Energen: Carl Icahn increases stake to 9.9% (Prior 8.9%) (75.20)
On August 14, 2018, the Issuer announced that it had entered into a definitive agreement under which Diamondback Energy (FANG) will acquire the Issuer. The Reporting Persons (Corvex + Icahn) commend the Issuer's board of directors and management for entering into this transaction, which the Reporting Persons believe will have great strategic benefits and will position the combined company for years of growth. In light of this transaction, the Corvex Persons and the Icahn Persons will henceforth cease filing joint statements on Schedule 13D with respect to the Issuer.
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Lagardère Travel Retail to buy Hojeij Branded Foods for USD 330m in cash
16 AUG 2018
Lagardère Travel Retail (Paris:MMB) has agreed to buy Hojeij Branded Foods (HBF), an Atlanta, Georgia-based airport restaurants and bars operator, for USD 330m in cash.
The France-based company said that combining the activities of Lagardère Travel Retail and HBF would create a USD 1.1bn player, the third largest player in the North American travel retail and foodservice industry.
HBF, which was founded in 1996 by Wassim and Kathy Hojeij, has been backed by Morgan Stanely Private Equity since 2015.
Press release:
Lagardère Travel Retail (Paris:MMB) announces the signing of an agreement for the acquisition of 100% of Hojeij Branded Foods (HBF), which will be combined with Paradies Lagardère, the organi sation’s North American division.
The completion of this transaction is subject to a number of customary conditions, including regulatory approval and third-party consents.
Combining the activities of Lagardère Travel Retail and HBF would create a USD 1.1bn player, the third largest player in the North American Travel Retail and Foodservice industry. The price for the acquisition, payable in cash, is USD 330m 1 .
Hojeij Branded Foods, a leading Foodservice operator in North America
Founded in 1996 by Wassim and Kathy Hojeij, HBF is one of the leading airport Foodservice operators in North America. Headquartered in Atlanta, it operates more than 124 bars and restaurants in 38 airports across the US and Canada.
HBF generated total sales of USD 225m in 2017 and also benefits from a sound portfolio of awarded contracts (opened in 2018 and some to open in 2019). Its strong development over the past few years is attributable to its recognised operational excellence, the award of new concessions, and the successful acquisition in 2017 of Vino Volo, the largest airport wine bar chain in the US and Canada.
Its portfolio includes over 40 brand relationships and proprietary concepts ranging from full service to fast casual and quick serve – among which illy Caffè, LongHorn Steakhouse, ChickFil-A, P.F. Chang’s, Pei Wei and Cat Cora. HBF operates in several of the largest North American airports such as Atlanta, Dallas Ft. Worth, Detroit, Newark, Orlando, Salt Lake City, and San Francisco with an average contract maturity of over seven years. Vino Volo’s footprint includes operations in 33 airports in the US and Canada.
Arnaud Lagardère, General and Managing Partner of Lagardère SCA, commented:
“This transaction is fully in line with the Lagardère group's strategic refocusing, with priority given to developing the Lagardère Publishing and Lagardère Travel Retail businesses. In particular, it illustrates the re-use of proceeds from disposals in activities that provide significant operating synergies and are therefore accretive to Group recurring EBIT and cash. Lagardère Travel Retail is continuing on its growth path in the United States with a proven and effective team.”
Reinforcing Lagardère Travel Retail in North America
Combining Lagardère Travel Retail with HBF would craft a USD 1.1bn player in North America - ranking third overall largest operator in airport concessions as well as in the Foodservice segment. The acquisition would round out Lagardère Travel Retail’s portfolio of concepts with strong complementary brands (combination of national and global brands as well as local concepts) and provide it with new long-term store locations in major airports. The rollout of commercial and marketing synergies would help numerous development opportunities to be seized in terms of new concessions as well as improve revenue generation.
In addition to top line synergies, the transaction would generate significant costs and operating synergies starting from the first year of integration. Recurring synergies could reach approximately USD 10m a year as of the fourth year after the acquisition.
The very strong and experienced management team of HBF will remain at the helm of the company, facilitating its successful integration.
A value-generating transaction
The acquisition value amounts to USD 330m2 (or USD 393m gross of partners’ share) implying a multiple of seven times HBF’s estimated Full-Year 2018 Pro Forma EBITDA3 including recurring synergies.
The financing of the acquisition falls within the scope of the re-use of the proceeds from disposals, as part of the Group’s strategic refocusing launched earlier this year.
The transaction is expected to be finalised during the fourth quarter of 2018.
A strategic interest for Lagardère Travel Retail
This major acquisition would enable Lagardère Travel Retail to enter a new phase in its growth strategy by:
- reinforcing its presence in North America, a strategic and highly resilient market driven by traffic growth and the addition of new retail space in airports;
- strengthening a major player in Foodservice on the North American travel retail market, with a strong competitive position (combined presence in approximately 110 airports);
- seizing growth opportunities through the critical mass attained across all market segments and throughout the United States and Canada.
Dag Rasmussen, Chairman and CEO of Lagardère Travel Retail, commented: “This acquisition strongly reinforces the presence of Lagardère Travel Retail in the Foodservice industry and is in line with our strategy to grow in the three segments of Travel Retail:
Duty Free & Fashion, Travel Essentials and Foodservice. It allows us to expand our concession portfolio and to develop relationships with our brand partners and suppliers. We are very pleased to welcome HBF into our group. Together, we will aim to create a regional leader and break new ground.”
Gregg Paradies, President and CEO of Paradies Lagardère, added: “We are delighted to join forces with HBF, an industry leader that shares our same commitment to quality, first-class customer service, and a family culture. This acquisition will accelerate our growth and enable us to achieve our goal of becoming one of the largest and best airport restaurant operators in North America.”
Regynald G. Washington, CEO of HBF concluded: “Combining the forces of HBF and Paradies Lagardère is a natural fit as both companies are recognized for operational expertise, top-notch guest service, and a strong commitment to employees.”
New York Magazine Owner Explores Sale
Publisher of New York magazine, Vulture and The Cut is the latest media company to weigh consolidation
New York Media, owner of New York magazine and several websites, is exploring options including a possible sale, according to people familiar with the matter, the latest publisher to weigh consolidation to cope with pressures in the fast-changing media sector.
New York Media’s flagship publication, New York magazine, has for decades covered the nexus of politics and culture from its Manhattan perch as both a regional and national brand.
The publisher is owned by a holding company controlled by the heirs of Bruce Wasserstein, the late financier who purchased New York magazine in 2003 for $55 million. Pamela Wasserstein, a former corporate lawyer, took the helm of the company in 2016.
The Wassersteins have transformed New York Media, building upon the print magazine with a network of websites.
After Mr. Wasserstein’s acquisition, New York Media launched Vulture, a website that tracks the entertainment industry; Grub Street, a food and restaurant site; Select All, a vertical dedicated to technology; The Cut, a fashion and lifestyle site; and The Strategist, a vertical that makes recommendations for a variety of products.
Earlier this year, New York Media acquired Splitsider, a comedy website, from The Awl Network.
In a statement, New York Media said, “We are focused on building our business organically, but we also explore investment interest and strategic opportunities as a general practice...Given the growth New York Media has seen, it makes sense for us to evaluate the market for opportunities to continue to develop the business.” Closely held New York Media doesn’t make its finances public.
“Partnering to support acquisitions or other ways of growing might make sense. Or it might not,” Ms. Wassterstein said in a memo to staff Tuesday.
The company’s digital audience has grown rapidly over the past year. In June, the company’s network drew 35 million unique visitors, an increase of nearly 100% over the previous year, according to comScore.
The print magazine, which was founded as a weekly in 1968 and moved to biweekly in 2014, reports circulation of 404,000 per issue, according to the Alliance for Audited Media.
Nearly a quarter are copies distributed to places like doctor’s office waiting rooms and hair and nail salons. Some 288,000 are categorized as paid subscriptions and 7,350 are sold on newsstands on average.
Digital and legacy publishers alike have been pursuing deals, as they cope with a cutthroat online advertising market and other business headwinds. Within the past year, Meredith Corp. purchased Time Inc., Penske Media bought a controlling stake in Rolling Stone-parent Wenner Media, and Hearst Magazines acquired Rodale Inc., publisher of Men’s Health and Prevention.
On the digital-native side, Mashable sold to Ziff Davis late last year and Univision Communications Inc. recently put on the block its Fusion Media Group, which includes sites such as Gizmodo and Deadspin.
Interesting names to follow in this list
If you bothered to read the news over last Christmas you may have heard about something called Mifid II. The European legislation, the second iteration of the Markets in Financial Instruments Directive, came into force on January 3.
Among the many requirements set out by the directive are rules regarding sellside research, designed to increase transparency in the costs charged by brokers to investors. In short, brokers can no longer offer analyst reports in exchange for fees generated from trading. Instead, research would have to be paid for separately by clients who wanted more information on a stock or security. In media parlance, it was an “unbundling”.
The legislation inspired several pieces on the death of the sellside analyst — some even from this institution.
While many welcomed the increased transparency which the directive bought, there was some concern that it would have a negative effect on market liquidity. The logic went like this: companies which brought in lower trading commissions, by virtue of size or volume traded, would be dropped from analyst coverage by brokers, leading to illiquidity and potential mispricings in equities and other securities.
However so far this year, this does not seem to be the case.
A piece of research by Jeremy Monk of AKRO, published on the CFA Institute's blog, takes a look at the number of forecasts across indices for three company metrics — sales, net income and earnings-per-share — in the first half of this year versus the previous decade. The methodology is laid out in detail in the blogpost.
For instance, here is the data for the S&P 500:
Unsurprisingly there's no great change year-on-year, given the majority of analysts covering US companies do not fall under Mifid II rules. Well, for the moment anyway.
Yet, for European small-caps — personified by the STOXX Europe Small 200 index — the data are pretty unexpected:
So in the first half of the year, the amount of forecasts for this selection of European small-caps grew, with earnings-per-share forecasts returning to just below 2013 levels. Monk is so surprised he labelled it as a “blip” on the chart. The trend repeats itself across the larger market capitalisation STOXX Europe 600 index:
There are some other possibilities. One is that a lot of the restructuring of the sellside in anticipation of the directive came into law. After all, brokers had known about the rule change for years. This may explain the modest decline in forecasts between 2016 and 2017 across both European indices.
Another reason may be that while European banks are not out of the woods yet by any means, a lot of the pain suffered in 2016 from historically low interest rates has been mitigated. For instance, Commerzbank recently confirmed plans to start paying a dividend again after shedding 9,600 jobs as part of a restructuring plan. So improved levels of forecasts may just be the beginning of a return to pre-crisis norms.
Of course, the number of forecasts is not the only way to measure whether Mifid II has affected the markets — trading volumes, as suggested earlier, are perhaps another way to gauge the Directive's effects.
However, according to research from Union Investment published four weeks after Mifid II came into force, there was “no material impact on liquidity”, with volumes “good and robust” versus 2017. Similar conclusions were reached by senior fixed income and FX traders at the AFME European Trading & Market Liquidity conference in April, according to EuroMoney.
Yet the lack of noticeable change in volumes and forecasts doesn't tell the whole story of the buy and sellside adapting to a brave new world.
On the buy side — hedge funds and the like — the cost of buying research has led to cost reductions elsewhere in their businesses. As recently cited by the FT, budgets have been squeezed 20 per cent to accommodate research spending, according to Greenwich Associates.
On the sellside, the legislation has had a more drastic effect. A veteran of the sellside told us that street estimates for a drop in revenues of 30 to 40 per cent from Mifid II have proven fairly accurate.
They also revealed first quarter business activity “hit a wall” as the buyside and sellside tiptoed around each other, trying to figure out what constituted chargeable research, and what didn't. Since then, they said, activity has returned to normal but they anticipate a difficult fourth quarter as clients review the first year of spending under the new paradigm.
Boutique research firms, who do not generate cash from trading, have also suffered as their affordable price points have come under pressure from mammoth investment banks looking to maintain both market and mind share, according to a recent FT article.
So on the surface, all seems serene. Volumes and research output have so far proved stable. But below the waterline, in the world of market participants, there's a feeling that there's still a lot more pain to come as the great reconfiguration continues.
Price will be central piece of Tesla buyout puzzle
Elon Musk floated $420 for his take-private deal
Since Elon Musk tweeted his plan to take Tesla private last week, sending Wall Street into a frenzy, the focus has been on whether he really has the funding he claimed to have secured for the deal.
The Securities and Exchange Commission on Wednesday subpoenaed the company, as part of an investigation into his public declaration.
But if Mr Musk does assemble a group of backers, another question will quickly come into focus: is his proposed $420 per share an acceptable price?
The Tesla boss said in a blog post that he guessed about two-thirds of shares held by current investors would roll over into the private company, suggesting that a clear majority believe $420 undervalues the lossmaking electric car maker.
However, Tesla’s large institutional investors, including Vanguard, BlackRock and T Rowe Price, own about 60 per cent of its shares, and several will be forced to sell most or all of their stakes if Mr Musk is successful at taking the company private — and the independent board committee set up to evaluate any offer from Mr Musk will have to protect their interests.
“The problem I see with the deal is that many existing investors do not want an illiquid stock or cannot by charter own one,” said Walter Price, a portfolio manager at Allianz Global Investors who holds a small stake in Tesla.
His funds would be unable to roll over into a private Tesla and unlikely to want to be forced out at $420. “The price is too low for most of our accounts to vote to sell,” he said.
At $420 per share, the price floated in Mr Musk’s nine-word tweet last week, a buyout bid or tender offer would represent about a 20 per cent premium over Tesla’s closing price the previous day. That would be less than most takeover premia.
Over the past 10 years, the average premium in takeovers larger than $1bn has been 32 per cent over the average share price in the month preceding the bid, according to data from Dealogic. In tech sector deals specifically, it has been 34 per cent.
Against Tesla’s average share price in the month before the tweet, Mr Musk’s offer represents a premium of 36 per cent, but most of that period was before Tesla’s recent bullish quarterly earnings report sent the stock higher.
Charles Kane, a longtime financial executive who now lectures at MIT, said based on his experience on a dozen boards, he would expect a bid in the range of a 30 per cent premium over the company’s undisturbed share price — that is, above $430. “It’s the duty of the board to assess whether or not the value that’s presented is appropriate in the long haul for the valuation of a company, weighed against the risks that are involved,” Mr Kane said.
Institutional investors may accept a narrower premium if they are unhappy with a company’s prospects, or its management, however. Also concentrating the mind: the consensus of analysts’ forecasts pegs Tesla’s share price at just $326 next year.
“The stock has never got to $420, so nobody can complain they aren’t getting a return on their investment,” said Philippe Houchois, an analyst at Jefferies who believes the fair value of Tesla is no more than $300 a share.
“If you look on a pure financial basis you’d tell everyone to take the deal. But a lot of people have commitment to Musk and his vision.”
Some investors have publicly indicated they would be happy to hitch their wagon to Mr Musk in a private Tesla. The greater the number of shareholders who want to stay in, the less Mr Musk needs to raise to buy out the rest.
Ross Gerber, founder and chief executive of wealth manager Gerber Kawasaki and a prolific defender of Tesla against its critics, told the Financial Times he would not sell his stake because he estimates Tesla is worth $571 a share, or $95bn.
Yet others of a bullish persuasion are none the less sceptical of a proposition in which they would sacrifice publicly-traded shares for an illiquid position in a private business. Mr Musk promised to return to the public markets “once Tesla enters a phase of slower, more predictable growth”.
Tasha Keeney, an analyst at Ark Investment Management, which holds Tesla shares in three of its funds, thinks Tesla will be a $600 share within five years based on the prospects for the electric car business. If it cracks the market for autonomous vehicles, in the longer term it could be worth many times that.
But, she said, “in general we’d like the company to stay public”. She likened Tesla to Amazon, a company that drew criticism for years for not producing profits, but which nevertheless commanded a handsome valuation as a public company. “Eventually the story came through and the stock was rewarded. We think the same could happen to Tesla,” Ms Keeney said.
Tesla shares closed on Wedneday at $338.69.
“WE’RE NOT GOING TO MAKE AMERICA GREAT AGAIN, IT WAS NEVER THAT GREAT.”