A little more than three years after becoming an independent public company, ADT Corp. agreed to a buyout last week.
Funds affiliated with Apollo Global Management LLC agreed to buy the home and business security company for $42 a share, a total of about $6.9 billion.
Once the deal is completed, expected by midyear, ADT will merge with Protection 1, another security company owned by Apollo. The company will continue to operate under the ADT brand and keep ADT’s headquarters in Boca Raton.
ADT employs a total of about 17,000 people at 200 locations, with Jacksonville one of its most significant operations centers with about 2,000 employees.
ADT said the $42 cash price represents a 56 percent increase from its stock price before the Tuesday morning announcement, which sounds good. However, ADT’s stock had fallen significantly in the past year.
ADT was spun off from Tyco International Ltd. in October 2012, with Tyco distributing ADT shares to its stockholders. ADT’s stock opened at $37.18 when it began trading after the spinoff.
The stock was trading above $42 as recently as April, but it has faltered since and dropped to a record low of $24.22 early this month.
“The timing of ADT’s announcement was perhaps surprising in how quickly it emerged following the poor reception of the company’s first-quarter earnings less than two weeks ago. But we believe the poor reception played an important role in the emergence of Apollo’s offer,” William Blair analyst Nicholas Heymann said in a research report.
“The recent weakness in ADT’s share price after its first-quarter earnings likely further opened the door for ADT to be acquired,” he said.
ADT’s agreement with Apollo includes a “go-shop” provision in which ADT could solicit higher offers for 40 days. That could happen, according to Heymann’s analysis of ADT’s value.
“Besides private equity, other potential owners could still find significant value creation potential at prices above the $42-per-share acquisition offer,” he said.
Analysts differ on Web.com deal
Two analysts offered very different views on Web.com Group Inc.’s agreement to buy digital marketing company Yodle.
Following Jacksonville-based Web.com’s Feb. 11 announcement of the deal, SunTrust Robinson Humphrey analyst Matthew Thornton upgraded his rating on the company’s stock from “neutral” to “buy.”
However, Deutsche Bank analyst Deepak Mathivanan did the reverse last week, downgrading Web.com from “buy” to “hold.”
Web.com, which provides website development services for businesses, agreed to pay $342 million in cash to buy Yodle, saying it was a natural fit.
Yodle provides services such as website search optimization and email marketing services.
“Yodle will accelerate our growth profile going forward by dramatically increasing our exposure to the large and faster growing value-added digital marketing solution segment of the market,” Web.com CEO David Brown said in the company’s conference call after announcing the deal and fourth-quarter earnings.
“Strategically we’ve been moving in this direction on our own because we believe this market is underserved and that is an area where Web.com is most differentiated competitively. The addition of Yodle’s capabilities and size further strengthens our place in the value-added digital marketing solutions market and establishes Web.com as a leading provider in the market,” he said.
Brown also said the deal will add to Web.com’s earnings per share in the first year after completing the deal.
As Web.com announced the deal, it also announced fourth-quarter earnings of 66 cents a share, slightly higher than analysts’ forecast.
Thornton liked what he heard from Web.com.
“We expect the announced Yodle acquisition to be accretive to growth, quickly accretive to earnings, fairly low risk from a synergy/valuation standpoint, and with cross-sell and margin expansion opportunity,” Thornton said in his research report.
“Web.com also reported strong fourth-quarter results and issued what we view as conservative guidance,” he said.
While Mathivanan also liked what he saw in the earnings report, he is more skeptical about the Yodle deal.
“While we like Web.com’s approach in using debt capital for M&A, we think the acquisition of Yodle brings new execution risks without much profitability and doesn’t fit the profile of successful acquisitions by Web.com in the past,” Mathivanan said in his report.
“Web.com has a long history in acquiring companies at attractive valuation and the company’s track record of execution has been good overall. The acquisition of Yodle, however, in our view brings high execution risks given the lack of profitability, higher churn in Yodle’s business model, (and) heavy reliance on salesforce channel for customer acquisition,” he said.
Analyst downgrades FNFV rating
Keefe, Bruyette & Woods analyst Chas Tyson downgraded his rating on Fidelity National Financial Ventures (FNFV) from “outperform” to “market perform,” saying the current market environment will make it difficult for FNFV to monetize its investment portfolio.
FNFV is a tracking stock created by Jacksonville-based Fidelity National Financial Inc. to represent its portfolio of non-real estate-related investments.
It invests in businesses and then looks for ways to monetize them through methods including sales or spinoffs into separate public companies.
“To state the obvious, the market is off to a turbulent start in 2016, which creates a less than desirable environment for FNFV to create value through monetization,” Tyson said in his research note.
“On its fourth-quarter earnings call, FNFV did not note any upcoming monetizations, and we think the lack of visible catalysts could set the shares up for subdued performance,” he said.
Tyson said FNFV has a good track record.
However, “while we find some of FNFV’s portfolio investments attractive, we do not see a specific catalyst at this point in time for a revaluation of the underlying companies and believe the market price approximates what we deem fair value.”
CSX cutting about 116 mechanical jobs
Jacksonville-based CSX Corp. announced it is cutting jobs at 16 lower-volume mechanical facilities throughout the eastern U.S., including one in Baldwin.
The railroad company said its streamlining will impact about 116 mechanical employees, some of whom will be given opportunities to fill positions in other parts of the network.
CSX said the cutbacks will not affect train operations in the affected areas.
Meanwhile, CSX Chief Financial Officer Frank Lonegro reiterated last week the railroad expects continued declines in coal shipment volumes, which has prompted recent job cuts throughout its system.
“As we look toward a future with significantly less coal, our strategy includes rationalizing and realigning the network to match decreased demand in some markets and adjust to increases in others, investing in clearance and terminal projects to leverage intermodal growth, and optimizing technology to serve the CSX of tomorrow,” he said, according to a company news release.
Lonegro also said at the conference in Miami sponsored by Barclays that the company expects earnings to “decline significantly” in the first quarter, due to the coal volume and other factors.
CSX added to Nasdaq-100
After CSX switched its stock listing from the New York Stock Exchange to Nasdaq in December, Nasdaq will today add CSX to its Nasdaq-100 stock index.
The Nasdaq-100 comprises of the largest domestic and international non-financial companies listed by Nasdaq, based on market capitalization.
CSX is also included in the Standard & Poor’s 500 index and the Dow Jones transportation average.
Florida regulator OKs Aetna-Humana deal
Aetna Inc.’s proposed acquisition of Humana Inc. moved a step closer to completion last week when the Florida Office of Insurance Regulation approved Aetna’s application to buy Humana’s Florida-based businesses.
The state insurance regulator said an economic analysis of the deal found “no strong evidence of an overall significant reduction in the competitive landscape of the private Florida health insurance markets resulting from this proposed merger.”
Aetna said in a news release it now has secured 10 of 20 required state approvals for the deal. However, the Florida Attorney General and the U.S. Department of Justice still need to sign off on it.
Aetna and Humana announced the $37 billion deal in July and shareholders of both companies approved it in October. But the deal is not expected to be completed until the second half of 2016 as it goes through the regulatory process.
One smaller issue, in the grand scheme of things, is what will happen to the two companies’ Jacksonville offices after the merger.
Before the deal was announced, Humana made plans to relocate about 100 employees out of Downtown Jacksonville to two locations on the Southside.
Humana expects to open its new market office in Prominence Plaza in Baymeadows in mid-to-late second quarter, spokesman Mitch Lubitz said last week. He also said a new retail customer service office is expected to open in Merchants Walk in Mandarin in the summer.
Aetna employs about 775 people in its building on the Southbank.
General Employment improves earnings
General Employment Enterprises Inc. last week reported adjusted earnings of $214,000 for the first quarter ended Dec. 31, reversing a loss in the previous year’s first quarter.
The Illinois-based staffing company is run by Jacksonville executive Derek Dewan, who became CEO after General Employment acquired Jacksonville-based Scribe Solutions Inc. last year.
General Employment has been growing through acquisitions since Dewan joined the company, which helped it grow revenue 82 percent to $17.6 million in the first quarter.
“We still see strong demand for our professional specialty staffing services and solutions propelled by a very low U.S. unemployment rate for highly skilled labor, a healthy domestic job market for many professional occupations and secular drivers fueling the increased use of flexible on demand staffing,” Dewan said in a news release.