Fidelity offers more cash, less stock, to LPS shareholders
It didn't take long for Fidelity National Financial Inc. to alter its $2.9 billion proposal to buy Lender Processing Services Inc.
Three weeks after announcing the deal in which Fidelity would pay half the purchase price in cash and the other half in Fidelity stock, the two Jacksonville-based companies last week announced the deal had been adjusted. Fidelity is now intending to provide two-thirds of the price in cash and the other third in stock.
The original agreement also called for investment firm Thomas H. Lee Partners to acquire a 19 percent interest in LPS, but last week's revision includes a higher cash payment from Thomas H. Lee. As a result, Thomas H. Lee will now end up with 29 percent of LPS, with Fidelity owning a 71 percent stake in the business that was once a part of Fidelity before being spun off.
The adjustment is not a surprise because the companies said when the original deal was signed on May 28 that the stock-cash ratio could be altered. They did not say why the deal was altered now, but Fidelity's stock price has dropped in the last three weeks, even before last week's market slump. That reduced the potential value to LPS shareholders.
Fidelity agreed to pay $33.25 per share to LPS stockholders, originally consisting of $16.625 in cash plus .65224 shares of Fidelity stock.
Fidelity's stock price immediately rose after the deal was announced, increasing the value of the buyout above $33.25 a share, but it had dropped since. Fidelity's stock closed at $23.26 Wednesday when the adjustment was announced. At that price, the value of the deal was down to $31.80 per LPS share.
After the adjustment, Fidelity now intends to issue .42928 shares of its stock and $22.30 in cash for each LPS share to get the value back up to $33.25.
Of course, none of this is set in stone. The ratio could be adjusted again as Fidelity's stock price continues to move. Also, the deal includes a "go shop" provision that allows LPS to seek higher offers from other bidders through July 7, and some analysts have speculated that a higher bid may come in.
So as I said three weeks ago, you probably haven't heard the last word on this deal.
Analyst downgrades FIS after strong run
The other company in the triumvirate with Fidelity and LPS, Fidelity National Information Services Inc., was downgraded by one analyst after a strong run in its stock.
By way of review, Fidelity National Financial spun off Fidelity National Information, which calls itself FIS, in 2006. FIS then spun off LPS in 2008. While all three are headquartered at the same Riverside Avenue office complex, they currently are three independent public companies.
Anyway, Robert W. Baird analyst David Koning downgraded FIS from "outperform" to "neutral" as the stock traded near 52-week highs.
"We are downgrading on valuation, with a few other items creating some headwinds for further multiple expansion, in our view. The stock has had a nice run behind strong execution, and we now view the risk/reward as generally balanced," Koning said in his research note.
Koning said the stock was up 29 percent so far this year and up 36 percent since the company's third-quarter 2012 earnings release.
The "other items" creating headwinds include concerns about currency impacts on FIS' international business and also some security issues about FIS' technology raised by the Federal Deposit Insurance Corp. FIS provides technology services for banks and Koning said the FDIC sent letters to some FIS clients about the concerns.
"We doubt this causes a long-term impact, though it could cause some clients to mildly delay near-term purchases. We interacted with 13 FIS clients over the last couple days and most indicated no impacts, though a couple said it could impact/delay spending," Koning said.
Center Point Terminal business going public
Two months after expanding its Jacksonville operations, St. Louis-based Center Point Terminal Co. filed plans last week for an initial public offering.
The business is actually going public under the name World Point Terminals LP, a partnership formed to operate the Center Point business of oil storage terminals.
The company is selling up to $212 million in common units – as opposed to common stock – which represent limited partner interests, according to its registration statement filed with the Securities and Exchange Commission. World Point intends to trade the units on the New York Stock Exchange under the ticker symbol "WPT."
Center Point in April acquired terminal assets on Talleyrand Avenue from Chevron U.S.A. Inc. for $21 million, the Daily Record reported. Those assets were adjacent to Center Point's existing terminal operations.
The SEC filing said that acquisition expanded the oil storage capacity at its Jacksonville terminal by 450,000 barrels, bringing its total capacity there to 1.13 million barrels. That represents 8.8 percent of the company's total storage capacity, which includes other terminals on the Atlantic and Gulf coasts and in the Midwest.
Center Point built its original Jacksonville terminal in 2011, the filing said. It is building a pipeline to connect the two terminals, which it expects to complete by the end of the second quarter.
The filing said two major oil companies have contracted to bring a minimum of 225,000 barrels of light refined products each month to the Jacksonville terminals, but "we believe that these customers will throughput significantly more volume than their minimums."
World Point said its overall business produced $74.1 million in revenue and net income of $31.4 million in 2012.
Ashford 'Prime' could include One Ocean hotel
Hotel operator Ashford Hospitality Trust Inc. announced a plan last week to spin off some of its "prime" properties into a new public company that could include one Jacksonville area hotel.
The Dallas-based company is creating a second public company called Ashford Hospitality Prime Inc. that "will focus primarily on luxury, upper-upscale, and upscale hotels anticipated to generate RevPAR at least twice the national average," the company said in a news release.
RevPAR is revenue per available room.
Ashford Prime will begin with a portfolio of eight hotels but will have a right of first offer to acquire several other hotels owned by Ashford Trust, including the 193-room One Ocean in Atlantic Beach. The company said the right of first offer properties "satisfy the investment criteria" of the upscale hotel company.
"The high quality of the Ashford Prime portfolio, as well as the focused investment strategy and lower leverage profile, have been designed with the goal to make Ashford Prime attractive to a broad range of investors and to distinguish itself from Ashford Trust," the company said in a news release.
The board of directors decided to do this "after analyzing several strategies to maximize stockholder value," it said. However, the price of Ashford Trust's stock dropped last week during the overall market's slump.
Ashford Trust's stock closed at $13.88 Monday when the company announced the spinoff. On Thursday, the company priced an offering of 11 million new shares at $12 each.
Ashford Trust will continue to own 115 hotels after the initial spinoff. Its properties include a Hilton Garden Inn, SpringHill Suites and Marriott Residence Inn in Jacksonville.
Ashford Prime expects to trade under the ticker symbol "AHP," while Ashford Trust will continue to trade under the symbol "AHT."
Outlook improving for Adecco
Goldman Sachs put global staffing firm Adecco on its "sell" list in April, but that didn't seem to have a big impact on its stock. The Switzerland-based company's stock was up 9 percent in trading in Zurich since going on that list and was up 37 percent over the last 12 months.
So maybe an upgrade last week by Goldman Sachs analyst Charles Wilson from "sell" to "neutral" won't impact the stock, but it does mean that the company's outlook is improving.
With an improved global economic outlook, Wilson said in a research note that there are "fewer risks to the downside for Adecco's share price."
Adecco, which operates in more than 60 countries, reported first-quarter revenue fell 10 percent to 4.6 billion euros and net income dropped 40 percent to 67 million euros.
"Despite weakening gross profit trends over the last 12 months, the company has managed its cost base well and thus reduced the impact to profits which has benefited the share price, in our view," Wilson said.
Adecco's North American business has been a bright spot while European operations have struggled. Jacksonville has been a significant part of Adecco's North American operations since the company acquired Jacksonville-based MPS Group Inc. in 2010.
The North American headquarters are officially located in Melville, N.Y., but Adecco last year named Jacksonville executive Robert Crouch as the head of North American operations. Crouch was chief financial officer of MPS.
Adecco's North American operations increased revenue by 2 percent in the first quarter to 888 million euros, and earnings before interest, taxes, depreciation and amortization rose 3.6 percent.