FT : Virtual care groups Teladoc and Livongo to combine in $18.5bn deal

Virtual care groups Teladoc and Livongo to combine in $18.5bn deal
Companies aim to capitalise on boom in demand for tele-health services during coronavirus pandemic

Teladoc Health and Livongo, two virtual care companies, have agreed to combine in an $18.5bn cash-and-stock deal as they seek to create a telemedicine giant to capitalise on a boom in demand for remote healthcare services during the coronavirus pandemic.

Under the terms of the agreement, Livongo’s shareholders will receive 0.5920 shares of Teladoc plus $11.33 in cash for each of their shares. Once the merger is complete, Teladoc shareholders will own about 58 per cent of the combined company with the rest to Livongo.

Coronavirus has kept patients away from hospitals and doctor’s clinics for fear of infection, helping telemedicine come of age in 2020. That trend is expected to continue as uncertainty remains about when the pandemic will end.

“Covid-19 has caused a massive acceleration in the use of tele-health,” McKinsey said in a May report. “Consumer adoption has skyrocketed, from 11 per cent of US consumers using tele-health in 2019 to 46 per cent of consumers now using tele-health to replace cancelled healthcare visits.”

The valuations of telemedicine companies have also soared. Shares in Teladoc have risen 200 per cent since the start of the year, while Livongo’s stock rose has gained 500 per cent during the same period

“This highly strategic combination will create the leader in consumer-centred virtual care and provides a unique opportunity to further accelerate the growth of our data-driven member platform and experience,” said Glen Tullman, Livongo’s founder and executive chairman. 

The combined company is expected to reach 70m customers in the US. The new platform is set to generate revenues of about $1.3bn in 2020 on a pro-rata basis, representing year-on-year growth of 85 per cent. It is expected to generate pro rata earnings before interest, taxes, depreciation and amortisation of more than $120m for 2020, and revenue synergies of $100m by the end of the second year, increasing up to $500m by 2025.

“Together, we will further transform the healthcare experience from preventive care to the most complex cases, bringing ‘whole person’ health to consumers and greater value to our clients and shareholders as a result,” said Jason Gorevic, Teladoc Health’s chief executive.

Lazard served as the financial adviser to Teladoc and Paul, Weiss, Rifkind, Wharton & Garrison acted as its legal adviser. Morgan Stanley was the financial adviser to Livongo and Skadden Arps, Slate, Meagher & Flom LLP was its legal adviser.

FT : Italian government halts Telecom Italia asset sale to KKR

Italian government halts Telecom Italia asset sale to KKR
Officials want a more ambitious tie-up involving Enel to create a single national fibre network

The Italian government has told Telecom Italia to halt the sale of network assets to KKR, pushing instead for the creation of a single national fibre network.

Officials on Tuesday asked Telecom Italia to delay the €1.8bn sale of a 37.5 per cent stake of its fibre and copper, so-called “secondary”, network to the US buyout group, according to several people involved.

Under the existing plan, Telecom Italia’s last mile grid would be transferred to a newco, FiberCop, which would be responsible for upgrading the copper street-to-building network to fibre.

The government considers the network a national strategic asset and wants state-controlled utility Enel to be involved in forming a single efficient national network.

The delay is “by no means a way to interfere with a private company’s plans but rather a way to improve its potential”, said one Italian official speaking on condition of anonymity.

Shares in Telecom Italia rose 5.3 per cent on Wednesday on the potential for the creation of the broader single network.

Parties within Italy’s ruling coalition have contrasting views about the best way to successfully create a single national network and plans will be discussed over the next few weeks, according to multiple people involved.

Luigi Gubitosi, Telecom Italia’s chief executive, said earlier this year that KKR’s offer was a first step towards a possible integration with Open Fiber.

Telecom Italia said the board looked “very favourably upon the idea to speed up the national single network project and will be enthusiastically taking part in the works the government intends to launch over the next few hours”.

Telecom Italia said the board had been reconvened for August 31 and would make its final assessments on KKR’s offer.

However, according to multiple people involved, Enel, Open Fiber’s main shareholder, has so far resisted merger suggestions because it does not want to give up control of the fibre networks it built from scratch.

Spokespeople for the Italian government did not immediately respond to a request for comment. KKR declined to comment.

>>> US Gapping down

Gapping down
In reaction to disappointing earnings/guidance:

  • VAPO -27.9%, NEWR -18.8%, NKLA -14.3%, CDLX -12.6%, EZPW -10.2%, NPTN -9.9%, CORT -9.5%, GEL -9.5%, ETH -8.9%, GLUU -8.2%, NVTA -8%, WW -8%, ACLS -7.8%, BYND -6.9%, GNMK -6.8%, DS -6.3%, MCHP -6.2%, ACHC -6%, GTE -5.9%, UPWK -5.8% (also names new CFO), FMC -5.1%, EVER -3.9%, ANET -3.8%, OSPN -3.8%, PRGO -3.8%, TWLO -3.6%, REYN -3.5%, AVLR -3.4%, PLNT -3.2%, OI -3.1%, SGRY -3.1%, UIS -2.6%, FOXA -2.5%, ONTO -2.1%, ERJ -2.1%, ODP -2.1%, ENPH -1.9%, ENR -1.8%, ATVI -1.6%, CLDT -1.6%, GOLF -1.6%, MRCY -1.3%, Y -1.2%, ENBL -1.2%, SBGI -1%

M&A news:

  • EVER -3.9% (to acquire Crosspointe Insurance & Financial Services)

Other news:

  • AVLR -3.4% (stock offering)
  • IMUX -2.7% (prices offering of 5,000,000 shares of its common stock at $18.00 per share)
  • VCYT -1.4% (prices offering of 6,000,000 shares of its common stock at $30.00 per share)
  • WMT -0.9% (delays launch of Walmart+, according to Recode)

Analyst comments:

  • MC -1.5% (downgraded to Sell from Neutral at Goldman)
  • SAFM -1% (downgraded to Neutral from Outperform at Credit Suisse)
  • TSN -0.8% (downgraded to Neutral from Outperform at Credit Suisse)

>>> US Gapping up

Gapping up
In reaction to strong earnings/guidance:

  • FLGT +17.9%, LPSN +16.8%, HZNP +15.3%, FVRR +13.7%, BOOT +11.6%, SQ +10.5%, CLW +9.9%, HBIO +8.5%, LMNX +8.2%, LVGO +8.1%, GRBK +7.7%, VMD +7.5%, AIZ +7%, WD +7%, VRT +6.9%, CPRI +6.8%, DIS +6.5%, DVN +6% (also declares special dividend of $0.26/sh), GTES +6%, TEVA +6%, EVH +5.5%, PEAK +5.3%, SLRC +5.2%, RGA +5.1%, MIDD +5%, MNST +4.9%, GFI +4.9%, DK +4.8%, PLMR +4.8%, CAMT +4.8%, MDU +4.6%, DISCA +4.5%, CMP +4%, NXST +3.9%, MODN +3.8%, ALL +3.8%, NYT +3.8%, ORA +3.7%, JAZZ +3.6%, MTCH +3.3%, KTOS +3.3%, WK +3.3%, REGN +3.3%, TRUP +3.1%, NI +3.1%, PERI +3%, CNST +3%, CRL +3%, REGI +2.9%, CVS +2.9%, ABC +2.7%, PXD +2.6%, EVOP +2.6%, CDNA +2.5%, GLOP +2.5%, CDK +2.3%, LOPE +2.1%, RRR +2.1%, FNF +2.1%, EQH +2.1%, EVRG +2.1%, INMD +2.1%, FUN +2%, OMI +1.9%, PPD +1.8%, WYNN +1.7%, INGN +1.7%, TRI +1.5%, DFIN +1.5%, GNL +1.4%, BIP +1.4%, PSN +1.2%, WWW +1.2%, CDW +1.2%, EVTC +1.1%, NLSN +1.1%, PRU +1%, CLH +1%

M&A news:

  • DOYU +14.5% (stakeholder Tencent (TCEHY) said to be in talks seeking to combine DouYu with HUYA (HUYA), according to Bloomberg); HUYA +11.6%

Select metals/mining stocks trading higher:

  • HMY +3.5%, SLV +3.4%, AU +3.1%, GOLD +2.5%, AUY +2.2%, FCX +2.2%, GDX +1.8%, GLD +1.2%, . 

Select oil/gas related names showing strength:

  • BP +4.8%, USO +3.9%, RDS.A +2.8%, COP +2.3%, XLE +2.2%, HAL +2.1%, OIH +2.1%, TOT +2%, XOM +1.8%, SLB +1.8% . 

Other news:

  • IMV +23.8% (announces funding award from the Canadian government for COVID-19 vaccine Phase 1 clinical study)
  • NVAX +23.1% (announces data from its Phase 1/2 trial of its COVID-19 vaccine)
  • BLDP +5.7% (announces that vehicles powered by its technology have driven 50+ mln kms)
  • AXSM +4.3% (granted FDA Breakthrough Therapy designation for AXS-12 for the treatment of cataplexy in patients with narcolepsy)
  • GNFT +2.9% (reports publication of NIS4 technology in The Lancet)
  • FTI +2.8% (files mixed securities shelf offering)
  • KNL +2.8% (increases dividend)
  • PCRX +2.4% (publishes full results of Phase 4 study of EXPAREL)

Analyst comments:

  • IMXI +5.6% (upgraded to Mkt Outperform from Mkt Perform at JMP Securities)
  • HL +4.1% (upgraded to Neutral from Underperform at BofA Securities)
  • KGC +3.1% (upgraded to Buy from Neutral at BofA Securities)
  • PANW +2.1% (upgraded to Buy from Neutral at BTIG Research)

>>> US Early premarket gappers

Early premarket gappers

  • Gapping up:
    • NVAX +17.7%, FLGT +15.7%, LPSN +14%, FVRR +10.3%, SQ +9.3%, GRBK +9.1%, CLW +8.4%, VMD +7.5%, AIZ +7%, KNL +6.6%, LMNX +6.5%, GTES +6%, BOOT +6%, DIS +5.7%, PERI +5.6%, EVH +5.5%, PEAK +5.3%, VRT +5.3%, SLRC +5.2%, RGA +5.1%, DVN +5%, GFI +4.9%, DK +4.8%, MDU +4.6%, CVS +4.6%, REGN +4.1%, CMP +4%, MODN +3.8%, GEL +3.8%, JAZZ +3.6%, BLDP +3.5%, ORA +3.5%, ALL +3.4%, TRUP +3.4%, LVGO +3.4%, KTOS +3.3%, WK +3.3%, MNST +3.2%, PPD +3%, REGI +2.9%, HUM +2.8%, WD +2.8%, PLMR +2.7%, CDNA +2.5%, FTI +2.4%, CDK +2.3%, FMC +2.2%, OMI +2.2%, LOPE +2.1%, RRR +2.1%, FNF +2.1%, EQH +2.1%, CAMT +2.1%, MTCH +1.9%, INGN +1.7%, TRI +1.5%, GNL +1.4%, BWA +1.3%, PSN +1.2%, VST +1.2%, WWW +1.2%, EVTC +1.1%, WYNN +1%, PRU +1%
  • Gapping down:
    • VAPO -28.8%, ONTO -25%, NEWR -18.4%, CDLX -13.3%, NKLA -12.5%, NPTN -9.4%, BYND -8.9%, EZPW -8.8%, UPWK -8.6%, NVTA -8%, WW -8%, CORT -8%, GLUU -7.4%, MCHP -6.8%, ETH -6.5%, ERJ -6.4%, ANET -6.1%, ACHC -6%, EVER -5.8%, AVLR -5.3%, ENPH -5.2%, UIS -4.6%, TRHC -4.5%, TWLO -4%, OSPN -3.8%, PAA -3.7%, PUMP -3.2%, OI -3.1%, PLNT -3%, FUN -2.4%, LL -2%, Y -1.4%, ACLS -1.4%, CERS -1.3%, MRCY -1.3%, WMT -1%, PAYC -0.9%, HMC -0.7%, ATVI -0.5%

>>> US Close Dow +0.62% S&P +0.36% Nasdaq +0.35% Russell +0.69%

Closing Stock Market Summary

The S&P 500 gained 0.4% on Tuesday to close at session highs in a tight-ranged session, even as negotiations surrounding the next coronavirus relief bill remained deadlocked. The Nasdaq Composite (+0.4%) kept pace with the benchmark index to close at a record high, while the Dow Jones Industrial Average (+0.6%) and Russell 2000 (+0.7%) outperformed.  

According to media reports, Treasury Secretary Mnuchin said negotiators are no closer to a deal than a week ago while Senator Perdue (R-GA) estimated that stimulus talks could last an additional two weeks. While discouraging, the broad market was not deterred by the news, as nine of the 11 S&P 500 sectors closed higher.

The energy sector rose 2.5% amid higher oil prices ($41.68/bbl, +0.66, +1.6%), followed by gains in the real estate (+1.4%), utilities (+1.4%), and materials (+1.3%) sectors. The health care (-0.5%) and financials (-0.4%) sectors were the lone holdouts.

Financial stocks were pressured by some curve-flattening activity in the Treasury market, which reflected some growth-related angst given that lawmakers remained divided over stimulus talks. The 2-yr yield increased one basis point to 0.12%, while the 10-yr yield fell five basis points to 0.52%. 

Within the tech space, Microsoft (MSFT 213.29, -3.25, -1.5%) cooled off from yesterday's TikTok-driven rally, while Advanced Micro Devices (AMD 85.04, +7.37) surged 9.5% to fresh record highs. AMD shot higher after Jefferies raised its price target on the stock to $95 from $86 on a view that it will capitalize on Intel's (INTC 49.13, +0.83, +1.7%) production issues.

Gold futures ($2020.80/ozt, +$33.80, +1.7%) also rallied to new highs above $2000/ozt. The U.S. Dollar Index declined 0.1% to 93.27 after trading higher in the morning. 

Tuesday's economic data was limited to the Factory Orders report for June, which increased 6.2% m/m (consensus 5.2%) following a downwardly revised 7.7% increase (from 8.0%) in May.

  • The key takeaway from the report is the affirmation that business spending picked up in June as economies reopened, evidenced by a 3.4% increase in new orders for nondefense capital goods excluding aircraft that was up slightly from the 3.3% increase noted in the Advance Durable Goods Orders report.

Looking ahead, investors will receive the ADP Employment Change Report for July, the Trade Balance report for June, and the weekly MBA Mortgage Applications Index on Wednesday.

  • Nasdaq Composite +21.9% YTD
  • S&P 500 +2.3% YTD
  • Dow Jones Industrial Average -6.0% YTD
  • Russell 2000 -9.1% YTD

FT : Amazon’s Deliveroo investment approved by UK regulator

Amazon’s Deliveroo investment approved by UK regulator
CMA warns increased stake could trigger further scrutiny

The UK’s competition regulator has finally approved Amazon’s minority investment in Deliveroo after more than a year of deliberations, but warned that any attempt to take full control of the London-based food delivery company “could trigger a further investigation”.

Stuart McIntosh, inquiry chair at the CMA, said the agency cleared the minority investment after concluding it would “not result in a substantial lessening of competition in either restaurant delivery or convenience grocery delivery”.

“Our decision reflects the scale of Amazon’s investment in Deliveroo . . . and its incentives to compete in both markets,” he said, but added that if Amazon “were to increase its shareholding in Deliveroo, that could trigger a further investigation by the CMA”.

Amazon will own 16 per cent of Deliveroo as part of a $575m funding round, including other investors, that was first announced in May 2019.

Deliveroo said it plans to use the new funds from Amazon to open more “delivery-only” kitchens and help restaurants manage the impact of Covid-19 on their businesses.

“This is fantastic news for UK customers and restaurants, and for the British economy,” said Deliveroo.

While the hospitality business has been hit particularly hard by the pandemic, diners have turned to food delivery apps in record numbers during coronavirus lockdowns around the world, accelerating growth at Uber, Delivery Hero and Just Eat Takeaway.

That has spurred dealmaking around the world, with Uber buying rival Postmates and Just Eat Takeaway entering the US with the acquisition of Grubhub.

However, when lockdown measures first came into force around the world, many restaurants had to close. That included chains such as McDonald’s and Wagamama that account for a large portion of order volumes among UK delivery apps.

The initial impact on Deliveroo’s business was so severe that the CMA in April granted preliminary approval of Amazon’s investment on the grounds the UK start-up was a “failing firm”.

But in June the CMA made a U-turn, finding that Deliveroo was no longer at risk of going under but provisionally waving the deal through anyway, after deciding it would not reduce competition. The agency had previously suggested that Amazon’s investment could prevent it from re-entering the UK food delivery market, which it had left in late 2018.

Deliveroo on Tuesday pointed to a recovery in trading, saying that 100,000 restaurants around the world now use its platform to reach consumers, up from 80,000 18 months ago.

However, its rate of growth has slowed sharply. It said in February last year that the number of restaurants signing up to Deliveroo had increased 60 per cent in the previous five months.

Several UK technology investors have been critical of the CMA’s 15-month investigation, saying that it could deter other investment in the sector from Big Tech companies.

>>> US Gapping down

Gapping down
In reaction to disappointing earnings/guidance:

  • MNK -16.8%, SPCE -8.6% (also announces stock offering), VNOM -6.2%, THC -5.5%, KMT -5.1%, WEC -5%, EMN -4.9%, HAE -4.6%, SPR -4.6%, DEO -4.3%, AMRN -4.1%, VVV -3.9%, RMBS -3.8%, TREE -3.5%, HLIO -3.3%, LEG -2.9%, KLAC -2.7%, CLR -2.6%, ITRI -2.5%, NCMI -2.3%, BWXT -2.2%, CRUS -2%, AIG -1.9%, MIME -1.8%, NSP -1.5%, CW -1.4%, CHGG -1.2%, EPC -1.2%, RBC -1%, RNG -0.9%, H -0.8%

Other news:

  • DBVT -34.1% (receives Complete Response Letter from FDA for Viaskin Peanut BLA)
  • IMUX -10.9% (stock offering)
  • ACHV -9.2% (stock offering)
  • KBAL -6.9% (presents new organizational structure)
  • SITE -5.3% (prices offering of 2,150,000 shares of common stock for gross proceeds of $264 mln)
  • AMK -3.4% (stock offering)
  • SLP -3.4% (announces intended public offering of common stock; size not disclosed)
  • SALT -3.3% (to construct Wind Turbine Installation Vessel)
  • VCYT -2.5% (stock offering)
  • AYRO -1.7% (stock offering)
  • DKNG -1.4% (baseball players test positive for COVID-19)
  • VYGR -1.1% (terminates collaborations with ABBV)

Analyst comments:

  • TCS -4.3% (downgraded to Sell from Neutral at Goldman)
  • FCX -0.8% (downgraded to Equal-Weight from Overweight at Morgan Stanley)
  • NBL -0.8% (downgraded to Hold from Buy at Stifel)

>>> US Gapping up

Gapping up
In reaction to strong earnings/guidance:

  • OPCH +25.6%, HLIT +15.7%, AVT +11.3% (guides JunQ above consensus), JELD +8.4%, SEDG +8.3%, MOS +8.1%, SPNS +8.1%, IPHI +7.2%, VRNS +6.5%, BP +6.5%, TXRH +6.4%, IGT +6.2%, USFD +5.5%, WBT +5.3%, AMCX +5.3%, VNO +5%, IT +5%, BRX +4.9%, SYKE +4.9%, TTWO +4.8%, RCM +4.7%, LGIH +4.5%, AMRC +4.2%, FRPT +3.7%, OTTR +3.7%, PRIM +3.4%, ACM +3.1%, UGI +3%, SNE +3%, EMR +2.6%, VMC +2.5%, HHC +2.4%, WMG +2.3%, TECH +2.2%, VSH +2.2%, INCY +2.2%, DOOR +2%, FIVN +1.9%, FIS +1.9%, LDOS +1.7%, IAA +1.4%, ICHR +1.3% (also files for $200 mln mixed shelf offering), IR +1.3%, KKR +1.3%, O +1.2%, NBIX +1.2%, HSIC +1.2%, NEX +1.1%, AME +1.1%

Other news:

  • ELOX +13.2% (receives orphan drug designation from the FDA for ELX-02 for the treatment of cystic fibrosis)
  • TLSA +9.5% (expedites clinical development plan for its anti-interleukin-6-receptor)
  • CAMP +7% (names Amal Johnson as Chair of the Board)
  • EXPI +4.7% (acquires assets of Showcase IDX)
  • ABMD +2% (FDA has issued an EUA for left-sided Impella heart pumps to provide left ventricular unloading and support to COVID-19 patients who are undergoing ECMO treatment and develop pulmonary edema or myocarditis)
  • ONTO +1.8% (announces multiple orders for JetStep)
  • RGNX +1.5% (reported positive one year data from patients in Cohorts 4 and 5 of the Phase I/IIa trial of RGX-314 for the treatment of wet age-related macular degeneration) ONE +1.4% (reports that it has reopened more than 90% of its nationwide learning centers)
  • ZLAB +1.2% (granted priority review status to the New Drug Application for ripretinib from the Center for Drug Evaluation of China's National Medical Products Administration)

Analyst comments:

  • BRKS +1.3% (upgraded to Buy from Hold at Needham)
  • Z +0.7% (upgraded to Neutral from Negative at Susquehanna)
  • RS +0.6% (upgraded to Buy from Hold at Deutsche Bank)