A roundup of some of the North American equities making moves in both directions today
On the rise
Under the agreement, Onex will pay $31 per share for WestJet, which will continue to operate as a privately held company. WestJet shares closed at $18.52 on Friday.
Toronto-based Onex will make the airline a privately held company, and retain its headquarters in Calgary, according to the press release.
“WestJet is one of Canada’s strongest brands and we have tremendous respect for the business that Clive Beddoe and all WestJetters have built over the years. WestJet is renowned internationally for its unparalleled guest experience and employee culture,” said Tawfiq Popatia, a managing director at Onex, in a release.
Onex Corp. was 0.4 per cent in morning trading.
Calling the deal a “surprise,” Canaccord Genuity analyst Doug Taylor said: "Given the premium valuation and, in our view, a limited list of potential other bidders (noting Canadian foreign ownership rules), we believe the deal is likely to proceed on the stated terms following typical regulatory and shareholder approvals. The expected close is late 2019/early 2020. We are moving our target to $31.00 [from $23], in line with the proposed acquisition price. Given the stock is trading at a narrow discount to the bid (and will continue to pay dividends), we maintain a HOLD rating..”
Mr. Taylor said: “While Onex has not yet shared its vision for WestJet, from the perspective of Air Canada, we do not believe this transaction dramatically alters the competitive landscape, at least negatively. WestJet was generally well funded and was already embarking on a large and highly competitive expansion plan. In our view, a private equity owner of an airline is likely to remain rational with respect to its approach to yields and profitability vs. market share.”
“The interest rate and other terms of the notes will be determined based on prevailing market conditions,” the company stated.
Eldorado said it intends to use the net proceeds, together with term loan proceeds incurred under a new senior secured credit facility, also announced Monday, to redeem its US$600-million senior notes due December 2020 and to pay fees and expenses in connection with the financing.
HIVE Blockchain Technologies Ltd. (HIVE-X) jumped 14.6 per cent after it announced on Monday before the bell it has entered into a “non-binding letter of intent and heads of terms and a share swap agreement” with London-listed Argo Blockchain PLC “to explore a proposed strategic partnership to create the world’s largest business-to-business mining service provider aimed at large-scale enterprise and institutional customers.”
“The proposed strategic partnership will enable all miners to benefit from the combination of the two groups’ existing mining capacity, including part of HIVE’s equivalent mining capacity of 45 megawatts (”MW") and Argo’s 10.5MW capacity and presents a significant opportunity to service strategic institutional clients that require Mining-as-a-Service (MaaS) infrastructure to mine virgin coins from safe jurisdictions like North America and Europe," the companies said.
Premium Brands Holdings Corp. (PBH-T) rose 0.2 per cent despite reporting weaker-than-anticipated first-quarter results before the bell.
“Adjusted EBITDA of C$52m (excluding IFRS 16 impact of C$8m) was below our C$55m estimate (consensus of C$57m),” said Desjardins Securities analyst David Newman in a research note. “EBITDA margin of 6.7% was lower than our 6.9% forecast due to: (1) weaker organic growth from a shift in the timing of Easter to 2Q19, colder weather, reduced foodservice sales in western Canada, weak seasonality associated with recently acquired businesses and the lapping of a strong 1Q18; (2) the impact of Chinese tariffs on Ready Seafood in PFD; and, to a lesser extent, (3) higher freight rates and labour costs, and increased investments.
“While PBH maintained its revenue guidance of C$3.66–3.72b for 2019, it reduced its EBITDA guidance range to C$300–340m from C$320–340m due to uncertainties over the outbreak of African swine fever (ASF) in China, which has led to rising pork prices in North America. Management stated it is taking a “conservative approach” to estimating the ASF impact due to the time lag associated with price increases to offset rising raw material costs (potentially higher input costs for substitute products, eg chicken and beef).”
On the decline
Apple Inc. (AAPL-Q) shares fell 5.9 per cent after the U.S. Supreme Court on Monday gave the go-ahead for a lawsuit by consumers accusing the tech giant of monopolizing the market for iPhone software applications and forcing them to overpay, rejecting the company’s bid to escape claims that its practices violate federal antitrust law.
The justices, in a 5-4 ruling, upheld a lower court’s decision to allow the proposed class action lawsuit to proceed. The plaintiffs said the California-based technology company required apps be sold through its App Store and extracted an excessive 30-per-cent commission on purchases.
Restaurant Brands International Inc. (QSR-T) dipped 1.7 per cent after a Longbow Research analyst downgraded its stock, citing “a significant level of discord between corporate and franchisees related to [Burger King’s] recently more aggressive discounting strategy amidst an environment of higher labor and input costs.”
“We believe bullish investors have already embedded a revenue outcome for FY19 and FY20 consistent with historical beats to consensus,” said Ken Wong. “The valuation multiple has surpassed previous peak levels (~16x NTM EV/Sales vs. 14x) which we believe limits share appreciation from delivering results that significantly outpace street estimates.”
“We believe the company can sustain double-digit percentage MAU [monthly active users] and ARPU growth until 2021. That said, with PINS shares trading 50 per cent above the IPO price and at 16 times EV/Sales on our ‘19 Revenue estimates, we view them as reasonably valued,” said RBC Dominion Securities’ Mark Mahaney.
Shares of Uber Technologies Inc. (UBER-N) continued to fall on Monday, sitting down 11.4 per cent. On Friday, the ride-share company fell 7.6 per cent on Friday in its first day of trading as a public company in the most anticipated listing since Facebook Inc.
With files from staff and wires