A roundup of some of the North American equities making moves in both directions today
On the rise
Montreal-based TFI International Inc. (TFII-T) soared in Monday trading in the wake of announcing a definitive agreement to acquire UPS Freight, the less-than-truckload (LTL) and dedicated truckload (TL) divisions of United Parcel Service Inc. (UPS-N), for US$800-million.
TFI said approximately 90 per cent of the acquired business will operate independently within TFI International’s LTL segment under its new name, “TForce Freight”, while acquired dedicated TL assets will join TFI’s TL business segment.
In a research note, Desjardins Securities analyst Benoit Poirier said: “Overall, we are very pleased with TFII’s acquisition of UPS Freight, which should enable the company to enter the compelling U.S. LTL market (a concentrated segment which commands pricing discipline from the largest players). In addition, management’s strong M&A track record (~90 acquisitions realized since 2009) gives us confidence that TFII can unlock significant value from this transaction. Finally, TFII’s healthy balance sheet (net debt/EBITDA ratio of 1.2 times as of 3Q20) should enable the company to complete this transaction without issuing equity (we estimate that TFII has up to $1.3-billion of dry powder assuming the maximum leverage ratio of 2.25 times). The potential for such a transformative transaction was a key pillar of our investment thesis on TFII and a determining factor in selecting TFII as one of our top picks for 2021.”
Telus Corp. (T-T) was up as Telus International, its business and IT services division, kicked off a roadshow to market its initial public offering and is expecting to price its stock at between US$23 and US$25 per share.
Telus International will be offering 33.33 million subordinate voting shares – including 21.93 million from its treasury and 11.40 million from its owners, Telus and Baring Private Equity Asia – when it goes public on the Toronto Stock Exchange and New York Stock Exchange. It will trade under the ticker TIXT.
Telus International expects to raise roughly US$493.9-million if it prices the IPO at US$24 per share, according to its most recently filed prospectus with the U.S. Securities and Exchange Commission.
Telus International runs the digital customer experience for brands such as Fitbit, Uber and online gamer Zynga. It started out 15 years ago as a call centre operator for Telus and a handful of U.S. technology and telecom firms and grew organically and through acquisitions.
- Alexandra Posadzki
See also: Telus’s IT gamble proves to be winning play for Entwistle
After years of operating in ‘stealth mode,’ Telus subsidiary prepares for initial public offering
Aurinia Pharmaceuticals Inc. (AUP-T) increased after gaining approval from the U.S. Food and Drug Administration to sell its drug for a severe form of lupus, a rare milestone for a Canadian biotechnology company.
The Victoria-based company said late Friday its drug Lupkynis, formerly known as voclosporin, had been approved for use in combination with immunosuppressive therapies to treat adults with lupus nephritis (LN), a variant of lupus that occurs when the immune system attacks the kidneys, often causing kidney failure and death. Until recently there was no FDA-approved treatment.
The FDA approval “marks a turning point for the lupus nephritis community,” Aurinia chief executive Peter Greenleaf said in a release. “We are thrilled to bring Lupkynis to the people impacted by this devastating condition.”
On Monday, several equity analysts on the Street raised their target prices for Aurinia shares based on the news.
- Sean Silcoff
Blackberry Ltd. (BB-T) jumped more than 30 per cent in early trading, continuing its 2021 momentum.
There’s been a slew of good news of late, including a patent dispute settlement with Facebook and a partnership with Amazon to work on cloud-based vehicle software.
On Monday, BlackBerry said there haven’t been any major business changes to account for a trading frenzy that drove its share price higher.
Within the past year, the shares have traded for as little as $3.94 each, but have risen 61.5 per cent over the past five days alone.
About 23 million Toronto-listed shares changed hands by 2:30 p.m. ET, compared with an average day’s trading volume of less than 7.7 million.
The Investment Industry Regulatory Organization of Canada briefly halted the stock Monday morning after the surge set off the regulator’s circuit breaker, which slows down trading to ensure a fair and orderly market.
Obsidian Energy Ltd. (OBE-T) rose after extending its hostile takeover offer for Bonterra Energy Corp. (BNE-T) until March 29.
The offer was set to expire Monday.
Bonterra has repeatedly recommended shareholders reject the bid.
Obsidian has offered two of its shares for each Bonterra share.
In December, Obsidian reduced the minimum number of tendered shares needed to complete the transaction to 50 per cent from two-thirds.
Obsidian has said a combined Obsidian-Bonterra could save $50-million in the first year and a total of $100 million in the first three years, however Bonterra has said those savings are “uncertain.”
Advanced Micro Devices Inc. (AMD-Q) saw gains after an equity analyst at RBC raised his price target on the chipmaker’s stock on expectations of upbeat fourth-quarter earnings, helped by upside from PC demand, GPU demand and improving server trends.
Mitch Steves said: “Heading into the Dec-qtr print, we remain positive on AMD and wouldn’t be surprised to see a beat and raise quarter with potential for the firm to generate revenues at or above the high-end. At this time we note the following: 1) revenue has high potential for upside due to PC demand, GPU demand and improving server trends, 2) we do not think gross margins begin to beat until Q1/Q2, with multiple new products - servers, GPUs and consoles, it is unlikely that yields are high on the initial batch of chips (standard lower yields on initial production). That said, yields will likely improve quickly in Q1/Q2 time frame and gross margins should begin to improve; 3) due to PC and server share gains, Q1 guidance from a revenue perspective will likely ramp as well. This should result in above seasonal Q1 guidance. Finally, we remain positive on the AMD story given the pullback (competitor announcements). Our view is that share gains will continue until the beginning of 2023 at minimum.”
Shares of AMC Entertainment Holdings Inc. (AMC-N), which have lost nearly half their value in the last 12 months, jumped in the wake of saying on Monday that any talk of an imminent bankruptcy is “completely off the table” after the cash-strapped movie theater chain raised an additional US$917-million to help cushion the blow from the pandemic.
The New York-based company said it had raised capital by issuing new shares, while executing commitment letters for more debt.
The announcement comes as AMC continues to face heavy losses, with fresh pandemic-led restrictions forcing theaters to shut again.
Delays in the release of new movies due to the pandemic have crushed theater chains such as AMC, Cineworld Plc and Cinemark Holdings Inc, with the latest setback being the postponement of the James Bond film No Time to Die.
The company also said it was estimating that its “financial runway has been extended deep into 2021,” but warned investors on the uncertainty of its future cash needs.
Videogame retailer GameStop Corp. (GME-N) surged further after having already gained about 250 per cent since the beginning of 2021. Traders noted that the jump in shares could be short-sellers quickly buying back into the stock to cover potential losses and retail investors piling in to benefit from the surge.
See also: Smaller investors face down hedge funds, as GameStop soars
Merck & Co Inc. (MRK-N) reversed early losses and closed higher after the drugmaker said it will end development of its two COVID-19 vaccines and focus pandemic research on treatments, with initial efficacy data on an experimental oral antiviral expected by the end of March.
The drugmaker said Monday that it will focus instead on studying two possible treatments for the virus that also have yet to be approved by regulators. The company said its potential vaccines were well tolerated by patients, but they generated an inferior immune system response compared with other vaccines.
Merck entered the race to fight COVID-19 later than other top drugmakers.
It said last fall that it had started early-stage research in volunteers on potential vaccines that require only one dose. Vaccines developed by Pfizer and Moderna were already in late-stage research at that point.
The Food and Drug Administration allowed emergency use of both the Pfizer and Moderna vaccines late last year. Each requires two shots.
On the decline
Great-West Lifeco Inc. (GWO-T) slid after announcing a normal course issuer bid for the cancellation of up to 20 million common shares.
“In March 2020, the Office of the Superintendent of Financial Institutions (OSFI) instructed Canadian banks and insurers to suspend share buybacks and not to increase dividend payments,” the Winnipeg-based company said in a statement. “The Corporation does not currently intend to increase dividends or engage in share repurchases that reduce its outstanding shares while OSFI maintains this instruction. However, the Corporation may use the renewed NCIB for other purposes permitted by the TSX or, when the instruction is lifted or circumstances otherwise change, to acquire Common Shares to mitigate the dilutive effect of issuing shares under the Corporation’s Stock Option Plan and for other capital management purposes.”
Great Canadian Gaming Corp. (GC-T) was narrowly lower after the premarket announcement that its board of directors has accepted the resignation of Rod Baker as Director, President and Chief Executive Officer effective Jan. 24.
Terrance Doyle, President, Strategic Growth and Chief Compliance Officer, has been appointed by the Interim CEO.
The Toronto-based company will be delisted from the Toronto Stock Exchange after its acquisition by Apollo Global Management Inc. is finalized in the second quarter of 2021,
See also: Apollo takeover of Great Canadian Gaming granted court approval
Valens Company Inc. (VLNS-T) was down after announcing a $35-million bought deal offering in an agreement with a group led by ATB Capital Markets Inc..
Under the deal, the underwriters will purchase 17.1 million units of the company at $2.05 per unit.
Concurrently, the Kelowna-based manufacturer of cannabis derivative products announced the acquisition of LYF Food Technologies Inc. for $24.9-million, plus up to an additional $17.5 -million based on certainn earn-out EBITDA milestones.
“With the LYF acquisition, The Valens Company not only strengthens its already wide-reaching production capabilities for the 2.0 and 3.0 markets, but also unlocks significant growth potential with the addition of a cutting-edge platform designed to capitalize on one of the fastest growing product segments in the cannabis industry,” it said.
Oil and gas producer Hess Corp. (HES-N) lost ground as it forecasted a small drop in output and set a US$1.9-billion budget for 2021, most of it directed towards Guyana, touted as one of the most important new oil and gas discoveries in the last decade.
Hess, which is a part of a consortium with Exxon Mobil and China’s CNOOC Ltd, has made 18 discoveries totaling some 8 billion barrels of recoverable oil and gas in Guyana’s massive Stabroek block, southwest of Kaieteur.
Hess forecast net production to average about 310,000 barrels of oil equivalent per day (boepd) in 2021, excluding Libya, compared with 2020 estimate of 325,000 boepd.
For 2020, the New York-based energy company estimated to spend US$1.8-billion.
The company will also add a rig in North Dakota’s Bakken shale play in the first quarter, which operated just a single rig there since May in its efforts to slash production to cope with last year’s oil price crash. It had six rigs in the Bakken at the start of last year.
With files from staff and wires
David Leeder