A survey of North American equities heading in both directions
On the rise
Bitfarms Ltd. (BITF-T) rose after rival bitcoin miner Riot Platforms Inc. (RIOT-Q) said on Tuesday it had increased its stake in the Toronto-based company to 18.9 per cent.
Riot acquired 1 million common shares of Bitfarms on Tuesday, representing about 0.22 per cent of issued and outstanding Bitfarms common stock.
The acquisition takes the total count of Bitfarms shares owned by Riot to about 85.3 million.
Bitfarms said earlier in the day its co-founder and chair Nicolas Bonta, one of the three board members top shareholder Riot sought to replace, would leave the company immediately.
The two companies have been locked in a dispute since April, when Riot made an unsolicited US$950-million offer to acquire Canada-based Bitfarms.
Bitfarms said the bid undervalued it significantly and adopted a “poison pill” to fend off any attempt at a hostile takeover. A poison pill refers to shareholder rights plans used by corporate boards to thwart hostile takeover bids.
Riot withdrew its offer at the time, but is now seeking three seats on the Bitfarms board and has said it is “ready to engage” with the reconstituted board on a potential transaction.
Cheez-It and Pringles maker Kellanova (K-N) increased in response to news it is set to be acquired by family-owned candy giant Mars, whose brands include M&M’s and Snickers, in a nearly US$36-billion deal, making it the biggest buyout in the packaged food industry.
Mars will pay US$83.50 per share in an all-cash deal for Kellanova, representing about 33-per-cent premium to its closing price on Aug. 2 before Reuters first reported that Mars was exploring a deal for the Pringles maker.
The deal comes as sales growth at U.S. packaged food companies, including Kraft Heinz, Mondelez and Hershey, slows due to budget-strapped customers opting cheaper, private-labels instead of pricier branded items.
The deal dwarfs Mars’ US$23-billion takeover of Wrigley in 2008 and would bring under one roof popular consumer brands, including Mars’ Twix, Bounty and Milky Way chocolates as well as Kellanova’s snacks portfolio of Pop-Tarts, Rice Krispies Treats and Eggo frozen waffles.
The acquisition is also not expected to face too many antitrust roadblocks due to the limited overlap between the offerings of the two companies, legal experts had told Reuters.
Kellanova will become part of Mars Snacking, led by Global President Andrew Clarke and based in Chicago after the completion of deal in the first half of 2025, the companies said.
Kellanova, which split from WK Kellogg last October, is rooted in a salty snacks business and sells cereal outside of North America. WK Kellogg was left with the North American cereal business of Kellogg, the original parent company.
Kellanova logged net sales of more than US$13-billion in 2023.
Southwest Airlines (LUV-N) increased on news Elliott Investment Management has launched a boardroom battle seeking to replace 10 of 15 directors, as the hedge fund pushes to oust the airline’s chief executive and improve performance.
The move is an escalation in a fight over who should lead the airline and how it should change. Southwest’s stock price has fallen 24 per cent in the last 52 weeks, as it tries to implement a turnaround plan including adding seats with more legroom, moving to assigned seats and naming a new board member in July.
The board nominees by activist investor Elliott consist of former airlines chief executives, consultants and officials, including former Virgin America CEO David Cush and Robert Milton, the former CEO of Air Canada.
Southwest’s board will evaluate Elliott’s proposed nominees as part of its ongoing board refreshment process, the airline said on Wednesday.
These candidates would give shareholders a choice between the existing board or a new one that “brings relevant expertise, fresh thinking and accountability,” Elliott said in a statement.
Last week, Elliott said in a regulatory filing that it had a 7-per-cent beneficial ownership, putting it close to the 10-per-cent stake required for an investor to call a special meeting. The firm has a roughly 11-per-cent interest including derivatives.
The hedge fund has pushed to replace both Robert Jordan, who has been CEO since 2022, and Executive Chair Gary Kelly, former CEO before Jordan.
U.S.-listed shares of Swiss bank UBS (UBS-N) gained ground on Wednesday after it posted a quarterly profit that was double the market forecast, buoyed by investment banking and larger-than-expected savings from the integration of its one-time rival Credit Suisse.
The net profit of US$1.1-billion for the April-June period beat the US$528-million forecast in a company-provided poll for what were UBS’s first results since it formally completed its merger with Credit Suisse in May.
Results varied across divisions. Investment banking revenues surged, as seen at peers, and performance from its non-core and legacy unit was also strong, analysts noted.
Switzerland’s largest bank said savings from the Credit Suisse integration were occurring faster than forecast, although Deutsche Bank analysts said numbers at UBS’s Global Wealth Management and Personal and Corporate Banking divisions were below expectations, taking some shine off the results.
In a statement, UBS CEO Sergio Ermotti said the first-half results reflected “significant progress” the bank had made since buying Credit Suisse, leaving it well positioned to meet targets and return to pre-acquisition levels of profitability.
“We are now entering the next phase of our integration, which will be critical to realize further substantial cost, capital, funding and tax benefits,” Ermotti said.
UBS said it had made another US$0.9-billion in gross cost savings, hitting about 45 per cent of its cumulative annualized target.
Its goal is to reach US$13-billion in savings by the end of 2026, and the bank now expects to achieve US$7-billion of that this year, having previously eyed about US$6.5-billion.
UBS said it has reduced non-core and legacy risk-weighted assets by 42 per cent since the second quarter of last year, including an US$8-billion decline quarter-on-quarter.
Meanwhile, net new asset inflows were US$27-billion, even as UBS executives warned the outlook was clouded by geopolitical tensions, the U.S. election race and market volatility.
Victoria’s Secret (VSCO-N) soared after announcing it is making a change at the top, naming Hillary Super from Savage X Fenty as its new chief executive.
Ms. Super will take over for Martin Waters, effective Sept. 9. Mr. Waters became CEO of Victoria’s Secret in 2021. He will serve as an advisor through the end of the month to help with the transition process, while Chief Financial and Administrative Officer Timothy Johnson will serve as interim CEO.
Plans for a Victoria’s Secret spinoff were announced in 2021 after a deal to sell the lingerie, sleepwear, beauty and clothing company to private equity firm Sycamore Partners fell through because of the coronavirus pandemic.
The chain has struggled with slowing sales and has worked on reinventing its fashions and redesigning stores. Ms. Super had served as the Savage X Fenty CEO since June 2023. The lingerie company, which was co-founded by megastar and business mogul Rihanna, appeals to younger consumers and Super’s expertise running the company could help Victoria’s Secret cater to that prized demographic better.
Prior to working at Savage X Fenty, Ms. Super was the Global CEO of Anthropologie Group, an Urban Outfitters Company.
Victoria’s Secret Chair of the Board Donna James said in a statement on Wednesday that Ms. Super will be tasked with accelerating growth in the company’s core business in North America.
Flutter (FLUT-N) raised its full-year guidance after a much better than expected second quarter and said it would not hit customers with a surcharge in high-tax U.S. states, shortly after which rival betting firm DraftKings dropped plans to do so.
Flutter’s U.S. shares, where it recently moved its primary listing, were higher after the world’s largest online betting firm said it expects to beat its previous forecast for a jump of around 30 per cent in full-year core profit.
The Dublin-based group, whose brands also include Paddy Power and Betfair in Britain and Sportsbet in Australia, said adjusted core profit rose 17 per cent in the second quarter.
Flutter’s U.S. FanDuel brand and DraftKings (DKNG-Q) are by far the biggest players in the booming U.S. market with a combined share of around 70 per cent and investors were closely watching Flutter’s response to the charge DraftKings announced on Aug. 2.
At the time, DraftKings’ CEO compared the plans to similar charges in the hotel or taxi industry and hoped it would offset the cost of operating in states such as New York, which has a tax rate of 51 per cent on gambling revenues.
“We always listen to our customers and after hearing their feedback we have decided not to move forward with the gaming tax surcharge,” DraftKings said in a statement released after Flutter’s results.
While analysts had said DraftKings’ plans could boost cash flow, they warned it also risked losing market share if rivals did not follow suit. The charge would have applied to customers’ winnings in the four states that currently tax gaming revenues at 20% or more.
Flutter CEO Peter Jackson said the best response to higher taxes, based on its experience in the more established European market, was to cut local marketing or moderate customer offers, as it plans to do in response to recent tax hikes in Illinois.
Flutter said on Tuesday that it now expects full-year core profit of US$680-million to US$800-million at market-leading FanDuel versus the US$635-million to US$785-million seen in March and last year’s US$167-million, which was its first full year of profitability in the rapidly growing market.
Core profit of US$1.69-billion to US$1.85-billion is now seen in its other global markets including Britain and Australia. That compares to the US$1.63-billion to US$1.83-billion forecast previously.
On the decline
Shares of Metro Inc. (MRU-T) fell after it said it earned a third-quarter profit of $296.2-million, down from $346.7-million in the same quarter last year, as its sales rose 3.5 per cent.
The grocery and drugstore retailer said Wednesday the profit amounted to $1.31 per diluted share for the quarter ended July 6, down from $1.49 per diluted share a year earlier.
Sales in the quarter amounted to $6.65-billion, up from $6.43-billion in the same quarter last year.
The increase in sales came as food same-store sales rose 2.4 per cent. Pharmacy same-store sales gained 5.2 per cent, with a 6.3 per cent increase in prescription drugs and a 3.0 per cent increase in front-store sales.
On an adjusted basis, Metro says it earned $1.35 per diluted share in its latest quarter, unchanged from its adjusted result a year earlier.
“We recorded solid comparable sales growth in the third quarter, on top of a very strong quarter last year, reflecting effective merchandising and good execution in our food and pharmacy banners,” Metro chief executive Eric La Fleche said in statement.
Metro warned earlier this year that it would face significant headwinds in its 2024 financial year related to its transition to new distribution centres in Terrebonne, Que., and Toronto.
“Our new automated fresh and frozen facility in Terrebonne is now fully operational with productivity levels ramping up in line with our plans, and the transfer to the last phase of our automated fresh facility in Toronto has begun,” Mr. La Fleche said.
In a research note, Desjardins Securities analyst Chris Li said: “MRU reported adjusted EPS of $1.35, in line with our $1.35 and consensus of $1.34. We believe the key positive from the results was solid food SSSG of 2.4 per cent (vs our 1.5 per cent and ahead of L’s [Loblaw’s] 0.2 per cent) despite a very tough year-ago comp of 9.4 per cent and increasing competitive intensity. Internal inflation was slightly below food-at-home CPI of 1.1 per cent, implying solid ex-inflation growth of 1.4 per cent (vs our 0.3 per cent). Pharmacy SSSG [same-store sales growth] was also strong at 5.2 per cent (vs our 3.9 per cent), comprised of 6.3 per cent prescription drugs (vs our 5.0 per cent) and 3.0-per-cent front-store (vs our 2.0 per cent). Results also reflected good margin and expense control. Gross margin was stable vs last year, while SG&A expenses were also largely stable vs last year when excluding new automated DC costs. Supply chain modernization is on track, with the transition to the new automated Terrebonne DC (fresh and frozen products) completed and the recent launch of the final phase of the automated fresh distribution centre in Toronto. After three quarters, MRU is on track to achieve its FY24 guidance of EPS to be flat to down $0.10.”
With files from staff and wires