Market movers: Stocks that saw action on Tuesday - and why

On the rise

Shares of Teck Resources Inc. (TECK.B-T) gained 0.92 per cent after Glencore introduced a cash component to its takeover offer, but Teck doesn’t appear to be open to the proposal.

The sweetened offer came one day after Teck comprehensively rejected Glencore’s (GLNCY) proposal to merge with Teck and create two new companies, one that would hold their combined base metals assets, the other their coal operations.

Glencore’s new merger proposal would give Teck investors 24 per cent of the new metals company, plus US$8.2-billion in cash.

Glencore said in a statement that it “acknowledged that certain Teck investors may prefer a full coal exit and others may not desire thermal coal exposure. Accordingly, Glencore has proposed to the Teck board to introduce a cash element…to effectively buy Teck shareholders out of their coal exposure.”

Glencore added that “the new offer would mean that Teck investors could avoid exposure to Glencore’s thermal coal business, which the Canadian firm has said is less attractive than its steelmaking coal assets.”

Teck CEO opens door to takeover of metals unit if split is approved, but Keevil family has final say

Teck in response said that it intends to thoroughly review the Glencore offer, but at first glance, it isn’t impressed.

“Glencore’s revised proposal appears to be largely unchanged, with the exception of a cash consideration alternative in lieu of shares in the proposed combined coal entity,” Teck said in a statement. “The revised proposal does not provide an increase in the overall value to be received by Teck shareholders, or appear to address material risks previously raised.”

RBC Capital Markets analyst Tyler Broda wrote in a note to clients that Glencore’s new offer “helps to address some of the key points of the Teck management pushback,” most notably the ongoing exposure to thermal coal.

- Niall McGee

See also: Andrew Willis: Teck and Glencore dispute investor appetite for coal

First Capital Real Estate Investment Trust (FCR-UN-T) rose 1.5 per cent as it sold Toronto’s upscale Hazelton Hotel and three other properties on Tuesday for a total of $184-million, the latest step in a plan to raise up to $1-billion for investment in new developments.

First Capital, a REIT focused on grocery store-anchored malls, sold the boutique Hazelton property in Toronto’s Yorkville neighborhood and a 50-per-cent stake in the attached ONE restaurant for $110-million to Hennick&Co., a private real estate company founded by billionaire Jay Hennick.

The REIT also sold a condominium development site in north Toronto that is currently a retail centre and two properties in Montreal, an apartment building and a residential site that was previously part of a First Capital mall.

The property sales come after First Capital faced an activist investor campaign that began with last September’s announcement of a plan to aggressively sell assets to pay for building new malls. Several fund managers initially objected to selling properties when rising interest rates and the threat of a recession could depress prices.

The showdown ended last month with two new directors joining the board, and former Toronto-Dominion Bank executive Paul Douglas becoming First Capital’s chair, but no shift in strategy.

- Andrew Willis

Brookfield Infrastructure Partners LP (BIP.UN-T) increased 1.8 per cent after agreeing to buy French asset manager AXA IM’s stake in data centre firm Data4 for a undisclosed amount.

For Brookfield, the deal marks its entrance into the European data centre market with an eye to expansion, the unit of France’s insurer AXA said in the statement.

The deal is likely to value the data centre operator at close to 3.5 billion euros (US$3.8-billion) including debt, people familiar with the matter told Reuters last month.

AXA AM said it will continue to actively seek acquisition and development opportunities in sectors related to the storage and communication of data.

Headquartered in Paris, Data4 operates 31 data centres across six countries including France, Italy, Spain and Luxembourg. Its customers include cloud operators and companies.

AXA AM acquired Data4 in 2018 for an undisclosed sum.

Shares of crypto-related companies, including Galaxy Digital Holdings Ltd. (GLXY-T) and Hive Blockchain Technologies Inc. (HIVE-X), climbed after bitcoin breached the key $30,000 level for the first time in 10 months on Tuesday, adding to its steady gains as investors raised bets that the U.S. Federal Reserve will soon end its aggressive monetary tightening campaign.

Bitcoin peaked at US$30,438 in Asian trade and was last up 1.96 per cent at US$30,233. It has gained nearly 6% since the start of the month, after rising 23 per cent in March.

Investors are awaiting a U.S. inflation report on Wednesday to assess the Fed’s next steps after banking sector turmoil in March raised expectations that the central bank would let up on rate hikes to ease stress on the sector.

“The recent surge in bitcoin’s price is like a breath of fresh air after a long, cold crypto winter,” said Tim Frost, CEO of crypto yield platform Yield App.

“This renewed optimism could be attributed to an anticipated shift in the U.S. Federal Reserve’s monetary policy, which is expected to create a more stable, and hopefully predictable, environment.”

See also: Ethereum upgrade to unlock $33-billion

Warren Buffett’s Berkshire Hathaway Inc. (BRK.B-N, BRK.A-N) rose after it increased its stakes in Japan’s five largest trading houses to 7.4 per cent, and the billionaire investor said he may invest more in the country.

Mr. Buffett, 92, said in an interview with Nikkei that he was “very proud” of the investments and would meet with the trading houses this week to discuss their businesses, perhaps laying the groundwork for doing business together.

The trading houses are Itochu Corp, Marubeni Corp , Mitsubishi Corp, Mitsui & Co and Sumitomo Corp.

Their shares rose 2.1 per cent to 4.6 per cent in Tokyo on Tuesday following the Nikkei interview. Berkshire had disclosed owning 5-per-cent stakes in each company in August 2020 on Mr. Buffett’s 90th birthday, in investments then worth more than US$6-billion. It reported increasing the stakes to more than 6 per cent in November.

“We would love it if any of the five would come to us ever and say, ‘We’re thinking of doing something very big or we’re about to buy something and we would like a partner or whatever,’” Mr. Buffett said.

He also said Berkshire does not invest in other Japanese companies, but “there are always a few I’m thinking about.”

Known as “sogo shosha,” Japanese trading houses trade in a wide variety of materials, products and food, often serving as intermediaries, and provide logistical support.

They are also deeply involved in the real economy in such areas as commodities, shipping and steel.

The business model may have enticed Mr. Buffett, who prefers to invest for the long term and avoid businesses he claims not to understand.

“These five companies are a cross section of not only Japan but of the world,” Mr. Buffett told Nikkei. “They are really so much similar to Berkshire.”

Buffett’s Omaha, Nebraska-based conglomerate owns dozens of businesses, including the BNSF railroad, Geico auto insurance, and consumer, energy and industrial companies, as well as stocks such as Apple Inc and Bank of America Corp.

Nikkei also said Berkshire plans to sell more yen-denominated bonds, perhaps foreshadowing more Japanese stock investments.

Blackstone Inc. (BX-N) was up 2.2 per cent after it said on Tuesday it had raised US$30.4-billion for its latest global real estate fund, as the private equity behemoth looks to double down on the industry.

The fund, called Blackstone Real Estate Partners X, is 48 per cent bigger than the asset management giant’s previous real estate fund which closed in 2019.

Blackstone has been focusing its portfolio on logistics, rental housing, hospitality, lab office and data centers, shifting away from assets like traditional office and malls that are facing headwinds from a post-pandemic adoption of flexible work and surge in e-commerce.

“Sector selection has never been more critical as we witness the bifurcation of performance within real estate,” Ken Caplan, global co-head of Blackstone Real Estate, said in a statement.

Tupperware Brand Corp.’s (TUP-N) shares recouped some lost ground a day after losing half their value as the maker of reusable plastic containers flagged doubts about its ability to continue as a going concern.

The Florida-based company said on Friday that it had engaged with financial advisers to help improve its capital structure and near-term liquidity, while was also reviewing its real-estate portfolio in a bid to preserve its liquidity.

Shares of the company slumped as much as 50 per cent to a near three-year low of US$1.21 on Monday, and ended the session down 48 per cent with a market value of about US$55-million.

The stock was trading up at US$1.29 on Tuesday, still shy from its 2021 high of US$38.57, when the company benefited from a surge in demand as the lockdown-induced home cooking prompted consumers to use Tupperware containers to store their leftovers.

Still, Tupperware saw a decline in sales volumes since 2022 as consumers maintained a cautious stance with their discretionary spending.

Tupperware, known for its airtight, durable and colorful storage containers and bowls, had to hike prices to protect its margins from higher interest rates and elevated costs of resin and labor, as well as a stronger U.S. dollar and lingering supply chain challenges.

The company in November had raised doubts about its ability as a going concern, citing that it was doubtful about whether it could comply with some of its debt covenants.

On the decline

Shares of Tilray Brands Inc. (TLRY-T) dropped 9.4 per cent following the late Monday announcement that it is buying fellow cannabis company Hexo Corp. (HEXO-T) in an all-share deal valued at US$56-million aimed at helping the business navigate a “challenging” cannabis market that has seen significant price compression.

The deal will unite Leamington, Ont.-based Tilray, which is behind Broken Coast, RIFF, Solei and Good Supply, with Gatineau, Que.-based Hexo, known for its Redecan, Original Stash and Bake Sale brands.

The arrangement will see Tilray issue 0.4352 shares of its stock for each outstanding Hexo share.

Tilray chief executive Irwin Simon positioned the deal as way to increase the company’s market share, broaden their product offerings and deliver at least $25-million in additional cost savings on an annualized basis.

“Together we have the assets and the operating expertise to build a stronger Canadian platform that takes advantage of clear opportunities to deliver stronger topline growth and increase our market share,” he said on a Monday call with investors.

The arrangement structured as a merger builds on a strategic alliance the two companies struck a year ago, after Tilray acquired US$19- million in senior secured convertible notes originally issued by Gatineau, Que.-based Hexo to HT Investments MA LLC.

However, their transaction must be okayed by the courts and receive the support of about 66 per cent of Hexo shareholders at a forthcoming meeting. The companies expect the deal to close in June.

In a research note, ATB Capital Markets analyst Frederico Gomes said: “. We view the potential synergies positively, and we believe HEXO has a valuable asset in Redecan. However, we think the outcome of the transaction for TLRY shareholders is unknown, for two main reasons: (1) HEXO has been losing share, and, historically, attempts to acquire market share in the Canadian cannabis industry have failed; (2) the implied TTM [trailing 12-month] EV/Sales multiple of 1.8 times represents a premium of 64 per cent to peers, which, given current market conditions (deteriorating macro and headwinds faced by LPs), could be excessive. Ultimately, we believe the success of the transaction for TLRY will depend on its ability to avoid market share erosion in an industry that remains fragmented and overly competitive.”

Newmont Corp. (NGT-T) was lower by 2.6 per cent after it laid down a best and final offer for Australia’s Newcrest Mining Ltd on Tuesday at A$29.4-billion (US$19.5-billion) to close a deal that would extend Newmont’s lead as the world’s biggest gold producer.

If successful, the deal would lift Newmont’s gold output to nearly double its nearest rival Barrick Gold Corp. (ABX-T). The merger is set to be the third-largest deal ever involving an Australian company and the third-largest globally in 2023, according to data from Refinitiv and Reuters calculations.

Newcrest said on Tuesday it had given U.S.-based Newmont access to its books following the sweetened all-share bid that has received some support from shareholders.

“I think this offer strikes a better balance. We are positively disposed to the Newcrest-Newmont merger and would intend to remain a shareholder of the combined entity were a transaction to proceed,” said Simon Mawhinney, chief investment officer at Newcrest’s top shareholder Allan Gray Australia.

Under the revised offer, Newcrest shareholders would receive 0.400 Newmont share for each share held, with an implied value of A$32.87 a share, up from a previous exchange ratio of 0.380 that Newcrest’s board unanimously rejected in February.

“This transaction would strengthen our position as the world’s leading gold company by joining two of the sector’s top senior gold producers and setting the new standard in safe, profitable and responsible mining,” Newmont CEO Tom Palmer said in a statement.

Newcrest shares closed 5.16 per cent higher at A$29.74. Newmont’s U.S.-listed shares were down, which analysts said reflected some uncertainty over whether the deal would go through.

Newmont’s earlier offer had been seen as opportunistic by some investors given it came at a vulnerable time for the company. Newcrest is seeking a replacement for former Chief Executive Officer Sandeep Biswas, who stepped down in December.

“The deal may still be seen as opportunistic by (Newcrest’s) board and shareholders given short-term operational issues, an interim CEO, and a perceived lack of market appreciation for long-term project potential,” RBC said in a report.

The latest bid is 16 per cent higher than Newmont’s initial proposal, and represents around a 46-per-cent premium to Newcrest’s share price on Feb. 3 before Newmont’s first bid was announced.

Alibaba Group Holding Ltd. (BABA-N) turned lower and closed down 1.6 per cent in the wake of showing off its generative AI model - its version of the tech that powers chatbot sensation ChatGPT - and said it would be integrated into all of the company’s apps in the near future.

The unveiling, which came on the heels of the launch of a slew of new AI products by SenseTime this week, was swiftly followed by the government’s publication of draft rules outlining how generative AI services should be managed.

In a filmed demonstration, the AI large language model, named Tongyi Qianwen which means “truth from a thousand questions”, drafted invitation letters, planned trip itineraries and advised shoppers on types of makeup to purchase.

Tongyi Qianwen will initially be integrated into DingTalk, Alibaba’s workplace messaging app and can be used to summarise meeting notes, write emails and draft business proposals. It will also be added to Tmall Genie, Alibaba’s voice assistant.

The technology “will bring about big changes to the way we produce, the way we work and the way we live our lives,” CEO Daniel Zhang told the livestreamed event.

AI models like Tongyi Qianwen are “the big picture for making AI more popular in the future,” he added.

The Chinese internet giant’s cloud unit plans to open up Tongyi Qianwen to clients so they can build their own customized large language models and began registrations on Friday.

The draft rules published by the Cyberspace Administration of China said the country supported the technology’s innovation and popularisation but content generated had to adhere to “core socialist values” as well as to laws on data security and personal information protection.

Those who fall foul of the rules could face fines or criminal investigation, it added.

The proposed rules, open for public comment until May 10, come as governments around the world are looking at how best to regulate generative AI technology, which has sparked much concern about its ethical implications as well as its impact on national security, jobs and education.

Moderna Inc. (MRNA-Q) said on Tuesday its closely watched flu vaccine did not meet the criteria for early success in a late-stage trial, sending its shares down 3.1 per cent.

Not enough people had been infected with flu at the time of an interim analysis of the trial, which compared the shot with an approved vaccine, making it too early to determine Moderna shot’s efficacy, the company said, adding it would keep testing it for more data.

The company was banking on the success of its flu shot and aims to grab large portions of the respiratory syncytial virus (RSV) and seasonal flu markets with its new mRNA vaccines.

Moderna in February forecast US$5-billion in COVID vaccine sales this year, far less than the US$18.4-billion windfall in 2022, due to decreasing demand for the shots.

Investors had been hoping for stronger data on the flu vaccine after an earlier trial showed it generated a strong immune response against influenza A strains, but was inferior to an approved vaccine for the less-prevalent influenza B strain.

“We would have liked to see the study stop early for non-inferiority,” said Jefferies analyst Michael Yee in a research note.

Earlier this year, Moderna’s experimental messenger RNA vaccine, mRNA-1345, for respiratory syncytial virus (RSV) was 84 per cent effective in at preventing at least two symptoms in older adults. Moderna said it expects to file for approval of its RSV vaccine this quarter.

Moderna expects to make sales between US$8-billion and US$15-billion said on Tuesday it had not enrolled enough cases in a late-stage trial of its experimental flu vaccine to determine if the shot was successful or not, sending the company’s shares down.

The company said, ahead of its annual vaccines conference, that it will continue testing the flu shot for efficacy.

Data from the second trial comes two months after its flu vaccine generated a strong immune response against influenza A strains, but was inferior to an approved vaccine when compared to the less-prevalent influenza B strain in the first late-stage study.

Moderna also forecast sales from its respiratory vaccines to be between US$8-billion and US$15-billion in 2027. It is testing vaccines against respiratory syncytial virus (RSV), influenza and a next-generation COVID-19 shot in late-stage studies.

The company said it expects to launch six major vaccines in the next few years.

With files from staff and wires