A look at North American equities heading in both directions
On the rise
Haivision Systems Inc. (HAI-T) jumped 19.7 per cent after the video streaming technology company received an offer to be acquired by Evertz Technologies Ltd. (ET-T).
On Monday, Evertz, a Burlington, Ont.-based company, revealed a “non-binding” proposal to acquire all of its issued and outstanding common shares at $4.50 per share, a 21.6-per-cent premium to the last trade. Last month, it disclosed a 10-per-cent stake in Haivision.
“We expect Haivision shares to trend higher and no longer see the stock limited by recent fundamental performance,” said Canaccord Genuity analyst Robert Young, who upgraded his recommendation for its shares. “We suspect that the offer will be turned down but this may put Haivision into play or create a short squeeze.”
Bombardier Inc. (BBD.B-T) was up 1.8 per cent on news it is set to acquire Latecoere SA’s electrical wiring and interconnection systems business in Querétaro, Mexico.
“Bombardier will remain an integral customer of the Latecoere Group in North America and Latecoere will continue to develop its own EWIS activities from Hermosillo, Mexico, within its co-located aerostructures and wiring site, where it can better leverage its dual aerostructures and EWIS capabilities to meet the growing requirements of its expanding North and South American aerospace client base,” the Paris-listed company said in a statement.
WW International Inc. (WW-Q), known as WeightWatchers, soared 78.8 per cent after it said late Monday it is acquiring subscription telehealth platform Sequence, moving the weight-loss program operator into the obesity drug prescription business.
WeighWatchers said it expects its US$132-million acquisition in cash and stock will complement its nutrition and behavior-change program for weight loss at a time when obesity drugs are seen as one of the biggest markets for drugmakers.
Analysts have forecast the global obesity market to be worth around US$50-billion in sales in 2030.
“As science advances rapidly, we know there is a significant opportunity to improve outcomes for those using medications,” WeightWatchers Chief Executive Officer Sima Sistani said in a statement.
Launched in 2021, Sequence now serves about 24,000 members across the U.S., as of February 2023, and clocks about US$25-million in annual revenue on a run-rate basis.
The telehealth platform’s website says its clinicians can prescribe medications like Novo Nordisk’s Wegovy and Saxenda, and Eli Lilly’s Mounjaro.
Currently, Wegovy and Saxenda are approved drugs for obesity in the United States, with tirzepatide also widely expected to be approved for it later this year.
In December, Eli Lilly CEO David Ricks called the drug one of its “generational opportunities.” The drug was last year approved for diabetes, for which it is sold under the brand Mounjaro.
On the decline
BlackBerry Ltd. (BB-T) plummeted 11.7 per cent after its revenue expectation for fiscal 2023 disappointed investors.
The Waterloo, Ont.-based software firm says it expects its fourth-quarter and full-year revenue for its cybersecurity business to be lower than expected as some large deals that were expected to close in the quarter were not completed in time.
BlackBerry executive chairman and chief executive John Chen says macro challenges were a key factor for the company’s cybersecurity business unit, with elongated sales cycles in government causing some large deals to slip into later quarters.
The company also said it expects to take a one-time, non-cash charge of up to US$440-million in its fourth quarter related to its Spark security business.
In a preliminary look at its results for the quarter ended Feb. 28, BlackBerry says it expects total revenue of about US$151-million. Revenue from its internet of things (IoT) business is expected to be about US$53-million, while cybersecurity revenue is expected to be about US$88 million. Licensing and other revenue is expected to be approximately US$10 million.
For its full financial year, BlackBerry says it expects total revenue of about US$656-million with IoT revenue of about US$206-million and cybersecurity revenue of about US$418-million. Licensing and other revenue for the full year is expected to be about US$32 million.
Analysts on the Street had projected US$674.7-million, according to Refinitiv data.
BlackBerry is scheduled to release its full financial results on March 30 when it will also provide its outlook for the year.
Ritchie Bros Auctioneers (RBA-T) dipped 0.2 per cent in the wake of saying it would pay a special dividend of US$1.08 per share to its investors if they back its US$7-billion deal for U.S. auto retailer IAA Inc. (IAA-N).
Shareholders of both the companies are set to vote on March 14 on the deal that will allow Ritchie to tap into a growing market for heavy machinery and equipment, salvaged cars, trucks and motorcycles.
However, Ritchie’s shareholders including Luxor Capital Group, Eminence Capital, Deep Field Asset Management and Janus Henderson Investors have opposed the deal.
Ritchie Bros.’s major U.S. acquisition opposed by two influential proxy advisers
The latest move by Ritchie comes after proxy advisory firms Institutional Shareholder Services and Glass Lewis recommended that shareholders reject the deal, citing potential risks.
The dividend will be paid subject to receipt of required shareholder approvals of the merger, Ritchie said adding that IAA shareholders will not be entitled to receive it.
The deal is expected to close on March 20.
With investors concern about its earnings outlook, shares of Pet Valu Holdings Ltd. (PET-T) fell 3.6 per cent despite the introduction of stronger-than-anticipated same-store sales guidance for fiscal 2023, in-line fourth-quarter financial results and an increase to its dividend.
Before the bell, the Markham, Ont.-based retailer reported adjusted earnings per share for the final quarter of 2022 of 43 cents, up 5 per cent year-over-year and matching the Street’s forecast. Same-store sales rose 11.8 per cent topping the consensus projection of 9.3 per cent.
For 2023, it sees SSSG of 7 per cent to 10 per cent year-over-year.
In a research note, Stifel analyst Martin Landry called the sales growth expectation “an impressive target given the economic slowdown, suggesting that the industry and Pet Valu’s sales are very resilient.”
“However, the 2023 EPS guidance of $1.60 to $1.66, up 2.5 per cent year-over-year, is lower than our estimates of $1.72 and consensus of $1.71 as the company guides for gross margin erosion of 150 basis points year-over-year,” he added. “We believe that part of this gross margin erosion may be temporary during the transitions to a new distribution center. If that’s the case, we believe that shares could move higher with an organic growth that supports the company’s valuation.”
Pet Valu says it will now pay a quarterly dividend of 10 cents per share, up from 6 cents previously.
Meta Platforms Inc. (META-Q) finished narrowly lower after Bloomberg News it will cut thousands of jobs as soon as this week in a fresh round of layoffs, only a few months after the Facebook-parent reduced more than 11,000 people from its workforce.
The new round of job cuts is being driven by financial targets and is separate from the “flattening,” the report said, citing people familiar with the matter.
Meta declined to comment on the Bloomberg report when contacted by Reuters.
Last month, the Washington Post newspaper had reported that Meta was planning to cut jobs in a reorganization and downsizing effort.
Meta, at that time, declined to comment, but spokesperson Andy Stone in a series of tweets cited several previous statements by Chief Executive Officer Mark Zuckerberg suggesting that more cuts were on the way.
Meta’s mass layoffs in November that cut more than 11,000 jobs was among the biggest last year and the first in the company’s history. Other tech companies, including Google-parent Alphabet Inc and Microsoft Corp, have also cut thousands of jobs.
Corus Entertainment Inc. (CJR.B-T) slid 1 per cent after announcing a plan to cut its dividend for Class B shares in half to 12 cents annually (from 24 cents).
Its quarterly dividend is now set at 3 cents.
“While we continue to make strategic investments in the business to drive future growth, this redeployment of capital from dividends is expected to be directed to debt repayment,” said executive chair Heather Shaw.
The Toronto-based media company also revealed a change in its payment schedule of the quarterly dividend to align with its August fiscal year-end. After the March payment, they will follow the fiscal quarters (August, November, February, May).
“We believe the market may not be particularly surprised by the dividend cut given the prior 12.5-per-cent yield and indications from the company that the board was taking a hard look at dividend policy,” said Canaccord Genuity analyst Aravinda Galappatthige. “With that said, we believe both investor camps would be somewhat unsatisfied by the decision: those that believe that the full annual dividend of $50-million should have been diverted to debt paydown, and those who believed in maintaining the dividend considering the very low payout ratio. Ultimately, the company took the view that investors would want to a see meaningful dividend from Corus.”
Rivian Automotive Inc. (RIVN-Q) fell 14.6 per cent on its plan to sell bonds worth US$1.3-billion, as weakening demand and lofty costs tighten a cash crunch around electrical vehicle makers.
Initial investors will get an option to buy an additional US$200-million of the bonds for settlement 13 days after the bonds are issued, Rivian said in a statement.
The capital from this offering will help facilitate the launch of Rivian’s smaller R2 vehicle family, a Rivian spokesperson told Reuters, adding that convertible debt was “optimal cost of capital versus selling equity at today’s levels.”
Irvine, California-based Rivian, which makes R1T electric pickup trucks and R1S SUVs, has said its cash balance will fund its operations through 2025. It reported cash and cash equivalents of US$11.57-billion at the end of December, down from US$13.27-billion a quarter earlier.
In an effort to cut costs, the company last month laid off 6 per cent of its workforce.
Late last year, it shelved plans to build delivery vans in Europe with Mercedes and had earlier pushed back by a year to 2026 the planned launch of a smaller R2 vehicle family at the US$5-billion plant it is building in Georgia.
Rivian, which has been losing money on every vehicle it builds, forecasts 2023 production well below analysts’ estimates as it grapples with lingering supply chain bottlenecks after narrowly missing its target last year.
JetBlue Airways Corp. (JBLU-Q) was down 2.9 per cent after the U.S. Justice Department filed a lawsuit to it from buying Spirit Airlines Inc. (SAVE-N), saying that the planned merger “would put travel out of reach for many cost-conscious travelers”.
The Justice Department said the tie-up would especially hurt cost-conscious travelers who depend on Spirit to find cheaper options than they can find on JetBlue and other airlines.
Attorney General Merrick Garland was scheduled to hold a news conference to announce the lawsuit — a sign of the importance that the administration places on stopping further consolidation in the airline industry.
JetBlue and Spirit have anticipated the government challenge for weeks. The government had previously requested additional documents and depositions about JetBlue’s proposal to buy Spirit, the nation’s biggest budget airline. Negotiations over a possible settlement failed.
The Justice Department said in the lawsuit, filed in federal district court in Boston, that the deal would end direct competition between JetBlue and Spirit and eliminate Spirit, the nation’s biggest “ultra-low-cost carrier.”
“If the acquisition is approved, JetBlue plans to abandon Spirit’s business model, remove seats from Spirit’s planes, and charge Spirit’s customers higher prices,” the department lawyers wrote. “JetBlue’s plan would eliminate the unique competition that Spirit provides — and about half of all ultra-low-cost airline seats in the industry — and leave tens of millions of travelers to face higher fares and fewer options.”
As signals grew that the government would challenge the tie-up, JetBlue CEO Robin Hayes and other company executives launched a pre-emptive campaign to make their argument that the deal would help consumers by creating a stronger competitor to the four carriers that control about 80% of the domestic air-travel market.
With files from staff and wires
David Leeder