A survey of North American equities heading in both directions
On the rise
U.S. Steel Corp. (X-N) announced it is set to be acquired by Japan’s Nippon Steel in a deal valued at US$14.9-billion, helping it add significant capacity in a key market that is primed for a price hike.
U.S. Steel’s shares soared 26.1 per cent in Monday trading, but were still trading well below the offer price of US$55. That represented a premium of 142 per cent since the company announced a strategic review process on Aug. 11.
The all-cash offer represents an equity value of about US$14.1-billion and the world’s No.4 steelmaker said it had secured financing commitments to fund the transaction.
The deal is expected to help Nippon move toward 100 million tons of global crude steel capacity, while significantly expanding its production in the United States, where steel prices are expected to rise as automakers ramp up production following their recent deals with labor unions to end strikes.
All of U.S. Steel’s commitments with its employees, including all collective bargaining agreements in place with its unions, will be honored, Nippon said.
The company’s executive vice president, Takahiro Mori, told Reuters in an interview that the company had operated in the United States for 40 years and that it was confident the transaction would be completed.
“Standard Steel that we own is a union company in the United States, we have a good history of working with unions. We see no regulatory or antitrust issues with the deal,” Mr. Mori said.
Nippon Steel also has an electric arc joint venture with ArcelorMittal in Alabama. Those operations are not unionized.
Pittsburgh-based U.S. Steel’s shares had suffered after several quarters of falling revenue and profit, making it an attractive takeover target for rivals looking to add a maker of steel used by the automobile industry.
Osino Resources Corp. (OSI-X) jumped on the premarket announcement of a definitive agreement to be bought by Dundee Precious Metals Inc. (DPM-T) in a deal worth $287-million.
Dundee will acquire all of the issued and outstanding common shares of the Vancouver-based company for consideration of 77.5 cents in cash per Osino share and 0.0801 of a Dundee common share per Osino share. It implies a value of $1.553 per Osino share.
Upon completion, Dundee will issue 13.766 million shares to Osino shareholders, who will own approximately 7 per cent of the combined company.
Toronto-based Dundee will gain a 100-per-cent interest in Osino’s advanced stage, multi-million ounce Twin Hills gold project in Namibia.
“Twin Hills represents a unique opportunity to add a high-quality development asset in an excellent mining jurisdiction to our portfolio,” said Dundee president and CEO David Rae. “The project provides a foundation for our future production profile with production targeted for 2026, as well as significant exploration upside.
“This transaction also allows us to leverage our strong local relationships in Namibia, which we have built over many years, and continue our focus on growing our portfolio of gold assets. With Twin Hills and Čoka Rakita, DPM will have an extremely attractive growth pipeline and the financial capacity to fund it internally through our existing cash balance and free cash flow.”
FirstService Corp. (FSV-T) rose 1.7per cent after announcing the acquisition of “a significant controlling interest” in Atlanta-based Roofing Corp of America, one of the largest commercial roofing enterprises in North America, for US$413-million.
“The addition is highly complementary to FirstService’s existing portfolio of market-leading essential property services brands, adding to its capabilities in property repair, maintenance and restoration,” the Toronto company said in a statement.
Under the agreement, RCA’s senior leadership team, including CEO Randy Korach, will retain the balance of the equity and continuing to operate the business going forward.
The purchase price will be funded through a combination of cash on hand and funds drawn under FirstService’s existing revolving bank credit facility, which now has total borrowing capacity of US$1.25-billion after the recent exercise and bank syndicate approval of the US$250-million accordion feature.
Orla Mining Ltd. (OLA-T) was higher by 1.2 per cent despite Panama’s trade and industry ministry cancelling its concessions for the Cerro Quema project in the country, the latest after Panama’s unicameral congress passed a moratorium on mining concessions in the wake of widespread protests.
Orla Mining said it would continue to monitor developments in the country where it had already invested $120-million, as the situation was “uncertain and quickly evolving.”
In November, Panama’s Congress banned new mining concessions and expansions, and the Supreme Court ruled that a contract to operate First Quantum’s lucrative copper mine in the country was unconstitutional.
The copper mine’s closure has caused Panamanian officials to weigh a cut to the country’s 2024 economic growth estimates.
Months-long protests had choked access to First Quantum’s mine before the government ordered it end mining operations.
Orla Mining said it would “explore all legal remedies available” to protect its investments at the Cerro Quema project, which includes a heap leach gold project and a copper-gold sulphide resource, “including taking measures to protect its rights under international law.”
The original 20-year term for Orla Mining’s concessions had expired in 2017, analysts at TD Securities wrote in a note to clients.
The analysts called the news “expected” and said that they believed there would likely be “minimal, if any” progress on mining discussions in the country until next year’s general election. “Panama represents potential longer-term optionality” for Orla, they added.
Budget hotel operator Wyndham Hotels & Resorts (WH-N) rose 1.7 per cent after it asked its shareholders on Monday to reject Choice Hotels International Inc. (CHH-N) takeover offer, citing regulatory review of up to 24 months and lower valuation.
Last week, Choice launched a hostile bid for Wyndham after the New Jersey-based hotel repeatedly rebuffed the overtures.
“We are confident Wyndham can deliver long-term shareholder value well in excess of the US$85 per share offered by Choice by continuing to execute on our existing business plan” said Stephen Holmes, chairman of the Wyndham Board.
The offer, valued at US$7.8-billion in October, comes against the backdrop of rising demand for budget hotels from travelers looking for cheaper options due to still-high inflation.
Wyndham also added that reception from franchisees has been extremely negative. About 80 per cent of Wyndham franchisee respondents said a tie-up would hurt their business and about 60 per cent said they would terminate their contract in the event of a merger if they had the option, according to a survey.
Wyndham has repeatedly highlighted that the offer undervalues its business and carries regulatory risks. It has also pointed to a combined company’s likely high debt level, as well as the slower growth prospects of Choice’s business.
Choice has also said it was identifying director candidates for nomination to Wyndham’s board at its 2024 annual meeting and would file documents with the Federal Trade Commission to kick off a regulatory review process.
Biotech giant Illumina Inc. (ILMN-Q) was higher by 1.6 per cent after it said it will undo its US$7.1-billion purchase of the cancer-screening company Grail after losing legal battles with antitrust enforcers in the U.S. and Europe.
San Diego-based Illumina said in a Sunday statement that it made its decision to divest Grail after a U.S. appeals court ruled Friday that the merger could violate antitrust laws.
The European Union in October ordered the deal to be unwound because it closed in 2021 without regulatory approval from the 27-nation bloc. The EU earlier slapped a US$475-million fine on Illumina for jumping the gun on the acquisition without its consent.
Ilumina said Sunday it had already pledged to divest Grail if it was not successful with either the European Court of Justice or in the Louisiana-based Fifth Circuit Court of Appeals, where the U.S. Federal Trade Commission case seeking to block the deal was most recently considered.
The company said the divestiture will happen through a third-party sale or capital markets transaction by the end of the second quarter of 2024.
Illumina is a major supplier of next-generation sequencing systems for genetic and genomic analysis. Grail, based in Menlo Park, California, is a health company developing blood tests to try to catch cancer early.
Adobe Systems Inc. (ADBE-Q) gained 2.5 per cent after saying it has shelved its US$20-billion cash-and-stock deal for cloud-based designer platform Figma, pointing to “no clear path” for approvals from antitrust regulators in the European Union and the UK.
Britain’s competition watchdog earlier said on Monday that Adobe would not propose remedies to resolve regulatory concerns regarding the buyout.
“Adobe and Figma strongly disagree with the recent regulatory findings, but we believe it is in our respective best interests to move forward independently,” Adobe CEO Shantanu Narayen said in a statement.
Adobe, which struck the deal in September last year, has forecast its annual and quarterly revenue below estimates as tightened client spending remains a drag on its business.
On the decline
Gildan Activewear Inc. (GIL-T) was down 2 per cent after it announced late Sunday it has struck a support agreement with Coliseum Capital Management LLC, a Rowayton, Conn.-based hedge fund, for its move to oust CEO Glenn Chamandy by which Coliseum will support Gildan’s full slate of board nominees at its next two annual meetings.
Coliseum, which has a roughly 6-per-cent stake in the company, intends to increase its investment in Gildan over time to become its biggest shareholder, Gildan said. Chris Shackleton, Coliseum’s co-founder and managing partner, has joined Gildan’s board, the company said.
Pointing to the drama surrounding the Montreal-based T-shirt and sock maker, an analyst at Stifel downgraded it shares before the bell.
“This appointment suggests that Gildan’s BOD is unlikely to reinstate previous CEO Glenn Chamandy,” said Martin Landry. “In our view, these events create significant distraction for the BOD and the management team and could result in a proxy fight. This situation creates uncertainty for investors and shareholders, several of which could stay on the sidelines until things get clarified. Hence, Gildan’s shares could be range bound near-term, prompting us to change our rating and reduce our target price to reflect this uncertainty.
Neighbourly Pharmacy Inc. (NBLY-T) plummeted over 15 per cent after revealing it has received from a revised offer from Persistence Capital Partners to be taken private at $18.50 per common share, payable in cash.
The proposal is at a lower price than an early offer of $20.50 provided in a letter of intent on Oct. 2.
Neighbourly said the new offer is at a purchase price supported by Persistence’s equity financing sources and will now be evaluated by its board of directors with no timetable for a response.
Apple Inc. (AAPL-Q) declined 0.9 per cent after Bloomberg reported more Chinese agencies and state-backed companies across the country have asked their staff to not bring iPhones and other foreign devices to work.
For over a decade, China has been seeking to reduce reliance on foreign technologies, asking state-affiliated firms such as banks to switch to local software and promoting domestic semiconductor chip manufacturing.
Multiple state firms and government departments across at least eight provinces have instructed employees in the past month or two to start carrying local brands, the Bloomberg News report said.
On Monday, Apple said it will pause sales of the Apple Watch Series 9 and Apple Watch Ultra 2 in the United States starting this week, following an order from the U.S. International Trade Commission (ITC) on a patent dispute pertaining to Apple Watch devices containing the Blood Oxygen feature.
VF Corp. (VFC-N) said on Monday it was investigating “unauthorized” activity on its computer systems that disrupted some operations, including the ability of the Vans sneaker maker to fulfill global customer orders on its e-commerce site.
Shares of VF Corp were down 7.7 per cent after the company said in a regulatory filing that the incident was likely to continue to have a material impact on its business.
The incident, detected on Dec 13, encrypted some systems and compromised data, including personal details.
VF Corp added that it was not yet able to determine whether the company’s financial condition would also take a hit.
Cleaning products maker Clorox’s order fulfillment facilities were thrown out of gear for more than a month after a cyberattack in August, taking its products off the shelves for a short period.
SunPower (SPWR-Q) said on Monday it had substantial doubts on its ability to continue as a going concern, sending shares of the solar company down in trading on Monday.
The company also said it breached the terms of a credit agreement due to a delay in the filing of its quarterly results.
Earlier in October, SunPower had revealed that it would restate its financial statements for last financial year as well as first and second quarters due to issues with valuation of some microinverter components at certain third-party locations.
The lender may demand immediate payment of US$65.3-million borrowings outstanding, SunPower said in a filing.
“Substantial doubt exists about our ability to continue as a going concern and if we are unable to continue our business, our common stock might have little or no value,” the company said.
With files from staff and wires