Business News Roundup: September 16
World
Snowflake Prices its IPO Above Increased Range, Impying Market Cap of US$33.3 Billion
Snowflake, a provider of cloud-based data storage and analysis software, priced its IPO above its increased range in an offering that values the company at US$33.3 billion.Snowflake is selling 28 million shares at US$120 a piece, according to sources.The company, which is poised to debut on the New York Stock Exchange on Wednesday under the ticker symbol “SNOW,” will raise approximately US$3.4 billion from the offering.
Investors are bidding up Snowflake’s ahead of the offering as they anticipate a blockbuster opening for a company that’s generating over US$500 million in annualized revenue and grew over 130% in the first half of the year.The company had already raised its anticipated debut price range from a maximum of US$85 to a max of US$110 in the space of less than a week.Snowflake is growing alongside the major public cloud vendors by providing technology that allows clients to quickly analyze and share vast amounts of data and increase capacity as needed, rather than relying on databases that are tied to hardware.
Last week, Snowflake revealed in a filing that Berkshire Hathaway and Salesforce each agreed to buy US$250 million of stock at the IPO price in a concurrent private placement.
Berkshire Hathaway also agreed to buy 4.04 million shares in a secondary transaction from former CEO Bob Muglia.Based on the IPO price, Berkshire will be paying US$484.8 million for those shares.
Snowflake is entering a market that’s hungry for high-growth cloud software makers, particularly those that have shown an ability to continue expanding through the coronavirus pandemic.Even after pulling back this month, the BVP Nasdaq Emerging Cloud Index, consisting of over 50 publicly traded companies, is up about 55% this year, compared to a 25% gain for the Nasdaq and 5.3% advance in the S&P 500.
ZTO Seeks to Raise Up to US$1.55 Billion in HK Listing
Chinese delivery group ZTO Express aims to raise up to US$1.55 billion in the Hong Kong Stock Exchange, according to the company’s filings, the latest in a series of secondary listings to be carried out in the city this year.
ZTO Express, which is already listed in New York, begins its institutional bookbuild and will sell 45 million shares at a maximum price of HK$268 (US$34.60) per share, the filings showed.Final prices of the shares will be set next Tuesday and the stock is due to start trading in Hong Kong on Sept.29.
In case of high demand, a so-called ‘greenshoe’ option can be exercised and an extra 6.75 million shares can be sold within the next 30 days by the banks which underwrote the deal, according to a term sheet seen by Reuters.The option, if exercised, could raise an additional US$233 million at the maximum share price.Hong Kong retail shareholders will be able to bid for up to 5% of the company’s stock being sold, the term sheet showed.
Opendoor to Go Public in Social Capital Merger in US$4.8 Billion Deal
Opendoor Labs Inc, the home-selling platform backed by SoftBank Group, said that it has agreed to go public through a merger with a blank-check company led by venture investor Chamath Palihapitiya in a deal that will value the company at US$4.8 billion.
Opendoor buys properties from sellers and makes repairs, at a service charge, then lists them for sale.As part of the deal with Social Capital Hedosophia Holdings Corp II, Opendoor will get US$1 billion cash, including US$600 million from Palihapitiya and other investors such as BlackRock and Healthcare of Ontario Pension Plan.
OpenDoor was hit hard by the pandemic this year, and laid off 35% of its workforce in April.
As the home resale business started to recover, it looked for capital to fuel expansion and opted to go public through merging with Social Capital over a traditional initial public offering.
The merger is expected to close to by year end.A blank-check company, also known as a special purpose acquisition company (SPAC), uses capital raised through an initial public offering to buy a private company, usually within two years.The deal then takes the private company public.
Social Capital, the blank-check firm backed by Virgin Galactic Chairman Palihapitiya, raised US$360 million when it went public in April.In 2018, SoftBank’s Vision Fund invested US$400 million in Opendoor, which was founded in 2014.
TPG Capital in Talks to Buy LVMH-Owned Bootmaker R.M.Williams
Private equity giant TPG Capital Management LP is in talks to buy Australian bootmaker R.M.
Williams from French fashion giant LVMH Moet Hennessy Louis Vuitton SE, the Australian Financial Review reported.
The U.S.buyout specialist is conducting “late-stage due diligence” and trying to secure financing for a deal that would value the 88-year-old Australian manufacturer at more than A$250 million.A sale at the price Quote: d by the AFR would be a mark-down from the roughly A$500 million that was widely reported in Australian media as being R.M.Williams’s valuation when LVMH, via its investment arm L Catterton, put the asset up for sale in 2019.
Japan’s Exports Hit a Double-Digit Slump in August
Japan’s exports posted a double-digit slump for a sixth straight month in August as U.S.-bound shipments shrank due to a global demand slowdown from the coronavirus pandemic, casting a shadow over a trade-led recovery from the deep recession.
Total exports fell 14.8% year-on-year in August, a smaller decline than the 16.1% expected by economists in a Reuters poll, official data showed on Wednesday.That meant exports fell for their 21st straight month, marking the longest run of declines since a 23-month run through July 1987.That followed a 19.2% drop in the previous month.
The decline in August was driven by fewer shipments of cars and mineral fuels, though the pace of contraction eased somewhat from July as economic activity showed signs of picking up.By region, shipments to the United States – Japan’s key market – fell 21.3% in the year to August, weighed heavily by declines in engine parts and construction machinery.
Exports to China, Japan’s largest trading partner, rose 5.1% year-on-year in August, helped by a sharp increase in shipments of semiconductors, the data showed.That marked the second straight monthly rise in China-bound shipments, which showed signs of picking up, a finance ministry official said.Exports to the rest of Asia declined 7.8%, weighed by shrinking exports of iron and steel products.
Overall imports fell 20.8% in the year to August, versus the median estimate for an 18.0% decrease.As a result, the trade balance came to a surplus of 248.3 billion yen ($2.36 billion), versus the median estimate for a 37.5 billion yen shortfall.
FedEx Reports Better-than-Expected First Quarter Profit
U.S.
delivery firm FedEx Corp reported a bigger-than-expected quarterly profit, after price hikes, lower fuel costs and efficiency gains countered negative impacts associated with a pandemic-fueled surge in e-commerce shipments.Average daily package volume for FedEx Ground, which handles e-commerce deliveries for retailers like Walmart, jumped 31% to 11.6 million during the fiscal first quarter ended Aug.31.
Revenue per package rose 2% to $9.33 during the quarter, which also included one additional business day.
Home deliveries traditionally have been more expensive because they involved fewer packages and far-flung stops.
Rising volumes and investments in things like automated sorting centers and route optimization are bringing those costs down.FedEx spent US$565 million on fuel across the company during the quarter, 35% less than a year earlier.
FedEx did not provide an earnings forecast for fiscal 2021, citing continued uncertainty, but said it expects annual capital spending of US$5.1 billion, above analysts’ average estimate of US$4.96 billion, according to Refinitiv data.Fiscal first quarter adjusted net income at FedEx jumped 60% to US$1.28 billion, or US$4.87 per share.Revenue rose 13.5% to US$19.3 billion.Analysts expected earnings of US$2.69 per share and revenue of US$17.55 billion.
Kraft Heinz Revamps Business Structure, Sells Parts of Cheese Business
Kraft Heinz Co said that it would sell its natural cheese business to French dairy company Groupe Lactalis for US$3.2 billion, step up its marketing budget and overhaul its supply chain, hoping to save US$2 billion by 2024 and halt weak sales and brand deterioration.Packaged food companies like Kraft Heinz and Campbell Soup that market canned food and salty snacks have for years faced a perception that their products are unhealthy.
At the same time, the industry is battling aggressive competition from cheaper private-label brands from Walmart and Kroger.
The company also announced that it would sell its natural, grated, cultured and specialty cheese businesses in the United States – including its Breakstone’s and Cracker Barrel brands – to Lactalis, while retaining its more popular Philadelphia Cream Cheese, Kraft Singles, Velveeta Processed Cheese and Cheez Whiz brands.The sale is part of plans to reduce its net leverage of about US$27 billion to about four times EBITDA by the end of this year from the 4.2 times EBITDA it achieved at the end of the second quarter.
Fueled by shoppers in lockdowns buying more packaged food, Kraft Heinz forecast high-single-digit quarterly adjusted core earnings growth and mid-single-digit full-year adjusted core earnings growth.
The company expects third-quarter net sales growth in the mid-single-digit range versus last year, beating analysts’ expectations of a 2% increase in sales, according to Refinitiv data.
Of the US$2 billion cost cuts, US$1.2 billion will come from procurement and US$800 million will come from making Kraft Heinz’s logistical network more efficient.It also aims to promote products that can be used as ingredients, such as Oscar Mayer bacon and Planters nuts that can be used in salads.
BMW to Use Software from Tactile Mobility in Vehicles
Israel’s Tactile Mobility said that its software will be embedded into the BMW Group’s next-generation vehicles beginning in 2021.The collaboration will equip BMW vehicles with the ability to analyse the road surface attributes under their tires, enabling detection of road conditions.
Tactile Mobility develops software that uses a vehicle’s non-visual sensors, including wheel speed, wheel angle, RPM and gear position to help smart and autonomous vehicles “feel” vehicle-road dynamics and road conditions.In October Tactile Mobility said it secured US$9 million in funding from a group of investors that included Porsche.
The cooperation between BMW and Tactile Mobility began through the BMW Startup Garage, the venture client unit of the BMW Group.
JP Morgan and BlackRock Tap AI Start-Up
JPMorgan Chase & Co and BlackRock Inc have teamed up with artificial intelligence (AI) technology startup Saphyre to automate the opening of custody accounts, the companies announced.The system, which uses AI to remember when an asset manager has already uploaded a specific document needed to open a custody account, has been tested for the past six months and will now be used by the bank with BlackRock and other asset managers.The companies believe the system will make new funds get to market quicker by streamlining what is now a heavily manual process involving reams of paperwork, spreadsheets and faxes.
The partnership comes as large financial institutions increasingly turn to tech-savvy startups to help them automate and digitize some of their burdensome processes.JPMorgan, which has US$27.4 trillion of assets under custody, took on over US$1 trillion of BlackRock’s assets in 2017.The bank has securities services operations in 30 countries and a custodial network in more than 95 markets.
Singapore
Tencent to Open South East Asia Regional Hub in Singapore
Chinese gaming and social media group Tencent said that it would open a new office in Singapore that will be its regional hub for Southeast Asia.The move, adding a Singapore base to offices in Malaysia, Indonesia and Thailand, comes as Tencent presses on with a global push despite recent app bans in India and the United States.
Southeast Asia has proved an important market for Tencent, with some hit games, including “Arena of Valor,” performing well there.Its cloud computing arm, Tencent Cloud, is also making inroads in the region as the company seeks to tap into growing demand for remote IT services for home-based workers amid the coronavirus pandemic.
Keppel Corporation’s JV with Liquid Group
Keppel Corporation Limited announced that its wholly-owned subsidiary, Kepventure Pte Ltd (“Kepventure”) has entered into a joint venture with Liquid Group Pte.Ltd.
(“Liquid Group”) to develop and implement a customer reward programme for Keppel Group entities.In connection with the Joint Venture, Kepventure, Liquid Group and Keppel Rewards Pte.Ltd.(“JVCo”) have today entered into a subscription and shareholders’ agreement, to regulate the affairs of the JVCo.
The JVCo was incorporated as a wholly-owned subsidiary of Kepventure, with an issued and paid-up share capital of S$1.The Company and Liquid Group now hold 90% and 10% of the share capital of JVCo respectively.The book value and net asset value of Kepventure’s 90% interest in the JVCo are approximately S$1.8 million as at the date of this announcement.
Hiap Seng Engineering Placed under Judicial Management
Hiap Seng Engineering and its subsidiary, HS Compression & Process (HSCP), will be placed under judicial management.RSM Corporate Advisory has been appointed the Judicial Managers.
Mermaid Maritime to Sell Its Stake in Asia Offshore Drilling for US$31 Million
Mermaid Maritime Public Co announced that it will sell its 33.76 per cent stake in Asia Offshore Drilling (AOD) for US$31 million in cash.Mermaid Maritime’s wholly-owned subsidiary, Mermaid International Ventures (MIV), last Friday exercised a put option – about three weeks before it expires – to sell all its shares in AOD to Oslo-listed deepwater drilling contractor Seadrill.An affiliate of Seadrill holds the remaining 66.24 per cent interest in AOD.
Wilmar Secures US$200 Million Sustainability Loan from UOB
UOB has offered a two-year US$200 million sustainability-linked loan to Wilmar International.
To structure the sustainability-linked loan with the agribusiness group, UOB worked with Wilmar to identify a list of performance indicators in areas including corporate governance, carbon emissions, land use and biodiversity, community relations and supply chain practices.The interest rate on the loan will be pegged to Wilmar’s achievement of the pre-determined targets that are aligned to the list of performance indicators..
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