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A look at North American equities heading in both directions

On the rise

First Capital Real Estate Investment Trust (FCR-UN-T) was higher after activist investor Sandpiper Group launched a proxy battle on Monday aimed at replacing four of nine trustees, the second fund manager to push for changes in leadership and strategy at the underperforming REIT.

Vancouver-based Sandpiper wants to replace the long-serving chair of First Capital, which owns $10-billion of grocery store-anchored shopping malls in four provinces, and three other trustees. Sandpiper, quarterback of several successful dissident shareholder campaigns, also wants to scale back the REIT’s planned property sales and rework its compensation plan. Sandpiper said it may ultimately push for the sale of First Capital.

In October, fund manager Ewing Morris & Co. Investment Partners Ltd. called for First Capital chair Bernard McDonell to be replaced after 15 years on the board. First Capital founder and former chief executive Dori Segal backed the Ewing Morris campaign.

To date, First Capital has resisted calls for changes to its board. In recent months, the REIT announced plans to sell up to $1-billion in properties to fund buybacks of its own units and development projects.

- Andrew Willis

Pipeline operator Pembina Pipeline Corp. (PPL-T) increased as it said on Monday its PGI business has agreed to sell the 50-per-cent interest it holds in Canada’s Key Access Pipeline System for $662.5-million.

Pembina owns 60 per cent of PGI while KKR & Co Inc’s global infrastructure funds hold the remaining 40 per cent.

The deal is expected to close in the first quarter of 2023, subject to approval by the Commissioner of Competition as well as other closing conditions.

The sale came as Pembina says it expects adjusted earnings before interest, taxes, depreciation and amortization between $3.5-billion and $3.8-billion in 2023.

Pembina says the midpoint of the guidance reflects about a 5-per-cent increase in adjusted EBITDA contribution from Pembina’s fee-based business.

The company’s 2023 capital investment program is expected to total $730-million.

Constellation Software Inc. (CSU-T) saw gains after saying it will buy U.S. tech company WideOrbit Inc., merge the firm with its subsidiary Lumine Group and then spin them off into a separate business.

The Toronto software company says the purchase will involve an undisclosed cash payment, as well as the issuance of a 14 per cent stake in the Lumine Group to WideOrbit shareholders.

San Francisco-based WideOrbit develops sales, traffic, billing and broadcast automation software for media companies and has annual gross revenues of roughly US$167-million.

Under the proposed transaction structure, Constellation will remain the majority shareholder of Lumine Group but distribute dividend-in-kind, nominal value subordinate voting shares of Lumine Group to shareholders.

Constellation expects the deal to close in the first quarter of 2023.

The spin out is subject to the approval of the TSX Venture Exchange and acceptance of a final prospectus by Canadian securities regulatory authorities.

Microsoft Corp. (MSFT-Q) gained on news it will buy a 4-per-cent stake worth US$2-billion in the London Stock Exchange Group , in the latest sign of blurring boundaries between Big Tech and financial firms which have raised some concerns among regulators.

LSEG said on Monday the deal would bring a “meaningful” upside to revenues after 2025 from selling more of its existing products via Microsoft apps to broaden the customer base, along with better pricing of products, but it declined to give any specific estimates.

LSEG bought Refinitiv for US$27-billion from a Blackstone (BX-N) and Thomson Reuters (TRI-T) consortium, which turned the exchange into the second largest financial data company after Bloomberg LP.

Microsoft will buy LSEG shares from the Blackstone /Thomson Reuters consortium, the exchange operator said. The deal will make Microsoft the seventh biggest shareholder in LSEG, based on Refinitiv data.

Thomson Reuters, which owns Reuters News, has a minority shareholding in LSEG following the Refinitiv deal. LSEG also pays Reuters for news.

Microsoft’s purchase is expected to complete in the first quarter of 2023.

Deepening ties between the handful of big global cloud companies such as Microsoft, Google, Amazon and IBM, and financial companies like banks and exchanges, have prompted regulators to scrutinize the links more closely.

Microsoft has a longstanding relationship with LSEG, and the exchange group’s Chief Executive David Schwimmer said that about a year ago they began talks on a more strategic relationship.

“It’s a long term partnership. In terms of the products we will be building together, I would expect our customers to start to see the benefits of that 18 to 24 months out and we will continue building from there,” Mr. Schwimmer told Reuters.

LSEG said the link with Microsoft, which gives the software group a seat on LSEG’s board, is a partnership to reap the benefits of “consumption-based pricing,” and not a traditional cloud deal.

“We will continue to maintain our multi-cloud strategy and working with other cloud providers,” Mr. Schwimmer said.

Incremental costs will total 250 to 300 million pounds over 2023 to 2025, with a 50 to 100 basis points impact on EBITDA margin over that two-year period.

Analysts asked Mr. Schwimmer to elaborate on his comment about a “meaningful” upside to revenues from the deal, but he declined to do so.

“This feels like a key milestone in LSEG’s journey towards being information solutions-centric, even if ‘meaningful’ revenue growth specifics are lacking,” analysts at Jefferies said.

Jefferies analysts said the deal could “transformationally” broaden the appeal of LSEG’s Workspace, with a potentially compelling alternative to Instant Bloomberg available for the first time.

Weber Inc. (WEBR-N), known for its domed charcoal grill, said on Monday it had agreed to be taken private by controlling shareholder BDT Capital Partners LLC in a US$3.7-billion deal.

BDT, which has a 48.2-per-cent stake in Weber, will buy all outstanding shares that it does not already own for US$8.05 per share.

The purchase price represents a 60-per-cent premium to Weber’s closing price on Oct. 24, the last trading day before BDT submitted its takeover offer.

Shares of Weber, which have shed nearly half of their value this year, jumped. As of last close, they had risen over 29 per cent since BDT’s proposal.

The special committee of independent directors evaluating BDT’s proposal had unanimously approved the deal, which is expected to close in the first half of 2023, Weber said on Monday.

Palatine, Illinois-based Weber said that as part of the deal, funds managed by BDT will provide the grill maker with an unsecured loan of additional US$350-million.

Weber plans to utilize the loan to repay existing debt and fund working capital for the 2023 outdoor cooking season, among other purposes

Private equity firm Thoma Bravo will buy Coupa Software Inc. (COUP-Q) for US$6.15-billion in cash, the business software maker said on Monday.

Shares of San Mateo, Cal.-based Coupa saw large gains in Monday trading.

Thoma Bravo will pay US$81 per share for Coupa, representing a premium of 30.5 per cent to the stock’s closing level on Friday. The price tag was 77.2 per cent higher than the closing price on Nov. 22, when investors’ interest in the company was first reported.

The all-cash deal, which has an enterprise value of US$8-billion, is the latest in a series of tech acquisitions by Thoma Bravo, which has been snapping up public companies with lower valuations.

Over the last two years, the private equity firm has made a series of acquisitions in the cybersecurity space, including Ping Identity, Sophos, Proofpoint and Sailpoint Technologies.

On the decline

Amgen Inc. (AMGN-Q) slipped on news it is set to buy biotech firm Horizon Therapeutics Plc (HZNP-Q) at a valuation of about US$26-billion in what would be its largest acquisition.

The U.S. biotechnology company has offered about US$116.5 for each Horizon share, according to reports. The offer is at about a 20-per-cent premium to Horizon’s closing price of US$97.29 on Friday.

The news comes after French health group Sanofi said on Sunday that it no longer intends to make an offer for Horizon.

Last month, Horizon Therapeutics - which has a market capitalization of about US$22-billion - had said it was in talks with Amgen Inc, Sanofi and Johnson & Johnson’s Janssen Global Services unit, all three of whom have been active in deal-making this year.

Janssen also pulled out of the race last week, saying that it does not intend to make an offer for Horizon.

Rivian Automotive Inc. (RIVN-Q) tumbled after the company paused its partnership discussions with Mercedes-Benz Vans on electric van production in Europe.

The Amazon-backed company said it will focus on its consumer and existing commercial business as it tries to become cash flow positive in its U.S. operations

Mercedes-Benz Vans said it will invest more than 1 billion euros (US$1.06-billion) to build its first electric-only vans plant in Jawor, Poland, adding that the possible expansion of the plant through a JV with Rivian would not take place.

With files from staff and wires

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