I Buy You Out, You Don’t Buy Me Out!

-Moe Greene and Ericsson to Vonage

Thankfully Vonage (VG) had the foresight that Moe Greene did not. It was announced Monday that Swedish telecom equipment maker, Ericsson, would be buying cloud-based telecom company Vonage for $6.2B. Shares of Vonage surged 27.14% on the day bringing its year-to-date gains to +60.27%. Meanwhile, Ericsson is down 15.19% over the same period after closing Monday’s trading session lower by 7.23%. This is par for the course as the acquiring company most often sees its stock price dip on the announcement of a deal.

• Ericsson said that the deal will “expand its wireless enterprise and broaden its global offerings.”
• Ericsson will pay $21/share, a 28% premium over Friday’s closing price. The deal is expected to close in the first half of 2022 assuming shareholders and regulatory bodies sign off.
• Vonage is in a niche industry that provides tools, such as text, chat services, video, etc, for companies to use to interact with their customers.

Ericsson’s stock is at its lowest level since July 16th 2020 when the company announced positive earnings. The company’s stock closed that day at $9.65 before gapping up to open the following morning at $10.65. I’m keeping Ericsson in my watchlist to see if sellers push $ERIC’s price to that July 16th close.

“I’m not f’ing leaving”

^ J-Pow yesterday Biden announced today that he’s reappointing the money printer himself, Jerome Powell, as chair of the Federal Reserve. The other candidate for the position, Democrat Lael Brainard, will serve as J-Pow’s right hand woman in the role of vice chair, replacing Republican Richard Clarida. U.S. equities and Treasury yields both jumped on the announcement, signifying the market’s confidence in the appointments.

• Biden is resuming the tradition of reappointing the previous Fed chair regardless of political affiliation, a practice Trump abandoned when he gave Yellen’s seat to Powell in 2018 because she was *checks notes* too short? You can’t go long on stonks if you’re short #science.
• Powell’s renomination is expected to go smoothly in the Senate since Republicans and moderate Democrats alike support the Fed chair. Powell has been lauded for his aggressive market rescue programs at the beginning of the pandemic and his efforts to grow the economy at the beginning of the year– though we might not be clapping for the latter when we’ll all be burning wheelbarrows of money to heat our houses next year…
• The appointment- meaning safety, stability, and continuity- is extremely popular with everyone on Wall Street (read: you), since the stock market’s been on fire for months and analysts want to keep the hot streak alive.

Treasury yields and the stock market both benefit from votes of confidence and promises of stability (i.e. this very renomination). While J-Pow’s recent record for handling inflation doesn’t totally allay anyone’s fears, his record elsewhere is pretty good, and his Republican affiliation suggests he’ll take great pains to keep inflation in check during 2022. Expect a sunnier market forecast across the board.

Privacy Please

Privacy has its privileges  The IPO market has been on fire lately, but Authentic Brands Group is bucking the trend. The brand management company will push back its planned public offering from July to sometime in 2023 or 2024. Instead of going public, CVC Capital and HPS Investment Partners are buying roughly 25% of Authentic Brands in a $3.5B deal, valuing the company at $12.7B.

• The company is a bundle of mostly retail brands, like Aeropostale, Forever 21, Brooks Brothers, and Barney’s New York, as well as Sports Illustrated, which surprisingly still exists.  Who knew?
• Authentic Brands is currently in the process of buying Reebok and said to expect more acquisition announcements in the near future. If their target space is athletic brands that have not been relevant for decades might we suggest L.A. Gear or Avia?

Authentic’s CEO expressed a preference to remain private and speculated that a public offering could have been richer than the announced deal. This deal might set up a burgeoning debate for companies: what is the bigger pain in the rear, compliance with SEC reporting requirements or justifying every expense item with PE owners who prefer to use company cash to fund special dividends?

No country has dove deeper into the Bitcoin pool than El Salvador. The country made the digital currency legal tender back in September and now wants to issue bonds denominated in Bitcoin and use some of the proceeds to build a Bitcoin city near a volcano. Yes, you read that right. And you thought yesterday’s CC about a group of strangers trying to use Ethereum to buy the Constitution was the craziest digital asset-related thing you’d read this week.

• El Salvador’s president Nayib Bukele wants to issue a 10-year bond with a 6.5% coupon where investors would be paid via the laddered liquidation of Bitcoin holdings.
• Approximately half of the bond sale proceeds are earmarked for the construction of a city at the foot of the Conchagua volcano in southeastern El Salvador. The new Bitcoin city will be a mix of residential and commercial areas, with an airport and entertainment district….trying hard not to make a hot spot joke.
• The other half of the proceeds are tagged for Bitcoin mining infrastructure and the energy infrastructure that will surely be needed to power the mining capacity.

Anybody who buys these Bitcoin bonds is betting more on the direction of the digital currency’s price more than the development of El Salvador. Currently, the country’s bonds are yielding about 13%. While certainly an out of the box type issuance, is this really the nuttiest thing ever to come out of the Latin American bond markets? Now to start checking out real estate in Pompei Bitcoin City.

Healthcare technology leader Athenahealth will be purchased by private equity firms Bain Capital and Helmman & Friedman LLC for $17B. The deal, which was announced Monday, is expected to close in Q1 2022. Bain and H&F will be purchasing the company from Veritas Capital and hedge fund Elliott Management, who took the company private in 2019 for $5.7B. Just a two-year return of $11.3B for Veritas and Elliott…not a bad day at the office.

• Companies like Athenahealth that provide cloud-based solutions to the healthcare industry have seen demand for their products skyrocket during the pandemic.
• In April, Microsoft bought Nuance Communications for $16B
• H&F partnered with Blackstone and Carlyle Group in June to purchase Medline Industries for $34B.

As a private company, retail traders cannot easily buy and sell shares of Athenahealth. That said, Cerner Group (CERN), which is a direct competitor to Athena, is a public company that will allow for direct exposure to the healthcare technology industry. CERN closed Monday’s trading session up 0.96%. Now if someone can just help me understand why Athenahealth is not two words or at the very least hyphenated.

Other News Link Roundup

• When in doubt, buy the house? Inflation fears drive U.S. sales of existing homes to nine-month high

• China’s property moguls sac their bods to bail out their own companies

• KKR booty calls debt-stricken Telecom Italia with $12B takeover offer

• Sorry, cryptobulls, the S&P 500 is still the best hedge against inflation

• Target stock dips after they uninvite everyone to Thanksgiving

• For $300 you can own a share of the Green Bay Packers, and be a better NFL owner than Dan Snyder