July 14th - The Week Ahead

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Welcome Back!

The Week Ahead Of Us 🔍

3Q Earnings are kicking off! We’ve got some big names on deck this week:

• Monday: Goldman Sachs, BlackRock

• Tuesday: United Health Group, Bank of America, Morgan Stanley, Charles Schwab, PNC, State Street

• Wednesday: ASML, Johnson & Johnson, Prologis, Kinder Morgan, Crown Castle, Discover, Las Vegas Sands, Equifax

• Thursday: Taiwan Semi, Netflix, Novartis, Abbott Labs, Blackstone, D.R. Horton, M&T

• Friday: American Express, Schlumberger, Travelers

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The Main Stories 🔍

June CPI was better than expectations: The 10-year treasury tightened more than 10bps to 4.18% following Thursday’s cool CPI reading. Monthly CPI of -0.1% was better than expectations of +0.1%, driving 12-month CPI of 3% vs. estimates of 3.1%. Core CPI, (excludes energy and food) was +0.1% (vs. est. of +0.2%), driving 12-month Core CPI of 3.3% (est. of 3.4%). This slowing inflation shows a cooling economy and can drive the Fed towards a September rate cut.

AT&T Users - Your Group Chat Leaked: We’ve got bad news for AT&T customers - nearly all of AT&T’s 110 million customers now have had their call and text interactions exposed. For 6 months in 2022, there was a breach. While AT&T doesn’t expect a material impact to financials, the stain is mainly on Snowflake, the data cloud company that hosted this data.

Delta is struggling to fill their planes: Good news for a consumer who doesn’t want someone sitting next to them - but bad news for the airlines. Delta’s guide of 3Q EPS of $1.7-$2.0/share was below estimates of $2.04. There’s been excess supply, especially for the cheaper seats, driving Delta to cut pricing aggressively. Delta is hardly the first carrier to call out issues - following estimate slashing from Southwest and American Airlines a couple months back.

Red Box is liquidating: Chicken Soup for the Soul Entertainment, the owner of Redbox, will be liquidating (aka Chapter 7 bankruptcy) as opposed to the initial plan of a Chapter 11 restructuring. Over 24,000 kiosks will be shutting down and over 1,000 workers are impacted and are due paychecks. This is a sad end to a 22-year old company. Despite the fact that the DVD rental business is archaic, the real issue is that $1B of debt was plopped on this company. As a credit investor, this is a business that couldn’t sustain a high level of debt.

The Podcast Bubble is Still On: Dax Shepard has signed a $80 million deal to distribute his podcast “Armchair Expert” on Wondery, Amazon’s podcast platform. Shepherd moves from Spotify, and shows us that some of the frothy podcast deals seem intact.

More Headlines 🍿 

• The latest on the attempt on President Trump’s life

• Private Equity Investors may soon be able to take up to a 10% ownership stake in NFL teams. Roger Goodell shared the news in Sun Valley last week, noting that the League aims to update its ownership rules by year end. While the NBA, MLB, NHL, and MLS all allow PE ownership up to 30%, the NFL has bucked the trend, favoring ultra-wealthy individuals and families

• Virginia wins CNBC’s “Top State for Business” award. Last year’s winner, North Carolina, finished in 2nd this time around, losing out to “Old Dominion” and its best-in-country public education system. After NC, Texas (best workforce in the US), Georgia (strong infrastructure), and Florida (leading economy) closed out the top five

• This week, Pepsi executives reported that post-pandemic consumer spending is screeching to a halt. Years of inflated costs have taken their toll, and customers are increasingly bargain hunting. Missing revenue estimates for Q2 ($22.5B vs. $22.57E), Pepsi lowered its full-year outlook

• Across the board, banks have struggled to adapt to the Fed’s fast-paced rate-hiking cycle. This week, JP Morgan (America’s biggest bank) and Wells Fargo reported lower Q2 profits. Fueled by aggressive cost-cutting, Citigroup posted better numbers. Collectively, executives warned that accelerating M&A would likely only partially offset a weakening consumer

• Costco prices are going up, hiking prices for the first time in 7 years from $120 for executive members to an annual total of $130 per member. Costco’s stable membership cost has been impressively anomalous after years of high inflation and gas prices ate into grocery stores’ margins. To cope with rising costs, Costco has cracked down on nonmembers infiltrating stores, including by checking membership cards for access to the food court (home to the famous $1.50 hot dog and drink)

• Google is closing in on acquiring cybersecurity startup Wiz for $23B

• Separately - I run a Fantasy Football Newsletter that helps you with figuring out who to draft in Fantasy Football. With the season approaching, we’re going to have a lot of posts dropping in August. Subscribe for free here 🤝 

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M&A Transactions💭 

Ryan has entered into a definitive agreement to acquired the Global Property Tax Business of Altus Group for $510.77M. RBC Capital Markets advised on the sale.

Sunrise Wind, producer of renewable wind energy, was acquired for $230.0M by Orsted (CSE: ORSTED). Goldman Sachs advised on the sale.

Silo AI, provider of AI services, has reached a definitive agreement to be acquired for $665.0M by Advanced Micro Devices (NAS: AMD).

OSG Ship Management (NYS: OSG), a tanker company, was acquired for $950.0M by Saltchuk Resources. Evercore Group advised on the sale.

HRA Pharma Rare Diseases, provider of care and service, was acquired for $295.54M by Autajon Packaging Durero. Perella Weinberg Partners advised on the sale.

Nissens Automotive, manufacturer of thermal components, has reached a definitive agreement to be acquired for $388.0M by Standard Motor Products (NYS: SMP). Jefferies advised on the sale.

1492 Probitas, provider of finance and insurance services, was acquired for $307.48M by Aviva (LON: AV.). Fenchurch Advisory advised on the sale.

Yellow Jersey Therapeutics, provider of pharmaceutical substances, was acquired for $1.25B by Johnson & Johnson (NYS: JNJ). Centerview Partners and Morgan Stanley advised on the sale.

Supponor, operator of an innovative sports media and technology company, was acquired for $108.0M by TGI Sport.

Leap Green Energy, operator of renewable energy-based power projects, entered into a definitive agreement to be acquired for $200.0M by Brookfield Corporation (TSN: BN).

A portfolio of 914 beds at University of Florida was acquired for $160.0M by Investcorp.

Heroux-Devtek (TSE: HRX), designs develops and manufactures landing gear, has entered a definitive agreement to be acquired for $1.35B by Platinum Equity. Desjardins Capital Markets and BMO Capital Markets advised on the sale.

Global Specialty Solutions, provider of agricultural services, has entered into a definitive agreement to be acquired for $650.0M by Envu. Bank of America advised on the sale.

Envestnet (NYS: ENV), provider of wealth-management technology and solutions, has entered into a definitive agreement to be acquired for $4.5B by Bain Capital, Reverence Capital Partners, Fidelity Investments, Franklin Templeton (NYS: BEN), State Street Global Advisors, and BlackRock (NYSL BLK). Morgan Stanley advised on the sale.

Elk Valley Resources, operator of a mineral exploration company, was acquired for $7.3B by Glencore (LON: GLEN). Ardea Partners, Barclays, BMO Capital Markets, CIBC Oppenheimer Corp, Origin Merchant Partners, TD Securities, and Goldman Sachs advised on the sale.

Dura Supreme Cabinetry, manufacturer of semi-custom and custom kitchen and bath cabinetry, was acquired for $520.0M by MasterBrand (NYS: MBC). Harris Williams and Jefferies advised on the sale.

The Business Unit LPG Business of DCC (LON: DCC) was acquired for $105.0M by CITADEL Pacific.

Compagas, distributor of natural gas, was acquired for $165.93M by Compass Gas e Energia (BVMF: PASS3).

EyeBio, operator of an ophthalmology biotechnology company, was acquired for $1.3B by Merck & Co. (NYS: MRK). Centerview Partners advised on the sale.

Bulland Buildtech, provider of construction and civil engineering services, was acquired for $1.2B by Saviour Builders.

Private Placement Transactions💭 

Display Social, developer of a social platform, has raised $350.0M of venture funding from undisclosed investors.

Element Biosciences, developer of genetic analytic tools, raised $277.0M of Series D venture funding led by Wellington Management.

Earned Wealth, provider of wealth management services, has raised $200.0M of venture funding led by Silversmith Capital Partners and Summit Partners.

Helsing, operator of a defense artificial intelligence company, has raised $483.69M of Series C venture funding led by General Catalyst.

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