Like everything else, Waste Management Inc.’s acquisition of Ponte Vedra-based Advanced Disposal Services Inc. is on hold.
While the deal will not close next week as the companies had anticipated, Wall Street is indicating it expects the deal to get done.
Advanced Disposal is the one Northeast Florida-based stock that has not been crushed by the market’s recent collapse.
Waste Management agreed in April 2019 to buy Advanced Disposal for $33.15 in cash, a 22% premium over Advanced Disposal’s market price at the time.
Advanced Disposal’s stock was trading near the $33 level for the first two months of this year and while the Dow Jones Industrial Average has lost about a third of its year-end 2019 value in this month’s crash, Advanced Disposal’s stock was down only 5% through last weekend. The stock has remained mainly in the $30s this month.
The companies were expecting regulatory approval for the merger by the end of March, clearing the way to close it.
However, both companies said in Securities and Exchange Commission filings last week because of the COVID-19 outbreak, they now are expecting U.S. Department of Justice approval in the second quarter.
The companies anticipated the deal taking a long time to close because the merger of the waste services companies faced an extensive antitrust review. Although it is taking slightly longer than planned, it looks promising that it will get done soon.
Market drop cuts Rayonier deal value
Fortunately for Advanced Disposal shareholders, Waste Management agreed to a full cash price for the company.
Shareholders of Pope Resources may be more uncertain about the company’s buyout agreement with Rayonier Inc.
Rayonier in January agreed to buy each unit of Pope, a publicly traded limited partnership, for $125 in cash or Rayonier securities valued near that amount.
The deal was structured so Rayonier would pay cash for 30% of the Pope units and issue securities for the other 70%.
However, Rayonier’s stock price has dropped by more than 30% since the deal was announced.
Rayonier, based in Wildlight in Nassau County, agreed to exchange 3.929 shares of its stock for every Pope unit it is not buying in cash.
According to a proxy statement filed last week by Poulsbo, Washington-based Pope, that valued Pope units at $127.51 each, based on the closing price of Rayonier before the deal was announced.
With Rayonier trading close to $20 in recent days, down from $32.72 in mid-January, the value of the stock offer now is about $85 per unit.
Merger documents don’t say anything about adjustments to the offer based on changes in the market value of the stock.
The proxy does not have a date for a Pope shareholders meeting to approve the buyout.
It has a deadline to close the deal of Oct. 14, which can be extended, giving time for the market price of the stock to recover.
Pope would owe Rayonier a $20 million termination fee if it calls off the deal in certain circumstances.
Rayonier is buying Pope to expand its timber resources in the Northwest U.S.
Go-shop period ends for FNF deal
Another stock and cash deal, Fidelity National Financial Inc.’s acquisition of FGL Holdings is moving forward despite a sharp stock drop.
The deal signed last month included a 40-day go-shop period when FGL could seek better offers. Its financial advisers solicited 42 parties but no alternative bids were made by the time the go-shop period expired last week, FGL said.
Jacksonville-based Fidelity agreed to buy the annuity and life insurance company for $12.50 in cash for each FGL share or 0.2558 shares of Fidelity stock.
Fidelity’s stock lost about half of its value since the deal was announced Feb. 7, closing at $48.57 the day before the announcement but trading in the low $20s in recent days.
FGL’s stock, which was trading above $12 after the deal was announced, fell below $9 last week.
The deal is structured for 60% to be paid in cash and 40% in stock.
FGL said in a news release it expects the deal to close in the second or third quarters, subject to approval of its shareholders.
Another bid for TV station owner Tegna
The uncertainty of the market is not cooling off the merger talk surrounding Tegna Inc., owner of WTLV TV-12 and WJXX TV-25 in Jacksonville and 60 other U.S. television stations.
The Najafi Cos., a Phoenix-based private equity firm, and religious broadcaster Trinity Broadcasting Network announced a joint bid last week to buy Tegna for $20 a share in cash.
Tegna was trading at $15.08 at the time of the announcement. The stock has been below $20 since it split up with newspaper publisher Gannett Co. as separate companies in 2015.
Other potential bidders for Tegna, according to major financial news services, include Apollo Global Management Inc. and television producer Byron Allen.
Another television station operator, Gray Television Inc., offered to buy Tegna in early March, according to Reuters news service.
However, Reuters last week said Gray pulled out because of concerns about the impact of the coronavirus outbreak on the television business.
Tegna has not made any public comments about the potential bidders.
CSX upgraded by Morgan Stanley
With CSX Corp.’s stock losing a third of its value, Morgan Stanley analyst Ravi Shanker on March 23 upgraded the Jacksonville-based railroad company from “underweight” to “equal weight.”
“We retain our structural concerns about the long-term volume and pricing growth risks at CSX and believe that the big cost cuts are behind them but the 34% decline in the stock price since its 52-week high has brought the stock back toward what we believe is fair value,” Shanker said in a report on freight transportation companies.
He maintained an “underweight” rating on Jacksonville-based trucking company Landstar System Inc., which was down 19% for the year.
Landstar, which doesn’t employ drivers but contracts with drivers who own their own trucks, will have difficulty retaining drivers “at a time of severe disruption in operations,” Shanker said.
He also sees revenue issues at Landstar. Demand for truck services will continue as companies that transport consumer goods bring needed supplies to restock store shelves. But some freight sectors will be curtailed.
“One third of Landstar’s revenue is from flatbed which is most directly exposed to industrial end markets which are likely to come under severe pressure in the second quarter,” Shanker said.
After the big drop in the market, the worst could be over for freight transportation stocks, he said.
“We are not saying that the industry is out of the woods and now is the time to buy,” he said.
“However, we believe the stocks are already pricing in a recession, making risk-reward more balanced at this point.”
Obitx gets ticker symbol ‘OBTX’
Jacksonville-based mCig Inc. last week said a subsidiary it spun off as a separate public company, Obitx Inc., has a ticker symbol.
The Financial Industrial Regulatory Authority approved quotation of Obitx stock on the OTC bulletin board under the symbol “OBTX,” it said.
Obitx was a marketing and advertising software subsidiary of mCig, which is focusing on cannabidiol products.
The company, which still is 49% owned by mCig, reported no revenue for the nine months ended October 31, according to its most recent quarterly SEC filing.