By Jeff Sanford
Toronto, Ontario -- May 29, 2017 -- Tuesday Ticker keeps you up-to-date on the financial news from players large and small throughout the auto claims economy. In this week's edition, we take a look at the acquisition of Assured Automotive by the Boyd Group, a Dutch court has rejected a request by AkzoNobel investors to take immediate action against the company over its rejection of PPG's bids, Sherwin-Williams and Valspar get the nod from regulators and much, much more!
The big news this week: Monday morning Winnipeg-based collision repair giant announced a blockbuster deal for Assured Automotive, the Ontario-based collision repair chain. For western-based Boyd this is a big step into the eastern part of the country, as well a big change in the nature of the Canadian market overall. Based in Ontario, Assured Automotive provides a key piece of the larger national puzzle for Winnipeg-based Boyd Group, which will pay $193.6 million for Assured (including $146 million in cash and the rest in units of the Boyd Group Income Fund). Boyd executives have promised to double the size of the company between 2015 and 2020. This deal puts the company well down that trail and will push Boyd Group annual revenues to over $1.5 billion. For more on this, please see "Inside View: Boyd CEO on the Assured Automotive acquisition."
The US Federal Trade Commission and the Canadian Competition Bureau have, “... finally given the green-light to a major acquisition in the building products industry,” according to industry reports. “Late last week, the two competition watchdogs granted Sherwin-Williams Co. approval to buy rival paint and coatings firm Valspar Corp.” A major producer of paint will disappear into another. The number of outstanding independent manufacturers will shrink. The companies announced the US $11.3 billion deal in March of last year. The acquisition is the largest in 151-year history of Sherwin-Williams according to reports. The deal creates a, “... mammoth global paint company with combined estimated revenues of $15.6 billion, adjusted earnings of $2.8 billion, and about 58,000 employees.” Dozens of manufacturing plants will change hands, including two in Canada according to a report. Sherwin-Williams had to sell two coatings plants to complete the deal, Valspar’s Cornwall, Ontario, plant and a plant in High Point, North Carolina that was recently sold to Axalta. The SHW-Valspar deal is expected to close June 1.
AkzoNobel and PPG
The world's fanciest business paper, the London-UK-based Financial Times, ran a piece suggesting investors “brace” for what “could be a pivotal week in the battle over the future of paint maker AkzoNobel.” AkzoNobel, of course, is resisting a €26.9 billion takeover attempt by PPG. The board and management of AkzoNobel have rejected three unsolicited buyout offers from PPG. The board argued the bids undervalue the business. PPG argued shareholders should be allowed to vote to get rid of the chair of the board through the calling of an extraordinary general meeting (EGM). The whole deal went to court and the ruling came down Monday afternoon.
Reuters Canada reports that AkzoNobel management won the case: “Dutch court on Monday rejected a request by AkzoNobel investors to take immediate action against the company over its rejection of a takeover bid by US rival PPG Industries, handing the Dutch company a victory in its efforts to repel the US firm's 25 billion-euro ($28 billion) proposed offer ...,” according to the report. Also this week, “PPG’s board is ... scheduled to meet on Tuesday and could decide whether to walk away from its courtship of Akzo, or launch a hostile takeover bid with a direct offer to Akzo’s shareholders ... Under Dutch takeover rules, PPG must submit formal bidding papers along with evidence of financing by Thursday June 1 to the financial markets regulator AFM for review. Otherwise it faces a six-month 'cooling off' period during which it cannot make further takeover attempts for Akzo.” The US group has requested an extension of the deadline to June 14, according to reports. The FT reports that request, “... will be heard by the Netherlands’ highest court for managerial law in the Hague. The case was described by AFM spokesperson Michiel Gosens as ‘pretty unusual’.” The FT report also notes that the, “... episode has triggered a political backlash in the Netherlands, where the government is considering a new law to give publicly listed companies greater protection against foreign takeovers.”
Advance Auto Parts
Advance Auto Parts announced its financial results for the first quarter of 2017. First quarter GAAP earnings per “diluted share” were $1.46. “Our first quarter comparable store sales declined 2.7 percent. As expected, comparable store sales were unfavourably impacted by the shift in New Year’s Day to the first quarter of 2017 as well as the significant shift of winter related demand into December. These factors pulled sales forward into the fourth quarter of 2016 and reduced comparable store sales in the first quarter,” according to the press release. As of April 22, 2017, the company operated 5,059 stores.
A story in the financial press wonders if this, “... May Be Time to Buy AutoCanada.” The analyst makes his case that over the past two weeks, shares of AutoCanada have, “... slipped from nearly $23.50 per share to under the $20 mark.” He goes on to point out that investors may be receiving a “fantastic entry point at current levels ... Although things have not been so good in western Canada over the past two years, the company has remained profitable during the downturn in the oil sands ... What makes this company an interesting investment is the dividend yield [2 percent].” An expected pick-up in the Alberta economy could lead to a bump in sales at the western-focused company. “The sale of vehicles is, something that will fluctuate significantly throughout the economic cycle ... Investors must realize that wear and tear on a vehicle is completely normal, and after two years of muted sales, the company’s locations in Alberta may be ready to turn the corner and begin increasing sales at a much more rapid rate than usual,” according to the analyst. “Although the company is still in acquisition mode, investors need to be concerned with same-store sales much more than top-line total revenue growth.”
Related Market Notes:
- Is diesel about to die in America? Now that GM has attracted a lawsuit concerning diesel emissions cheating, some are asking if this is the end to the fuel in North America. A Bloomberg report notes GM, Daimler AG, Fiat Chrysler Automobiles NV and Volkswagen are all caught up in the scandal that now seems industry wide. No wonder then that, “This year there are only 10 diesel models for sale in the US, half what was offered in 2016. Sales fell to 86,000 last year from 143,000 in 2015 ...”
- BlackBerry shares surged to a four-year high in Toronto last week. The company has benefitted from a string of auto-related good news. The stock was already enjoying a two-month rally “spurred on by expectations for strong growth in the fast-expanding cyber security and automotive software markets,” according to a report. Ford uses BlackBerry technology in its cars, in particular Ford's Sync 3 system runs on BlackBerry's QNX operating system. Also helping the stock fly was news that BlackBerry had won a court case with Qualcomm that sees that company paying $1 billion back to BlackBerry. The company can use those funds to “build up the company's cyber security and automotive software efforts and possibly make acquisitions related to its relatively new Radar tracking business,” according to an analyst. It was also recently reported that BlackBerry was working with “two luxury automakers to develop a security service that would remotely scan vehicles for computer viruses.”
- As the auto industry shifts “from selling sheet metal to offering a range of mobility services,” Ford announced that Jim Hackett is the new CEO. Hackett is the former CEO of Steelcase. He has run Ford’s Smart Mobility division since March 2016. Bill Ford, Jr. seems to be watching Tesla coming up in the rear-view mirror. He was quoted recently as saying, “The clock speed at which our competitors are working …requires us to make decisions at a faster pace ...” Former CEO Mark Fields leaves Ford with an “estimated $51.1 million in cash, stock awards and pension benefits,” according to a report.
- The index for collector car prices in the May report by Hagerty, a specialist insurer of vintage automobiles, finds that prices fell 0.68 points to 160.06 recently. To put that number in context, that's “... down nearly 10 percent year-over-year, and down 14 percent, or 25.8 points, from its all-time high in September 2015 (185.86).” Apparently, the index for collector car prices is now at the lowest level since June 2014. Could this have something to do with the fact that baby boomers, the biggest buyers of collector cars, are now retiring in greater numbers and reining in spending as a result? Demographers would say so.