June 2019

Markross121_ June 17, 2019 No Comments

The market’s showing sparks of life with recent mergers, acquisitions

While Main Street investors had some trepidation over their portfolios during the six-week-long pullback in the stock market, the pros see many positives.

Sell-offs are a common corrective action, which is needed in order to move higher.

The fact is, the stock market just rallied 1,200 points in the first two weeks of June. Much of that is due to the Federal Reserve admitting it went too far in raising rates.

Another positive sign is the quality of the current initial public offerings, and the volume of mergers and acquisitions.

There are some very good indications that this bull market may not be as fragile as the pessimists say.

The IPO market has been strong, with 14 offerings this year — up more than 50 percent from last year. And these aren’t hope-and-a-prayer companies, as in the dot-com era.

Today’s IPOs are coming out — in some cases — with billions in revenues and well-established business models in high-growth areas.

Sure, some are better than others in terms of stock performance. The biggest ones, Uber and Lyft, both got a flat reception and remain underwater from their IPO price. Their issues were valuation and offering size. But they are each credible, established businesses.

Jungle Creations in talks to merge with influencer marketing agency Goat

Social media publisher Jungle Creations and influencer marketing outfit Goat Agency are in talks to merge into a media and marketing powerhouse, according to sources close to the deal in each company.

Execs from both London-based companies are currently at Cannes Lions and are still thrashing out the terms of the merger, The Drum can reveal. Last year, Goat and Jungle both bid for cash-strapped Unilad – but were defeated by LadBible. They have since changed course and believe merging a media firm with an influencer network would forge an attractive and dynamic proposition for brands.

Jungle Creations is the owner of viral social media verticals like VT (26 million followers across Facebook, Instagram, and YouTube) and food channel Twisted (16 million on Facebook) and also runs six London food delivery kitchens. The company boasts 110 million followers across all of its verticals. Additional channels include Four Nine (female facing), Level Fitness, World Unknown (travel and adventure), Four Nine (DIY) and Craft Factory (craft).

Goat, which currently boasts 120 staff, would power up Jungle’s campaigns with “data-led influencer marketing”. It currently has relationships with Formula E, Malibu, and Lidl (Dream Big with the FA). It has additional offices in New York and Singapore and would almost double Jungle’s 130-strong team. Furthermore, Goat snapped up Social Media Agency/Team of the Year at The Drum Social Buzz Awards in 2018.

One source said: “The media landscape is changing with social becoming a core focus for brands to spread their message and story. The coming together of two major players in the social media industry to create a full offering to clients is an obvious and strategic move to further investment in these areas.”

The source said the merger offers significant expansion opportunities in the US and Asia for a combined entity. Together they would boast annual revenue figures of over £40m.

In the last year, Jungle has been on the talent acquisition path, hiring Dylan Davenport, managing partner at Adam&EveDDB, to lead its new agency The Wild which launched in March. It also secured its first chief marketing officer in 2018 in The Guardian’s Charlotte Emmerson.

Leveraging Jungle’s scale, Wild can identify and tap into social media trends for a client roster which currently includes Diageo, Kraft Heinz and The National Lottery. It works with partners across creative, content, strategy and distribution and Wild’s first creative work, ‘Project Celt’ for The National Lottery, landed in April.

Earlier this year Jungle won the B2C Branded Content Team of the Year gong at The Drum Online Media Awards, showing it has been effective in quickly scaling up its creative proposition for brands.

Oilfield services firms Keane Group, C&J Energy to merge

Keane Group Inc and C&J Energy Services Inc are set to merge in an all-stock deal that will create a new U.S. oilfield services company worth around $1.5 billion (£1.2 billion), three people familiar with the matter said on Monday.

The deal underscores the consolidation under way in the oil and gas industry, as exploration and production companies cut back on spending on new projects to return more money to their shareholders. This puts pressure on services providers to gain scale, so that they have more negotiating power and can save on costs by eliminating overlap.

The transaction between Keane and C&J, which will be presented to investors as a merger of equals, is set to be unveiled later on Monday, the sources said, asking not to be identified ahead of the official announcement. Keane and C&J could not be reached for comment outside normal business hours.

U.S. oil and gas producers are reluctant to commission new projects, preferring to instead return that cash to shareholders, which, in turn, is weighing on services firms such as Keane and C&J.

RBS shares jump after Saudi bank merger boosts capital

Royal Bank of Scotland shares have jumped this morning after the bank said a merger between two Saudi banks would boost its capital and reduce its risk weighted assets by £4.7bn.

Saudi Arabia’s Alawwal Bank and rival Saudi British Bank (SABB) completed a merger yesterday, creating the third-biggest lender in the kingdom.

RBS, through its Dutch subsidiary Natwest Markets NV, said it was part of consortium owning a 40 per cent stake in Alawwal bank – with RBS itself holding an equivalent 15.3 per cent stake in the bank.

Share in RBS jumped two per cent this morning following the completion of the merger and the bank was among the FTSE 100’s biggest risers. The UK bank said the merger had left the consortium with a 10.8 per cent stake in the new SABB, and RBS with a 4.1 per cent shareholder. It said it would receive £400m from the disposal of those shares and a reduction in risk weighted assets of £4.7bn. The bank’s CET1 core capital ratio would also rise by 60 basis points. Chief executive Ross McEwan said: “We are pleased that this merger has now concluded; it will help facilitate the future exit of our shareholding as we continue to focus on our key target markets. “The release of capital will also have a positive and material financial impact for RBS.”

Boeing to acquire aerospace interiors manufacturer EnCore Group

Boeing has signed an agreement to buy California-based aerospace interiors company EnCore Group as part of a strategy to complement growth with strategic acquisitions.

EnCore Group designs, certifies and manufactures plane galleys and seats for airlines. It also supplies products and components to Boeing.

Boeing expects its acquisition of EnCore Group to strengthen capabilities and increase innovation within the cabin vertical to provide customers with increased options, better products, as well as improved capacity and availability.

The acquisition includes EnCore Interiors, EnCore International and LIFT by EnCore.

Previously, Boeing partnered with LIFT by EnCore for the launch of Tourist Class Seating, designed to complement the Boeing 737 Sky Interior.

Boeing cabin vertical leader and vice-president of strategy Sheila Remes said: “With this acquisition, we aim to deliver quality and high-value interior offerings that our customers expect and passengers prefer.

“Boeing and EnCore have a history of partnering on products, and we are excited for EnCore and its employees to join the Boeing family.”

Cabin vertical is one of Boeing’s targeted vertical integration efforts to develop in-house capabilities in key areas, including those that strengthen the company’s customer support through Boeing Global Services.

Subject to customary conditions, the transaction is expected to close by the end of the second quarter of 2019.

Based in Huntington Beach, EnCore Group has approximately 700 employees in facilities in California and Mexico.

The group has been a supplier to Boeing since its formation in 2011 and was previously recognised as a ‘Boeing Supplier of the Year’.

Boeing provides commercial airplanes, defence, space and security systems, and global services.

As one of the major exporters in the US, the company supports commercial and government customers in more than 150 countries.

Boeing has more than 150,000 people worldwide and uses the talents of a global supplier base.

Markross121_ June 17, 2019 No Comments

Raytheon and United Technologies announce $121bn merger

Trump says he is a ‘little concerned’ about the deal and wants ‘to see that we don’t hurt our competition’

United Technologies and defense contractor Raytheon have agreed a $121bn merger that will create the world’s second-largest defense contractor.

The new company, to be called Raytheon Technologies, which will make Tomahawk missiles, the F-35 fighter jet engine and space suits for astronauts among other items, would have sales of about $74bn in 2019. It will be the second largest defense contractor behind Boeing and ahead of Lockheed Martin.

The merger, the largest of the year so far, will have to be approved by competition authorities and was questioned by Donald Trump on Monday. Trump told CNBC that he was a “little concerned” about the deal and that while he would like to see it go through he added: “I want to see that we don’t hurt our competition.”

Trump said aerospace companies had “all merged in so it’s hard to negotiate” with them and suggested the defense industry could be heading in the same direction.

UTC and Raytheon do not compete directly in many markets and the deal may not attract significant scrutiny. The companies expect approval by 2020. “I think from a regulatory standpoint, the beauty of this deal is there’s very little overlap … But really less than 10 jurisdictions have to approve this. We don’t have to go to China. We truly believe that we’re going to get this done relatively quickly,” Gregory Hayes, chairman and chief executive officer of United Technologies, said in a call with analysts.

There have been a series of mergers in the defense contracting sector in recent years, driven by modest growth in US spending. Companies have argued that they need greater scale to compete and spend on research and technology.

United Technologies’ aerospace business makes engines for Airbus as well as the F-35, which was developed by Lockheed Martin and is the most expensive military project in history. Last year United announced it was spinning off its escalator and air-conditioner businesses, which included the Otis elevator brand and Carrier air conditioners.

Raytheon makes missile defense and radar systems, including the Patriot missiles and other military technology used by militaries around the world.

Together the two companies employ about 180,000 people worldwide. United technologies said the merger would lead to $1bn in cost savings.

“The combination of United Technologies and Raytheon will define the future of aerospace and defense,” said Hayes. “Our two companies have iconic brands that share a long history of innovation, customer focus and proven execution. By joining forces, we will have unsurpassed technology and expanded R&D capabilities that will allow us to invest through business cycles and address our customers’ highest priorities.”

Why AI is making tech giants like Google and Amazon even harder to beat

Taking on big tech.

The issue is becoming so popular it’s bringing together political adversaries like Donald Trump and Nancy Pelosi. Even Elizabeth Warren and Ted Cruz. Last week, the House Judiciary Committee announced it would be launching a bipartisan antitrust investigation into companies like Google, Facebook and Amazon.

Each of those tech giants has become enormously powerful, particularly as it relates to gathering personal data and influencing behavior. Increasingly, that control is being driven by AI & machine learning technologies—e.g., Google’s Assistant and YouTube algorithms; Facebook’s content flagging, filtering and moderation; and Amazon’s Alexa, purchasing recommendations and AWS tools.

It’s clear that AI is no longer a nascent prototype tech of the future. It’s being industrialized and commercialized at a massive scale, impacting billions of people at the behest of the world’s biggest companies.

“Essentially as AI/ML technology becomes more readily available, these huge firms are positioned to dominate and potentially be extremely hard to compete with—especially within certain core competencies,”. “It’s a look at what’s to come and how central AI/ML is going to be for essentially all internet users and enterprises alike.”

The tech giants have all made it clear that implementing AI/ML throughout their business and product offerings and by running open source frameworks—like TensorFlow and PyTorch—thathelp build an ecosystem of development around their platforms, creating a moat of sorts and attracting AI/ML talent.

Venture capital investors, however, are still making plenty of bets on smaller players trying to compete in the space, perhaps by carving out tangential or niche areas where the giants aren’t as firmly developed. According to PitchBook data, deal flow into US-based AI/ML startups has increased unabated for about a decade.

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