All about that paper – Verso gets
Shares of Verso Corp surged over 31% yesterday on news that the company will be bought by BillerudKorsn AB. They do words differently in Sweden. BillerudKorsnas will pay $27/share, which is a 35% premium on $VRS stock. The deal, which amounts to $825M, is expected to close in Q2 2022.
- Verso is a North American producer of printing paper and specialty paper, and a direct competitor of Dunder Mifflin.
- This is huge for Verso, which has had a rough couple years. After filing for bankruptcy in 2016, it closed several mills, aborted plans to reopen them, and then paid a settlement to the state of Maryland for polluting the Potomac river. No wonder its board unanimously approved this deal.
- BillerudKorsnäs plans to spend $1B converting Verso’s Escanaba Mill facility– the company’s largest– into a sustainable paperboard production site while keeping Verso’s other mill open to service North American markets.
One of BillerudKorsns’ main motives in acquiring Verso is to take advantage of its physical location (read: North America), which gives it better shipping routes to Asia and parts of Europe. This is promising for long-term growth prospects, but those also depend largely on how the world recovers from the pandemic, because demand for paper is highly dependent upon whether workers are back in the office and children are back in schools. Maybe written letters will make a return.
For your health – Oracle acquires
It has been quite the month for software giant Oracle. After experiencing one of its biggest gains in 20 years last week, the company continued its tear by announcing that it will be acquiring medical-records systems provider Cerner Corp for $28.3B. Oracle is flexing a bit of its financial prowess by making the deal an all-cash transaction, paying $95 per share, a 20% premium over Cerner’s Market value last Thursday when the talks went public. By this point one doesn’t need to read the tea leaves to know that Oracle has some serious momentum and is acting upon it.
- Oracle had been the second-biggest software producer by revenue in 2020, but has been lagging behind major competitors like Amazon and Microsoft (ever heard of ’em?) when it comes to cloud computing and data solutions. Its acquisition of Cerner is meant to address this deficiency while also giving them a foothold in the healthcare industry.
- This deal also comes on the heels of Cerner appointing former Google Health VP, David Feinberg, as its CEO on October 1st. Feinberg’s stated goal was to pivot Cerner away from the legacy health records business and focus more on data-driven strategies. Goal: achieved.
- With Oracle paying a serious premium of $95 per share of Cerner, the company’s own stocks slid 5.14% by market close Monday. Meanwhile trading of shares in Cerner was halted for the time being.
After the impact that its earnings report made last week, it was clear that the decision-makers behind Oracle were looking deep into the future. They had already experienced real success with their cloud-based solutions, but this move to acquire Cerner really fills out their options. With the healthcare sector expected to spend upwards of $15.8 billion on cloud-infrastructure it appears to be a moment of adept insight from the all-knowing Oracle.
I go to America – Bank of
Montreal to acquire BNP Paribas’
Bank of the West
Dropping mentos into coke has nothing on the shakeup that just occurred in the banking world. The Bank of Montreal announced Monday that it will be purchasing BNP Paribas’ US unit, Bank of the West, for $16.3B. The Bank of Montreal will now have a presence in 32 US states, and gain 1.8M new customers, while BNP Paribas can now concentrate its efforts within Europe (and will have a cool $16.3B to mess around with).
- The US has been an unattractive market for non-American banks. This move by BNP Paribas follows sales made by other European banks like BBVA who sold off their US operations in 2020.
- The deal is being hailed as accretive by the executives of both banks, with BNP emphasizing that the move will allow them to fuel more share buybacks and finance future acquisitions. This would give them a lot more flexibility than other European banks.
- The deal will also increase the US contribution to BMO’s pre-provision, pre-tax earnings from 36% to 44% in fiscal year 2021.
The executives over at BMO and BNP Paribas must be clinking their champagne over some poutine right now because this deal really does seem to benefit both parties. For the rest of us the deal serves to demonstrate some potential trends in the banking sector. First off, BNP Paribas stated that they’ll use the funds from this deal to fuel share buybacks which gives credence to the theory that we’ll see increased buybacks in the coming year (particularly in banking). It also could indicate that there are to be further shake-ups with European banks shedding their US operations. If this remains the case it may be worthwhile to keep track of other international banks before they scurry back across the pond.