The big business news last week involved new rules from the Obama administration aimed at stopping U.S. companies from moving their headquarters overseas to avoid U.S. taxes, rules which killed a major pharmaceutical merger.
As analysts debated the impact, Medtronic plc took the opportunity to insist its merger last year with Ireland-based Covidien plc, and subsequent headquarters move to Dublin, was “strategic.”
Minneapolis-based Medtronic officially moved its corporate headquarters out of the U.S. after completing the $49.9 billion merger in January 2015, although the medical device maker maintained its operational headquarters in Minneapolis.
Medtronic maintains the headquarters of its surgical technologies division in Jacksonville.
The company announced those plans at about the same time several U.S. companies came under fire for these “tax inversion” strategies, in which they merge with a foreign company and avoid taxes by moving the headquarters to the offices of the merged company.
The U.S. Treasury Department last week announced its third set of rules aimed at stopping tax inversions. The latest rules include a measure to prevent these companies from shielding U.S. earnings through the use of debt.
Medtronic issued a statement Wednesday saying it has reviewed the new regulations and concluded they will not have a material impact on any transaction it has undertaken.
The statement also said the Covidien deal “was undertaken for strategic reasons and has created a company that is positively impacting the lives of more patients, in more ways and in more places around the world.”
Meanwhile, the Treasury’s new rules had an impact on one significant transaction.
Drugmakers Pfizer Inc. and Allergan plc announced Wednesday they decided to terminate their $160 billion merger plan “by mutual agreement” because of the regulations.
New York-based Pfizer had intended to move its headquarters to Allergan’s Dublin offices after completing the merger.
Advanced Disposal faced tough market
The first quarter was the worst quarter for initial public offerings since the last recession, according to Renaissance Capital, a Connecticut firm that manages IPO-focused exchange traded funds and provides research on IPOs.
That would be no surprise to Advanced Disposal Services Inc., which bravely tried to bring its IPO to market in February but had to pull it back because of the weak market.
According to a report by Renaissance, only eight relatively small health care-related companies completed IPOs in the first quarter while eight other companies postponed IPOs. Advanced Disposal was one of the biggest.
The only deal larger than Advanced Disposal’s $450 million IPO to get pulled back was a $552 million IPO by OTG EXP Inc., a New York-based operator of airport restaurants and concessions, Renaissance said.
“We believe most of these companies could have completed IPOs had they been willing to take significant discounts (as much as 50 percent in some cases) to their proposed valuations,” the report said. Obviously, Advanced Disposal wasn’t willing.
The waste management company headquartered in Nocatee in St. Johns County said in a Securities and Exchange Commission filing Feb. 1 that it hoped to sell 21.4 million shares of stock at $20 to $22 each.
The company issued a news release Feb. 10 saying it was postponing the stock sale. It has not filed an update on its IPO plans since then.
Renaissance said the eight IPOs completed in the first quarter “were all early-stage health care companies, most of which could not have gotten done without significant insider buying.”
The good news is Renaissance does expect the IPO market to reopen soon.
“The IPO market will likely proceed carefully at first, as it did in 2009, but we are already seeing body language that the first icebreaker IPOs could hit in April or May,” it said.
Another downgrade for Landstar system
Cowen and Co. analyst Jason Seidl lowered his rating on Jacksonville-based Landstar System Inc. from “outperform” to “neutral,” becoming the third analyst to downgrade the Jacksonville-based trucking company after it lowered its first-quarter earnings forecast two weeks ago.
In his research report, Seidl said Landstar was already trading near his $64 price target.
“It is our belief that sluggish trucking industry trends and potential headwinds from a major upcoming IT implementation could prevent shares from going materially higher,” he said.
Seidl said the new information technology is a system that will increase efficiency for the agents in Landstar’s network to arrange freight shipments.
The implementation may not be complete until 2020 and could cost the company 5 to 10 cents per share a year, but it’s “an investment well worth its potential benefits, in our view,” Seidl said.
Landstar on March 29 downgraded its first-quarter earnings forecast from a range of 70 to 75 cents a share to 66 to 70 cents.
Following that report, Macquarie Research analyst Kelly Dougherty lowered her rating on Landstar from “neutral” to “underperform” and Stifel Nicolaus analyst John Larkin downgraded the stock from “buy” to “hold.”
Landstar is scheduled to release final results for the quarter April 20.
Analyst upgrades FIS
Goldman Sachs analyst James Schneider upgraded his rating on Fidelity National Information Services Inc., or FIS, from “neutral” to “buy, “and upgraded his price target from $68 to $76, with the stock trading at $63.31 at the time.
“Following a series of execution missteps in 2015, we expect fundamentals to begin to improve in 2016,” Schneider said in his report.
He expects revenue growth will “reaccelerate following tepid trends in 2015” at Jacksonville-based FIS, which provides technology for financial services companies.
Schneider also expects profit margins to grow, due in part to a restructuring of its business after the acquisition last year of SunGard Data Systems Inc.
He said FIS is trading at a discount to its peers that is “unwarranted” and he expects the stock’s value to grow as FIS shows signs of improved topline growth and margin trends in 2016.
More changes on Stein Mart board
Stein Mart Inc. is making more changes to its board of directors.
The Jacksonville-based fashion retailer said in an SEC filing last week that Linda Farthing and Susan Falk are retiring and will not stand for re-election at Stein Mart’s annual meeting June 21.
No replacement nominees were named.
Farthing has not only been a Stein Mart director since 1999, but served as president and CEO from September 2007 to December 2008.
Falk was an executive for several retailers who has served on the board since 2007.
Their departures follow the retirement from the board last month of former Jacksonville Jaguars owner Wayne Weaver. Lisa Galanti was appointed to replace him.
In addition to those moves on the board of directors, Stein Mart last month brought in Dawn Robertson as CEO and appointed her to the board. Former CEO Jay Stein remains as chairman of the board.
EverBank reduces board
EverBank Financial Corp.’s board is also changing.
The Jacksonville-based bank said in an SEC filing that Gerald Armstrong, a director since 2011, and Mitchell Leidner, a director since 2009, will not stand for re-election at EverBank’s annual meeting May 19.
Instead of replacing those two, EverBank is reducing the size of its board from 13 directors to 11.
$400M renovation helps International Speedway
A massive $400 million renovation at the Daytona International Speedway, completed in time for the February Daytona 500, helped drive earnings higher for the track owner, International Speedway Corp.
Daytona Beach-based International Speedway reported adjusted earnings of 44 cents a share for the first quarter ended Feb. 29, which included the events leading up to the signature Daytona 500 race.
That was 8 cents higher than last year’s first-quarter earnings and 3 cents higher than the average forecast of analysts surveyed by Thomson Financial.
“Financial results for the first quarter 2016 exceeded expectations with growth in all areas of the core business. Daytona Rising (the renovation project) was the driving force behind the success,” CEO Lesa France Kennedy said in a news release.
However, revenue was lower than analysts’ forecasts. Revenue for the quarter rose 4.4 percent to $142.6 million, but that was below the average forecast of $146 million.
International Speedway’s stock fell by $1.01 to $35.25 Tuesday after the earnings report.
International Speedway owns 12 other motorsports facilities around the country, in addition to the Daytona venue.