WSJ : HotelPlanner, Reservations.com Near Deal to Merge and Go Public

HotelPlanner, Reservations.com Near Deal to Merge and Go Public
Online travel booking companies would combine with blank-check firm, be valued around $685 million

HotelPlanner and Reservations.com are nearing a deal to merge and go public through a special-purpose acquisition company, people familiar with the matter said.

The combined online travel-booking firm, which would still be called HotelPlanner, would be valued at about $685 million while combining with the SPAC Astrea Acquisition Corp. ASAX -0.21% , the people said. The merger could be announced as soon as this week.

The talks come as online travel companies cope with last year’s decline in demand due to the coronavirus pandemic and amid concerns that the Delta variant could halt this year’s rebound. HotelPlanner—which already owns the business-focused site Meetings.com—expects to post record sales this year that top 2019’s figure, the people said. The combined company projects roughly $170 million in revenue next year.

Smaller than many of its competitors, HotelPlanner hopes to sell public investors on its growth potential, discounted group rates and what it terms a gig customer-service system in which independent workers around the world do short-term work for the company, the people said.

HotelPlanner, founded in 2004, would be expected to use some of the money held by the SPAC to cover transaction costs and compensate existing investors in the combined company who are selling a small portion of their stakes, the people said. Current investors are still expected to own most of the company, which would be expected to have about $105 million left over in cash proceeds.

A SPAC is a shell company that raises money and lists on an exchange to merge with a private firm and take it public. The private company then replaces the SPAC in the stock market and is allowed to make business projections when going public. Those aren’t allowed in a traditional initial public offering. SPACs have exploded as faster IPO alternatives in the past few years, raising a record of nearly $120 billion so far in 2021, according to SPAC Research.

Astrea raised $172.5 million in February.

The HotelPlanner deal wouldn’t be expected to have an associated fundraising round called a private investment in public equity, or PIPE, that often accompanies mergers and lets companies do larger SPAC deals. Shares of companies that raise PIPEs have historically performed better because PIPEs are raised from institutional investors and can validate a company’s valuation.

PIPEs have become harder to complete, with shares of many companies that went public via SPACs struggling in recent months and issuance slowing. Some firms that don’t need as much cash have also chosen to keep more control of their companies by not using PIPEs.

FT : It’s time to ban autonomous killer robots before they become a threat

It’s time to ban autonomous killer robots before they become a threat
With their first use on the battlefield, AI-powered drones are now a growing problem the world must face

The subject of autonomous killer robots exercises many technologists, politicians and human rights activists. Indeed, the Financial Times’s advice page for would-be opinion writers complains that, in their pitches, “lots of people spin doomsday scenarios about robots”. But now these robots are on the battlefield — and we need to do something about it.

A UN report on the Libya conflict has revealed that, for the first time, humans were “hunted down” and presumably killed by “lethal autonomous weapons systems such as the STM Kargu-2”, which were programmed to attack targets with no human control. The Kargu-2 is a plate-sized quadcopter equipped with cameras, onboard AI and a warhead of roughly 1kg, enough to kill a room full of people.

Meanwhile, in early June an Israeli newspaper reported that the Israel Defense Forces had begun using AI-controlled drone swarms to attack targets in Gaza during the recent conflict there.

Many people find the very idea of robots hunting and killing humans intolerable. António Guterres, UN secretary-general, has observed that “machines with the power and discretion to take lives without human involvement are politically unacceptable, morally repugnant and should be prohibited by international law”. The International Committee of the Red Cross has declared that the “use of autonomous weapon systems to target human beings should be ruled out”. 

Such weapons also lower the threshold for war, promote strategic instability, are vulnerable to cyber infiltration and risk accidental escalation when false alarms turn into instant, real retaliation.

But the principal reason why states should ban lethal autonomous weapons is that they will become weapons of mass destruction. Because they require no human supervision, one button-push is enough to launch a mass attack by thousands or millions of weapons. If we are going to allow their manufacture and sale on the international arms market, we might as well start selling nuclear weapons on Amazon.

In July 2015, leading AI researchers signed an open letter calling for a ban on lethal autonomous weapons. Alas, six years later, discussions about a possible treaty at the UN in Geneva, which are in session right now, have stalled. Nations are — or pretend to be — incapable of understanding what autonomous weapons are or why they present a threat.

The Slaughterbots film, which premiered at the 2017 Geneva meeting, was designed to explain in simple, graphic terms exactly what the AI community was trying to say. As an AI researcher, I knew that every piece of technology shown in the film was already feasible. Yet I clearly remember the Russian ambassador saying there was no point in discussing science fiction that would not be real for 25 or 30 years. As he spoke, Kargu prototypes were already being built and were announced a month later.

Russia is not the only obstacle to a treaty. The UK and US also oppose formal negotiations. Their opposition seems especially senseless because both countries have internal prohibitions on autonomous weapons; they are, in effect, just insisting that other countries be allowed to deploy them. All three countries — and of course the entire world — have a lot to lose if and when mass-destruction capabilities proliferate to unreliable regimes and non-state actors.

Some argue that a ban wouldn’t work, but there are many precedents for successful international action. The chemical and biological weapons conventions have largely eliminated two entire classes of WMDs; under the landmine treaty, 92 countries have destroyed their entire stocks (more than 55m mines); and the treaty on blinding laser weapons nipped another inhuman technology in the bud. As early as 1868, the St Petersburg Declaration banned bullets that explode inside the body.

The Red Cross proposal for an immediate moratorium on autonomous anti-personnel weapons is an essential first step, because small anti-personnel weapons are the easiest to deploy in large numbers. A treaty should include agreements on weapon identification and tracking to prevent unattributable remote attacks, and on communication protocols to prevent accidental escalation and ensure that weapons can be recalled or disabled by their owners.

As with the Chemical Weapons Convention, industry protocols can prevent large-scale diversion of civilian devices to illicit uses by criminals, terrorists and rogue states. All of this is the hard, boring work of allowing human beings to live their lives in relative security. Let it begin.

WSJ : Canadian Pacific Plans New, Higher Bid for Kansas City Southern

Canadian Pacific Plans New, Higher Bid for Kansas City Southern
Move would reignite takeover battle with Canadian National Railway for the U.S. railroad

Canadian Pacific Railway Ltd. CP -1.06% is planning to make a new, increased offer for Kansas City Southern, KSU -0.80% according to people familiar with the matter, reigniting a takeover battle with Canadian National Railway Co. for the coveted U.S. railroad.

Canadian Pacific’s board of directors met Monday to authorize a bid that values Kansas City Southern near $300 a share, the people said, or about $27 billion. There is no guarantee Canadian Pacific will follow through with the plan; if it does, it is expected to do so soon.

Kansas City Southern is the smallest of the nation’s major freight railroads. The company plays a big role in U.S.-Mexico trade, with a network stretching across both countries and contributing to its desirability as an acquisition target. Railroad takeovers are rare as regulators tend to view them warily, but Kansas City Southern is seen as one of the last operators of size that is potentially available for purchase. Its allure has only grown as the U.S. economy recovers from the slowdown triggered by the coronavirus pandemic.

Canadian Pacific had clinched a cash-and-stock deal with Kansas City Southern valued at around $275 a share, or $25 billion. Kansas City Southern later agreed to a sale to Canadian National instead after CN offered about $30 billion (then worth around $320 a share) and Canadian Pacific declined to raise its offer.

Kansas City Southern shares closed Monday at $269.60 apiece and rose 6.5% in after-hours trading after The Wall Street Journal reported on Canadian Pacific’s plans.

Canadian Pacific could be motivated to submit a new bid ahead of a planned shareholder vote on the Canadian National-Kansas City Southern deal slated for Aug. 19. Canadian Pacific has been urging Kansas City Southern shareholders to vote against the current deal.

An influential proxy advisory firm last week recommended Kansas City Southern shareholders support the Canadian National deal even though regulators could block it. Institutional Shareholder Services Inc. said in a report that voting for the agreement would lock in the termination fee that Canadian National would owe if its deal fails. It also noted that Canadian Pacific is soliciting votes against the deal but hasn’t provided Kansas City Southern shareholders with “any actionable alternative,” which many saw as an opening for the Canadian railroad to submit a fresh bid.

Canadian Pacific had previously indicated that should regulators nix the Canadian National deal, it would remain interested in making a deal and that it would continue working to gain required regulatory approvals.

Canadian Pacific Chief Executive Keith Creel said in an earnings call last month that his conviction about the deal the company initially negotiated with Kansas City Southern “has not changed, has not wavered at all. In fact, it’s grown stronger.”

Either deal would involve a two-step process. First, a voting trust would acquire Kansas City Southern shares and, assuming necessary approvals are granted, the companies would then merge. Both the use of a trust and the merger itself need approval from the U.S. Surface Transportation Board, which requires major railroad combinations to be in the public interest and enhance competition.

The STB approved a voting trust proposed as part of the Canadian Pacific deal in May. It hasn’t yet ruled on Canadian National’s voting trust, but a decision was expected soon.

Canadian Pacific has argued that the deal with Canadian National is more likely to face regulatory scrutiny. Canadian National has said it is confident it would receive approval and has offered to sell a 70-mile stretch of a Louisiana rail network to defuse antitrust concerns. Canadian National is the larger of the two, with a market value of about $77 billion compared with Canadian Pacific’s $49 billion valuation.

There have been no major railroad mergers in the U.S. for two decades, after a handful of industry combinations triggered widespread complaints about poor service. Voting trusts have been used so infrequently that there isn’t much precedent for how the STB might rule on the Canadian National-Kansas City Southern proposal.

Canadian National agreed to pay $200 in cash and 1.1129 shares of its stock for each Kansas City Southern share under its current agreement. In sweetening its proposal in May, Canadian National agreed to add more stock and cover the $700 million breakup fee Kansas City Southern would owe Canadian Pacific for walking away from their agreement.

If an agreement with Canadian National fails to get approval from regulators, the Canadian company would also owe Kansas City Southern a $1 billion reverse breakup fee.

The drama comes as the Biden administration has singled out the railroad industry as one of the sectors in which it says regulators should confront consolidation and perceived anti-competitive pricing. In July, the administration asked the STB to combat what it calls a pattern of consolidation and aggressive pricing that has made it onerously expensive for American companies to transport goods to market.

The White House push to limit what it sees as anti-competitive behavior hasn’t done much to cool a hot mergers-and-acquisitions market. So far this year, U.S. companies have struck $1.75 trillion of deals, more than triple the comparative year-earlier total, according to Dealogic, as high share prices and a resurgent economy spur companies to seek merger partners.

>>> US After Hours Summary: MODN +12.2%, PRPL +12.1%, DDD +11.2%, QLYS +6.5% hig

After Hours Summary: MODN +12.2%, PRPL +12.1%, DDD +11.2%, QLYS +6.5% higher on earnings; FLGT -14.1%, SDC -12.7%, SQSP -9.5%, REAL -5.7%, SAIL -5.1% fall on earnings; ARCT +44.5% jumps on moving to Phase 3 trial

After Hours Gainers:

Companies trading higher in after hours in reaction to earnings/guidance: ORGO +13.6%, MODN +12.2%, PRPL +12.1%, DDD +11.2%, HALO +10%, VRRM +8.4% (also approves $100 mln share repurchase authorization), LU +7%, QLYS +6.5%, ATCO +5.7%, NTR +5.2%, OUST +5.2% (also names new chairperson), COMP +4.6%, DHT +4.3%, EVBG +4.3% (also announces collaboration that will incorporate AP's news reports), AMC +4.1%, STE +3.8% (also increases dividend), APPS +3.6%, HLIO +2.8%, ELY +2.6%, CHGG +2.5%, TALK +2.5%, CCXI +1.4%, ETH +1.2%, CXW +0.8%, DOOR +0.2% (also approves new $250 mln share repurchase program), HBM +0.2%, ESE +0.1%

Companies trading higher in after hours in reaction to news: ARCT +44.5% (updates its vaccine and therapeutics pipeline progress; also reports Q2 earnings), KSU +5.4% (CP planning to make increased acquisition bid for KSU, according to WSJ), ATRA +3.7% (provides operational progress and reports Q2 results), FLXN +1.8% (announces publication of Phase 2 study of ZILRETTA), PPTA +1.5% (announces antimony supply agreement with Ambri), NET +0.5% ($1 bln convertible notes offering), AMK +0.4% (provides July operating metrics), DAL +0.1% (SKYW to purchase and operate aircraft under contract with DAL), GMS +0.1% (announces platform expansion activity)

After Hours Losers:

Companies trading lower in after hours in reaction to earnings/guidance: MILE -19.8%, FLGT -14.1% (also acquires CSI Labs), RETA -13.6%, SDC -12.7%, VUZI -9.6%, SQSP -9.5%, PNTG -6.3%, ZIOP -6.1%, INO -6%, REAL -5.7%, SAIL -5.1%, APPF -5%, FGEN -4.3%, PLNT -4.1% (also signs franchise agreement to expand global footprint in Mexico), IPAR -4%, CMBM -2.7%, CF -2.2% (also announces joint exploration with Mitsui on blue ammonia projects), ACM -2%, MESA -2%, BARK -2%, NHI -1.2%, NCMI -0.6%, PEN -0.5%, CABO -0.3%, OSH -0.2%

Companies trading lower in after hours in reaction to news: IGMS -6.4% (files for $400 mln mixed securities shelf offering; also files for 24,747,658 share common stock offering by selling shareholders), KNBE -5.4% (stock offering), BCRX -4.9% (stock offering), BRSP -4.9% (stock offering by selling shareholder), HCAT -4.2% (stock offering), CP -3.2% (CP planning to make increased acquisition bid for KSU, according to WSJ), FRC -2.7% (stock offering), SIVB -2% (stock offering), CADE -1.9% (BXS and CADE receive shareholder approval for proposed merger), ATER -1.5% (stock offering), WPC -1.4% (stock offering), BCLI -1% (files for $200 mln mixed securities shelf offering), SKYW -0.3% (SKYW to purchase and operate aircraft under contract with DAL), TMST -0.1% (to increase tubing selling prices), CNS -0.1% (reports July AUM), CNA -0.1% (CFO resigns), TRQ -0.1% (issues comments on review of Oyu Tolgoi Mine increase)

>>> US Close Dow -0,30% S&P -0,09% Nasdaq +0,16% Russell -0,58%

Closing Stock Market Summary

The S&P 500 decreased 0.1% on Monday in a mixed, and tight-ranged, session that lacked conviction. The Dow Jones Industrial Average (-0.3%) and Russell 2000 (-0.6%) joined the benchmark index in negative territory, while the Nasdaq Composite increased 0.2%.  

There weren't that many new macro developments, which might have explained the 15-point range in the S&P 500 as investors preferred to wait for key inflation data later this week. Seven of the 11 S&P 500 sectors closed lower, although the energy sector (-1.5%) was the only sector that lost more than 1.0%. 

Energy stocks succumbed to weaker oil prices ($66.55/bbl, -1.73, -2.5%), which along with copper prices ($4.29/lb, -0.07, -1.3%) reflected lingering growth concerns attributed to the Delta variant. Media reports continued to discuss the spread of the variant and the measures that governments and businesses are taking to contain its spread. 

The Treasury market, meanwhile, didn't reflect increased growth concerns since the 10-yr yield settled three basis points higher at 1.32% after touching 1.27% intraday. The financials sector (+0.3%) benefited from the positive turnaround and was accompanied by the health care (+0.4%) and consumer staples (+0.3%) sectors atop the leaderboard. 

Looking at individual movers, Moderna (MRNA 484.47, +70.75, +17.1%) surged 17% amid positive momentum, Tesla (TSLA 713.76, +14.66, +2.1%) rose 2% after receiving an upgrade to Buy from Hold at Jefferies, Coinbase (COIN 280.47, +22.21, +8.6%) followed cryptocurrencies higher, and Tyson Foods (TSN 77.30, +6.18, +8.7%) rose 9% following its earnings report.  

In M&A news, Sanderson Farms (SAFM 195.88, +13.51, +7.4%) agreed to be acquired by Cargill and Continental Grain Company for $4.5 billion, or $203/share, in cash. Golden Nugget Online Gaming (GNOG 18.50, +6.23, +50.8%) agreed to be acquired by DraftKings (DKNG 52.36, +0.77, +1.5%) in an all-stock transaction valued at $1.56 billion.

Separately, the $1 trillion bipartisan infrastructure bill is expected to pass the Senate as soon as tonight, although House Speaker Pelosi reaffirmed she won't bring the bill to a House vote unless the $3.5 trillion budget reconciliation bill is passed. 

The 2-yr yield was unchanged at 0.20%. The U.S. Dollar Index increased 0.2% to 92.98. 

Monday's economic data was limited to the JOLTS report for June, which showed job openings increase to a record-high of 10.073 million from a revised 9.483 million (from 9.209 million) in May. Looking ahead, investors will receive preliminary Q2 Productivity and Unit Labor Costs and the NFIB Small Business Optimism Index for July on Tuesday.  

  • S&P 500 +18.1% YTD
  • Nasdaq Composite +15.1% YTD
  • Dow Jones Industrial Average +15.0% YTD
  • Russell 2000 +13.2% YTD

WSJ : Coinbase Says Capital-Markets Head Brett Redfearn Has Left Company

Coinbase Says Capital-Markets Head Brett Redfearn Has Left Company
Former SEC official was a high-profile hire by the cryptocurrency exchange this year

Brett Redfearn, a former federal regulator who joined Coinbase COIN +6.99% Global Inc. earlier this year, has left the cryptocurrency exchange after about four months on the job.

Mr. Redfearn had been head of Coinbase’s capital-markets group. He resigned from the company at the end of July. A Coinbase spokesman confirmed the departure, which hasn’t been previously reported.

Coinbase is the largest U.S. crypto exchange. It has played a major role in popularizing digital currencies, with over 56 million users.

Mr. Redfearn, a former official at the Securities and Exchange Commission, left the firm after Coinbase decided to shift its priorities away from digital-asset securities, people familiar with the matter said. He had been one of the company’s highest-profile hires this year.

Digital-asset securities are crypto tokens that fall within the legal definition of securities under U.S. law, like traditional stocks and bonds, and unlike bitcoin, which regulators consider a commodity.

Coinbase had said Mr. Redfearn would work on digital-asset securities when it announced his hire in late March. The Coinbase spokesman said on Monday the departure was amicable.

Last week, SEC Chairman Gary Gensler gave a speech pledging to rein in the “Wild West” of the crypto markets, using the full extent of the SEC’s authority. He suggested in his speech that many crypto trading platforms were offering unregistered securities in violation of U.S. law.

From 2017 to 2020, Mr. Redfearn led the SEC’s trading and markets division, which oversees exchanges and brokerages. Before that he had a long career on Wall Street, including as a top electronic-trading executive at JPMorgan Chase & Co.

Coinbase said it was hiring Mr. Redfearn as vice president of capital markets about two weeks before the company went public on the Nasdaq Stock Market. Coinbase’s capital-markets group includes exchange operations and capital-markets products.

News of Mr. Redfearn’s departure comes several days after another prominent ex-regulator left one of Coinbase’s rivals, also after just a few months on the job.

Brian Brooks resigned as chief executive of Binance.US, citing “differences over strategic direction” as he announced the departure on Twitter on Friday. Mr. Brooks had been acting head of the Office of the Comptroller of the Currency, a top banking regulator, under the Trump administration.

Binance.US is the U.S. affiliate of overseas crypto-exchange operator Binance Holdings Ltd. Changpeng Zhao, the founder and CEO of Binance, confirmed Mr. Brooks’s resignation and voiced confidence in Binance.US’s business.