Advanced Disposal alters its IPO plan

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  • | 12:00 p.m. October 3, 2016
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As it makes a second attempt at an initial public offering this week, Advanced Disposal Services Inc. has altered its plan from its first try in February.

The waste management company filed an updated registration statement with the Securities and Exchange Commission last week saying it intends to sell 19.25 million shares of stock at $18 to $21 each.

All of the stock will be new shares issued by the company, which is a big change from its original IPO plan.

Advanced Disposal’s previous filings in February indicated it wanted to sell 21.4 million shares at $20 to $22 each, but only 9 million of those shares would have been new stock issued by the company.

The other 12.4 million shares that would have been sold in the IPO were controlled by a Canadian government pension fund manager. Advanced Disposal would not have received any proceeds from the sale of those shares.

It became a moot point when Advanced Disposal called off the stock sale in February because of the poor overall conditions in the stock market early this year.

Advanced Disposal, headquartered in Nocatee in St. Johns County, remained silent on the IPO until it filed an updated registration statement in August.

Last week’s filing was the first indication of how much stock it hopes to sell in its second try.

The filing said the Canada Pension Plan Investment Board, which has increased its holdings to 15.3 million shares, now intends to hold on to its stake.

Advanced Disposal’s largest stockholder is an investment group led by Highstar Capital, which owns 43 million shares. Highstar, which acquired control of the company in 2006, will hold on to all of its shares after the IPO.

Highstar still would control 51.4 percent of Advanced Disposal’s stock after the company sells 19.25 million shares, but the company’s underwriters have an option to purchase an additional 2.89 million shares to cover over-allotments. If the extra shares are sold, Highstar’s stake would fall below 50 percent.

The CPPIB would own 17.9 percent, if the additional shares are not sold, and public stockholders would own 23 percent.

The rest of the stock is owned by other investors, including company management. CEO Richard Burke owns 522,025 shares.

Advanced Disposal would take in net proceeds of about $350 million if the shares are sold at the midpoint of its target price range, the company said in the latest filing. It intends to use the proceeds to pay off debt.

The company had $2.24 billion in debt on its balance sheet at the end of the second quarter.

Advanced Disposal reported revenue of $692 million in the first half of this year and operating income of $49.1 million but because of interest expense, it had a net loss of $14 million.

Interest expense has caused the company to lose money every year since at least 2013, according to its registration statement.

Advanced Disposal has not indicated the date its stock will be priced and trading will begin, but filing the number of shares and estimated price is generally a final step before an IPO is completed, so the deal is expected this week.

Once trading begins, the shares will list on the New York Stock Exchange under the ticker “ADSW.”

Deutsche Bank reports send stock down

From Jacksonville’s point of view, Deutsche Bank appears to be a giant success story, growing to 1,800 local employees since the Jacksonville office opened in 2008 with plans to perhaps hire 1,000 more.

However, the Germany-based global bank is under fire elsewhere, with its stock dropping to record lows last week amid speculation it is in dire need of capital.

Deutsche Bank’s latest problems are the result of negotiations with the U.S. Department of Justice to settle charges of wrongdoing in the issuance of mortgage-backed securities from 2005 to 2007.

The bank confirmed three weeks ago the Justice Department proposed a whopping $14 billion fine and asked it to submit a counterproposal.

“Deutsche Bank has no intent to settle these potential civil claims anywhere near the number cited. The negotiations are only just beginning. The bank expects that they will lead to an outcome similar to those of peer banks which have settled at materially lower amounts,” the bank said in a news release.

However, news reports that Deutsche Bank is asking the German government for a bailout to replace capital lost through the fine (denied by the bank) and the government is working on its own contingency plan to bail out Deutsche Bank (denied by the German Finance Ministry) sent the stock lower last week.

As the stock hit another new low Friday, Deutsche Bank CEO John Cryan sent a letter to employees to reassure them about the bank’s strength.

“It is our task now to prevent distorted perception from further interrupting our daily business. Trust is the foundation of banking. Some forces in the markets are currently trying to damage this trust,” he said in the letter.

Cryan said there is “no basis for this speculation” about financial woes at the bank.

“Nor can uncertainty about the outcome of our litigation cases in the U.S. explain this pressure on our stock price, if we take the settlements of our peers as a benchmark,” he said.

News reports over the weekend suggested the fine could be reduced to $5.4 billion, but the Wall Street Journal on Sunday reported nothing has been presented to management.

All of this happened about six weeks after Cryan visited Jacksonville for the official opening of its new office on Gate Parkway. He touted the Jacksonville office as a “role model” for how Deutsche Bank should be running its businesses around the world.

Cryan opened the possibility of Deutsche Bank adding 1,000 jobs to the Jacksonville operation, but did not give a timetable.

It may be a while as Deutsche Bank continues to deal with problems — real or perceived — outside of Jacksonville.

Robertson leaves Stein Mart for ‘good reason’

Stein Mart Inc. did not say why CEO Dawn Robertson resigned last week after only six months on the job, but an SEC filing said both she and the company agreed she resigned for “good reason,” as defined in her employment contract.

We probably won’t hear much more about it from them.

Robertson’s separation agreement includes a clause that “neither will make any oral or written statements or communications that disparage executive or the company” for two years.

She is receiving a severance package including one year’s base salary, vesting in certain stock awards and incentive payments totaling $1.6 million.

EverBank meeting in November

EverBank Financial Corp. has scheduled a special shareholders meeting for Nov. 9 to vote on a proposed buyout by TIAA, according to an updated proxy statement filed Friday with the SEC.

In many mergers, the deal is completed shortly after shareholders approve it.

However, the merger of EverBank into TIAA’s bank subsidiary is still subject to regulatory approvals, so the companies do not expect to complete the deal until 2017.

Analyst downgrades Ameris Bancorp

Sandler O’Neill & Partners analyst Casey Orr last week increased her earnings estimates and price targets for Ameris Bancorp, but downgraded her rating on the stock from “buy” to “hold.”

Orr said in a research note the downgrade was due to the stock’s strong run this year, as it rose 39 percent from its 52-week low early this year.

“We believe that the stock’s outperformance has been driven by more earnings visibility given two consecutive quarters of strong earnings, which in turn has afforded the company a valuation on forward EPS that is closely aligned with peers,” she said.

Orr raised her earnings estimate for this year by a penny to $2.27 a share and despite the downgrade in her rating, she increased her price target for the stock by $2 to $38, with the stock trading at $34.87.

“We note that our fundamental view on Ameris remains unchanged,” she said.

“In particular, still low long-term rates should be helpful for the company’s mortgage revenues, we believe the company will continue to generate very strong organic loan growth, and we expect the company to continue to be opportunistic (but also disciplined) with respect to M&A.”

Ameris is officially headquartered in Moultrie, Ga., but its executive offices are in Jacksonville.

Goldman Sachs prepares for election

With a month left in the election campaign, Goldman Sachs analysts are giving advice on how to prepare for the outcome of the presidential race.

“Regardless of victor, the most likely policy outcome of the election is increased fiscal spending. We recommend clients vote with their wallets and focus on the likely beneficiaries,” the analysts said in their report.

“Both candidates have advocated increased infrastructure spending and would also likely support higher defense spending,” they said.

On the other end, “Health Care appears to be the sector most at risk from the election. Sec. Clinton’s criticism of drug pricing and Mr. Trump’s opposition to the Affordable Care Act have drawn investor focus to the sector as the election approaches.”

The month leading up to the election is likely to be turbulent.

“Equity market uncertainty typically rises in the month immediately ahead of presidential elections, and we believe the current below-average level of uncertainty is unlikely to persist,” the analysts said.

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