibb and Celgene have substantially complied with the Second Request, unless that period is extended voluntarily by the parties or terminated sooner by the FTC.”
    • GG/NEM – Late yesterday, Paulson issued its response, commending the special dividend and giving its support for the merger. “Since the Newmont board and other significant shareholders are supportive of the revised terms, we will no longer oppose the transaction.” The about face came after large holder, Van Eck, also changed its stance after the company announced a special cash dividend aimed at appeasing investors.
    • GG/NEM – On the heels of yesterday’s developments, ISS has now recommended that Newmont Mining shareholders vote in favor of the Goldcorp transaction.
    • TIER/CUZ – The DMA was filed late yesterday. MD law. The deal is subject to both TIER and CUZ shareholder approvals. The proxy must be filed within 45 calendar days. There is specific performance available but no limitation on divestitures. The termination date has been set for 10/31 with a termination fee of $45.45mm.
    • LABL – The preliminary proxy statement has been filed, which should setup shareholder votes by June. The deal is subject to HSR, EC, Mexico and South Africa. All filings have been made.
    • LABL – According to the backgrounder, LABL contacted some 12 interested parties, of which 10 signed CA’s, with several unsolicited proposals following. Five first round IOIs were received, from $40 - $57. As a result of poor operating performance, several parties dropped out of the process, with Platinum Equity and Party X remaining until the end. The 2nd round bidding showed IOI’s as low as $39 per share and as high as $48 per share. Platinum Equity adjusted its proposed range to as low as $45 - $48, and eventually reaching $50 per share after feedback from LABL.
    • RHT – Red Hat announced earnings that beat on EPS but were slightly lower than analysts’ estimates on revenue. The company did not provide an update on the pending deal with IBM. A fundamental analyst this morning has pegged RHT’s stand-alone valuation at $190.
    • NITE – The German FCO filing has been made and is set to expire on 4/20.
    • RPC LN – The court and general meetings have been set for 4/18
    • DB/CBK GR – According to reports late yesterday and early this morning, the companies are starting to see some push back from the Qatari shareholders, who are concerned with the dilutive effects of such a transaction.
    • LION/ABCB – The definitive proxy has been filed, setting the shareholder votes for 5/6. The deal remains subject to the Fed, FDIC and the GA DOB.
    • CBS/VIAB – The NY Post is reporting this morning that CBS and Viacom may restart merger talks in the wake of the Viacom/AT&T contract dispute settlement. According to the report, CBS is now prepared to offer a premium to Viacom shareholders. The consideration is expected to be all stock.
    • BBBY – The WSJ is reporting that 3 activists, Legion, Macellun and Ancora are seeking to replace Bed Bath & Beyonds entire 12-person board. The group contends Bed Bath & Beyond has failed to adapt as consumers increasingly shop online or expect unique experiences in bricks-and-mortar stores, the people said. The retailer has allowed its costs to increase, they said, resulting in shrinking margins over the past several years.
    • DEB LN – Sports Direct is reportedly considering a cash offer for Debenhams
    • Uber – Uber has reached an agreement to buy Careem for $3.1B, only days after the initial speculation began to circulate. Uber will pay Dubai-based Careem $1.4 billion in cash and another $1.7 billion in convertible notes when the deal closes, the two companies said in a statement. They are seeking regulatory approval in the 15 countries where Careem operates.
    • Bitmain – The bitcoin mining gian, Bitmain Technologies has reportedly let its HK based IPO filing lapse.  “We do recognize that despite the huge potential of the cryptocurrency and blockchain industry, it remains a relatively young industry which is proving its value,” Bitmain said in a statement posted on its website Tuesday. “We hope regulatory authorities, media and the general public can be more inclusive to this young industry.”
    • Events/Calendar – FNSR/IIVI shareholder votes, Free State Foundation’s 11th Annual Telecom Policy Conference - DOJ’s Makan Delrahim speaks at 9:10am in DC; FTC’s Joseph Simons speaks at 2pm, ULTI go-shop expiration (last night)

Disclaimer:
This publication is prepared by Weeden & Co. LP’s ("Weeden") trading department and is for informational purposes only. Weeden & Co. does not produce research, nor does it have a research department. This publication is not intended to form the basis of any investment decision and should not be considered a recommendation by Weeden or its associates and/or affiliates. The material herein is based on data from sources considered to be reliable, but is not guaranteed as to accuracy and does not purport to be complete. It is not to be construed as a representation by us or as on offer or the solicitation of an offer to sell or buy any security. Options involve risk and are not suitable for all investors. Trading in options is considered speculative and it is possible to lose all, a portion of, or funds in excess of your initial investment. Any calculations and valuations presented herein are intended as a basis for discussion. Any opinions or estimates given may change. Weeden undertakes no obligation to provide recipients with any additional information or any update to or correction of the information contained herein. No liability is accepted by Weeden for any loss that may arise from any use of the information contained herein or derived here from.
From time to time, Weeden, its affiliates, and/or its individual officers and/or members of their families may have a position in the subject securities which may be consistent with or contrary to the recommendations contained herein; and may make purchases and/or sales of those securities in the open market or otherwise. This publication is intended solely for Weeden’s institutional customers/broker-dealers. Use by other than the intended recipients is prohibited. This publication may not be reproduced or redistributed outside the recipient’s organization.