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A look at North American equities heading in both directions

On the rise

Shares of Superior Plus Corp. (SPB-T) gained almost 4 per cent after announcing before the bell it will acquire Certarus Ltd. for $1.05 -billion including debt, adding low-carbon fuels to its portfolio.

Certarus operates mobile storage units to bring green fuels including compressed natural gas, renewable natural gas and hydrogen to North American customers who want to transition away from diesel and other distillates but do not have the infrastructure in place.

It directly passes on changes in the commodity cost of its fuels to customers.

The Calgary-based company expects to expand the number of its fuel-moving trailers to 640 by the end of the year.

Superior’s chief executive Luc Desjardins added the Toronto-based company now expects to hit the lower end of its target of $700-million to $740-million in EBITDA from operations by 2024, two years ahead of schedule.

The equity value of the deal is $853-million. Superior, which distributes and markets propane and distillates, will also assume Certarus’ outstanding senior bank credit and leases worth $196-million.

Certarus shareholders will own about 17 per cent of the combined company as they will receive $353-million in cash and $500 million of Superior common shares at $10.25 a share.

The deal is expected to close in the first quarter of 2023.

In a research note, ATB Capital Markets analyst Nate Heywood said: “Despite the acquisition being multiple neutral on a pre-synergy basis, we view the strategic rationale as attractive given the high growth potential of the underlying low carbon fuel business and expect Superior will also be able to leverage its extensive fuel distribution network to offer efficiencies and realize synergies. Management has previously pointed towards tuck-in acquisition multiples around 7-8 times pre-synergies (6 times post synergies); however, we are supportive of the higher multiple for the transformative transaction.”

Toronto-based auto parts maker ABC Technologies Holdings Inc. (ABCT-T) rose 3.4 per cent with the premarket announcement of a definitive agreement to acquire WMG Technologies from the Bierer family for US$165-million with potential earn-out payments that may become payable based on specified profitability targets over the next 24 months.

WMGT, a supplier to global automotive original equipment manufacturer (OEMs), generated US$270-million revenue in its last full fiscal year, ending April 30.

“”WMGT brings with it a rich history as a family-owned Canadian business that parallels ABC’s own story. Founded two years apart, both companies built strong legacies guided by intentional and focused leaders. Six years after our own transition from being a family-owned business, ABC is excited to welcome WMG into its next exciting chapter as part of the ABC family,” said ABC president and CEO Terry Campbell in a statement. “This acquisition strengthens ABC’s exterior products offering, expands our injection molding technical expertise and brings additional value-added tooling in-house.”

On the decline

Alimentation Couche-Tard Inc. (ATD-T) dipped in response to news it has signed a deal to buy all of the membership interests of U.S. company True Blue Car Wash LLC.

Financial terms of the agreement for the operator of car wash sites under the Clean Freak and Rainstorm banners were not immediately available.

Couche-Tard CEO Brian Hannasch says True Blue is an opportunity to extend the company’s brands into a very attractive industry subcategory.

Founded in 2016, True Blue has 65 car washes in Arizona, Texas, Illinois and Indiana.

True Blue’s management, office and operations teams are expected to join Couche-Tard once the deal is complete, while True Blue CEO Stuart Crum will continue to lead its operations.

The deal is expected to close in the first half of 2023, subject to regulatory approvals and closing conditions.

Vivo Cannabis Inc. (VIVO-T) dropped with the premarket announcement of a definitive agreement to be acquired by MediPharm Labs Corp. (LABS-T).

“The Transaction is expected to combine two highly complementary businesses, creating a unique and market differentiating international medical cannabis leader,” the companies said.

Existing shareholders of Barrie, Ont.-based MediPharm are expected to own between 65 per cent and 79 per cent of the combined company.

Under the terms of the agreement, Vivo shareholders will receive between 0.2110 and 0.4267 common shares of MediPharm for each Vivo share held.

Tesla Inc. (TSLA-Q) shares are on track for their worst month ever as a sell-off deepened on Thursday over worries about softening demand for electric cars and Chief Executive Elon Musk’s distraction with Twitter.

The stock dropped over 9 per cent on Thursday to their lowest level since September 2020 after the automaker’s website showed it was offering US$7,500 discounts on Model 3 and Model Y electric vehicles delivered in the United States this month.

Tesla’s stock has tumbled 36 per cent so far in December, putting it on track for its worst ever monthly performance. By comparison, Tesla’s shares dropped 22 per cent in March 2020, when the coronavirus pandemic tipped financial markets into a tailspin.

Mr. Musk’s US$44-billion takeover of Twitter in October has been marked by chaos and controversy, with some investors questioning whether the billionaire is too distracted to properly run Tesla. Musk has also sold almost US$40-billion worth of his Tesla shares this year, adding to pressure on the stock as investors worry he could sell more to keep Twitter afloat.

Under Armour Inc. (UAA-N) turned lower after it named veteran hotelier Stephanie Linnartz as its chief executive, betting that her experience in e-commerce and branding strategy will help revive sales at the apparel maker.

Ms. Linnartz, who will join Baltimore-based Under Armour on Feb. 27, will take over at a time when the company is grappling with uncertain demand for clothes and discretionary items as decades-high inflation curbs consumer spending.

Under Armour cut its annual guidance last month, pressured by promotions and a stronger dollar. Its stock has more than halved so far this year.

The company, which has product lines backed by actor Dwayne Johnson and National Basketball Association’s Stephen Curry, also faces stiff competition from Nike Inc, which is turning around recent inventory problems and reported strong quarterly results on Tuesday.

Appointing an outsider as CEO echoes a similar move by Nike almost three years ago when the sneaker maker named former eBay Inc’s CEO John Donahoe, tasking him with strengthening its online strategy.

“Under Armour chose somebody from outside the industry which is a little unusual,” said Morningstar analyst David Swartz.

“It is clear the company is interested in her background in developing Marriott digital strategy and membership programs,” he said, adding that these are areas where it trails Nike and Adidas AG.

Ms. Linnartz currently serves as president of Marriott International Inc and has been with the hotel chain operator in various roles for the last 25 years.

She succeeds Patrik Frisk, who stepped down in June after two years on the job. Interim CEO Colin Browne will resume his responsibilities as chief operating officer, Under Armour said in a statement.

Ms. Linnartz will receive a base salary of US$1.3-million per year and a one-time sign-on cash bonus of US$375,000.

Chipmaker Micron Technology Inc. (MU-Q) on Wednesday forecast a much steeper-than-expected second-quarter loss and said it will lay off 10 per cent of its workforce next year, citing a nagging glut in the semiconductor market.

“Due to the significant supply demand mismatch entering calendar 2023, we expect that profitability will remain challenged throughout 2023,” Micron chief executive Sanjay Mehrotra said. Micron had about 48,000 employees worldwide as of September 1.

Micron, reporting earnings on Wednesday, forecast second-quarter revenue of US$3.8-billion, plus or minus US$200-million, above Wall Street estimates. But it forecast a loss of 62 US cents per share plus or minus 10US cents, much steeper than analysts’ estimates for a 30 cents loss.

Micron’s shares fell in Thursday trading. They have dropped about 45 per cent so far this year.

Red-hot inflation, rising interest rates, geopolitical tensions and COVID-19 lockdowns in China have led businesses and consumers to rein in expenses, hitting the PC and smartphone market and in turn the business of chip makers. The situation was a quick U-turn from chip shortages last year that hit everything from laptops to car makers.

Micron said on Wednesday that its investments in fiscal 2023 would now be adjusted down to US$7-billion to US$7.5-billion and that it would be “significantly reducing capex” plans in fiscal 2024. It invested US$12-billion in fiscal 2022.

Micron, the first major chip maker to alert the market of the downturn over the summer, previously said it would be cutting investments in 2023. It was not clear what its previous 2024 investment plans were.

“The message overall is very much status quo,” said Matthew Bryson, analyst at Wedbush Securities. “There’s no sign that memory is yet recovering from declining fundamentals, but Micron is also continuing to work to create a better future supply demand dynamic.”

Revenue for the first quarter ended Nov. 30 fell about 47 per cent year on year to US$4.09-billion. It had a net loss of US$195-million, or 18 US cents per share, compared with a profit of US$2.31-billion, or US$2.04 per share, a year earlier.

CarMax Inc. (KMX-N) reported an 860-per-cent drop in quarterly profit and the largest U.S. used car retailer announced it was cutting expenses and pausing stock buybacks, as rising interest rates sap consumer confidence.

Shares of the company tumbled and opened at more than two-and-a-half year low, dragging down other auto retailers such as AutoNation Inc. (AN-N) and Carvana Co. (CVNA-N).

The auto retail industry has been facing the brunt of consistent rate hikes and weakening consumer confidence. Analysts have been warning that more pain is ahead as a period of bumper earnings comes to an abrupt halt.

“We believe vehicle affordability challenges continued to impact our third-quarter unit sales performance, as headwinds remain due to widespread inflationary pressures, climbing interest rates, and low consumer confidence,” CarMax said on Thursday.

The company said it slowed car buying in the quarter, adding it was also reducing marketing and capital expenditures to shore up profits, which missed analysts’ expectations in the third quarter.

CarMax reported net income of 24 US cents per share for the quarter through November, compared with expectations of 70 US cents, as per Refinitiv data.

Revenue was US$6.51-billion and came in below the average analyst estimate of US$7.29-billion.

Cinema chain AMC Entertainment Holdings (AMC-N) said on Thursday it would raise US$110-million in new equity capital through the sale of its preferred stock, sending the cinema chain’s shares down.

Antara Capital will buy APE (APE-N) at an average price of 66 US cents per share. APE shares surged about almost 80 per cent early in the trading day.

Antara, a current AMC debt holder, will also exchange US$100-million in debt for about 91 million APE units, which would reduce AMC’s annual interest expense by about US$10-million.

AMC in August announced APE as a special dividend for shareholders and a means to raise capital in the future. The company in the same month listed the stock in New York under the ticker ‘APE.’

With files from staff and wires

Follow David Leeder on Twitter: @daveleederOpens in a new window

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