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https://www.marketwatch.com/story/apple-buys-a-lot-of-stock-high-then-stops-buying-low-2019-01-31 | Apple buys a lot of stock high, then stops buying low | Referenced Symbols ; AAPL. -0.59% ; LITE. +2.48% ; QRVO. +0.11% ; AMSSY.
-3.75% ; AMS. +0.50%. | Feb 2, 2019 | MarketWatch | Apple Inc. remained aggressive in buying back its stock when momentum was strong, and prices held above the $200 mark, but when the going got tough for investors, Apple was nowhere to be found.
In a filing with the Securities and Exchange Commission, the technology giant disclosed that it spent $8.24 billion repurchasing 38,024,000 shares during its fiscal first quarter ended Dec. 29, at what amounted to a weighted average price of $216.61.
That compares with the $19.44 billion Apple spent to buy back 92,463,000 shares, at a weighted average price of $210.32, during the sequential September quarter.
Apple
AAPL,
What might disappoint some investors, who may have been banking on continued large share buybacks for support, is the last close above $200 for Apple’s stock was Nov. 9.
On Nov. 12, the stock tumbled 5%, after Lumentum Holdings Inc.
LITE,
Apple’s stock continued to slide the rest of November, as a number of other Apple suppliers, such as Qorvo Inc.
QRVO,
Then from Dec. 2 to Dec. 29, when stock tumbled 12% during the month, and closed at a 17-month low of $146.83 on Dec. 24, there were zero shares repurchased.
Since then, the stock closed at a fresh 21-month low of $142.19 on Jan. 3, after Apple cut its holiday sales forecast, before recovering.
On the post-earnings conference call with analysts after Tuesday’s close, Morgan Stanley analyst Katy Huberty asked if the “weaker quarter” was one of the reasons the company bought back so many fewer shares during the December quarter.
Chief Financial Officer Luca Maestri responded by saying Apple always strives to execute share repurchases “in an efficient, effective, I would say disciplined manner,” taking into account overall market conditions, according to a transcript provided by FactSet. “So that’s what we did during the course of the December quarter.”
Does that mean Maestri believed Apple was being “effective” and “disciplined” by buying high, and not buying low?
Although the stock has run up 17% from its Jan. 3 closing low, helped by an upbeat earnings report, it was still 23% below the price Apple paid last quarter. That implies those shares would now be worth nearly $2 billion less. Read a recap of the live blog of Apple’s earnings call.
Including the shares repurchased the previous quarter, Apple bought 130,487,000 shares at a weighted average price of $212.15, which would be worth about $6 billion less at current prices.
Apple stock has lost 0.8% over the past 12 months, while the Nasdaq Composite Index
COMP, | AAPL | 185.55 |
https://seekingalpha.com/article/4237892-apple-is-market-big-enough | Apple: Is Any Market Big Enough? (NASDAQ:AAPL) | When Apple (NASDAQ:AAPL) hit the $1 trillion level at the end of 2018, I
showed my skepticism toward a few of my colleagues and recommended to
either hedge... | Feb 4, 2019 | Seeking Alpha | Apple: Is Any Market Big Enough?
Summary
- Having $240 billion in cash doesn't mean that they can turn that money into profitable growth.
- A quick view of Apple's business segments and their fundamentals show that they lost some of their premium appeal over the years.
- Let us talk about two scenarios, translate one of them into numbers and analyze the value per share depending on the assumptions we made.
Introduction
When Apple (NASDAQ:AAPL) hit the $1 trillion level at the end of 2018, I showed my skepticism toward a few of my colleagues and recommended to either hedge their investment by buying an appropriate short or by taking in some of their profits. I based my skepticism on a historical high P/E-ratio, diverging top-line and bottom-line growth, and the recent flood of new premium smartphone and laptop devices.
Source: www.news.com.au
Since the peak in 2018 Apple's share price plummeted to approximately $750 billion. The main concern that investors, me including, have is that Apple has been unable to diversify its business sufficiently and there's no counterbalance to their iPhone segment. Apple's valuation metrics don't look bad in a historical comparison, but investors also should keep an eye on their overall business performance.
In this article, we will critically examine two scenarios of how Apple's business will continue to develop depending on the actions they are going to take. The first scenario assumes stagnating product sales and fast accelerating service revenue of 20% YoY and how it will influence revenue growth and share price. The second scenario analyzes an opportunity Apple currently has but is not fully exploiting.
Apple's Business Segments
The following section is a quick summary of Apple's business segments and their influence on top-line growth. For experienced Apple investors, I would recommend jumping to the "Fundamental Analysis."
Source: Apple Annual Report 2011-2018
In the last seven years, Apple's main growth engine has been the iPhone as one can see in the graph above. iPhone sales increased drastically from $45 billion in 2011 to $165 billion in 2018 - that's 20% YoY growth! The second biggest business segment is "Services" with sales of nearly $40 billion in 2018.
In 2018 the dependency of Apple's growth to iPhone sales was 67%. For 2017, 2016, and 2015 the dependencies were 28%, 63%, and 91%, respectively. For the years before 2015, the dependency was only between 50% and 55%. The trend over the last seven years has been that iPhone sales contribution to overall growth increased from 50% in 2012 to 67% in 2018.
Source: Apple Annual Reports 2011-2018
The unit sales strengthen our observation. iPhone unit sales increased from 70 million in 2011 to approximately 220 million in 2018. iPad unit sales increased slightly from 2011 and Mac sales stayed pretty much flat. The graph of the iPhone unit sales looks like it reached saturation in 2017/2018 and I can think of a few reasons that iPhone sales will stagnate or even decrease in the next few years.
Fundamental Analysis
We will analyze Apple's numbers and take a look at key ratios and how they evolved over the last 5-7 years.
Source: Apple Annual Report 2012-2018
Next, to the absolute sales number, we have to look at the profitability ratios.
Source: Apple Annual Reports 2012-2018
Revenue increased with a CAGR of 7.85%, but Apple's margins weakened over the last few years. The increase of Apple's net margin in 2018 came from the tax reduction and did not result from improved operating performance.
Apple was able to increase their operating margin from about 10% in 2006 to approximately 35% in mid 2012, but from that peak in 2012, the operating margin has been decreasing to a current level of 26.7%.
Source: Apple Annual Reports
Apple is less and less able to provide a good return on their increasing assets. Assets consist of inventories, PP&E, and other non-current assets. The compounded annual growth rates of their PP&E is 16% while their compounded annual growth rate of their net income is only 5.21% in the same time frame. Return on asset (RoA) decreased from 125% in 2013 to 90% in 2018. RoA shows that even if Apple is investing in their business, the return that they can get on those assets is decreasing with time.
Source: Apple Annual Reports and Author's Calculations
The current ratio tells us if a company can pay off its short-term obligations and in the case of Apple that should be no problem. The interesting point is that the current ratio decreased over the last seven years, which means that their liabilities increased faster than their assets. Apple's total liabilities increased with 21% CAGR and their total assets increased by 10% CAGR. In the time of ultra-low interest rates, it makes sense to finance their business with cheap long-term debt instead of new equity.
This finding translates into their return on equity and gearing ratio. Apple returned $238 billion in the last six years to shareholders by buying back their common stock. In the same time frame, they paid $29 billion in the form of dividends to their shareholders. The gearing ratio (financial leverage) increased from 13% in 2013 to 107% in 2018. Their emphasis to finance their business with debt has diluted their return on equity, which rose from 30% in 2013 to 56% in 2018.
Source: Apple Annual Report
Apple reduced outstanding shares by nearly 24% in the last seven years, which is quite impressive considering that they are one of the most valuable companies in the world. In the same time frame, Microsoft (MSFT) only bought back 8.4% of shares. Buying back tremendous amounts of shares can be explained in various ways. From doing shareholders a favor because the business is running great to having no practical means to expand the business or inflating its valuation metrics to boost the share price.
Scenario Analysis
Before we get to the different scenarios let us sum up all the things we learned so far from our observations of Apple's business:
- iPhone sales make up 63% of total revenue.
- Services correspond with iPhone sales and can be only partially accounted for as an independent business segment.
- Sales of Apple's Mac and iPad stagnated or increased only minimally over the last seven years, contributing to only 17% of Apple's revenue in 2018.
- Apple has not been able to diversify its business away from the iPhone.
- Strong competition in the premium smartphone market requires Apple to increase marketing and sales efforts.
- Technological advances in smartphones have no substantial effect on daily smartphone usage anymore.
- Strong competition in the premium laptop segment with a comparable build and hardware quality.
- Apple is building its service segment with the possible intentions to grab a considerable market share in the content delivery industry or healthcare industry.
- Apple's HomeKit business contains their entry to the IoT market and their expertise in user experience, and device connectivity may be their lever to grab a substantial market share.
Scenario 1 - iPhone business stagnates - Service business increases 20% YoY
Let us get to our first scenario where we assume that iPhone sales will continue to stagnate while service revenue will increase 20% YoY for the next five years.
Source: Authors Calculations
If service revenue increases and hardware revenue decreases, I will tilt the operating margins for the estimated years in favor of Apple and use an operating margin of 28.5%, which is slightly above the five-year average.
Source: Author's Calculations
These are our numbers for the projected five-year time frame. The revenue growth rate is increasing every year because we used 20% YoY growth of service revenues. The influence of services in the first three years is well below 4% on total revenue and only after the fifth year service revenue will improve total revenue by a bit over 5%. Using five-year averages to calculate the change in working capital and adjustments in non-cash charges, we get our unlevered free cash flow.
Source: Author's Calculations
Now, all that's left for our first scenario are market capitalization, weighted average cost of capital, and the EBITDA-multiple.
Source: Author's Calculations
Using the terminal EBITDA multiple-method and some variations in the WACC and five different multiples, we can create an array of possible values for our Apple shares:
The results of the Scenario 1 analysis are sobering, with a current value per share of $166 there's minimal upside potential calculated into the shares. We used a very favorable outcome for Apple's service revenue with 20% YoY growth while the Apple product segment is just stagnating. To me, these two segments correlate, and Apple won't be able to accomplish a YoY of 20% with stagnating or deteriorating product sales.
Scenario 2 - Apple in the IoT business
After reading through Apple news and analysis all around the company there seem to be a lot of theories about the next "big thing" that Apple will capture. The main opportunities each one of us will read about when searching for Apple are entertainment or content, healthcare, and developing new pricing strategies in emerging markets to capture market share. In the second scenario, I want to introduce a new possibility for Apple based on the things that they are good at.
Internet of Things. These three words are a few of the most widely discussed words of the past ten years, and they appear daily in the news. Apple's strength lays not only in the great hardware they create but also the software that runs flawlessly on the hardware, the device interconnectivity, and ease of use.
An Example:
I recently switched from a Mac back to a Windows-PC, and I immediately realized that even if the hardware is 10 times better, the whole experience on the Windows machine is not as smooth as on the Mac. Just the experience of scrolling in my Google Chrome browser on my Windows machine feels worse than on my old Mac, and that was a 2011 MacBook Air with 4 GB ram. I connected a Microsoft Arc mouse to my Windows Laptop and got quite frustrated because it just doesn't feel and connect as smooth as the Apple Magic mouse that I used on my Mac. Then I wanted to connect some Bluetooth earphones to my laptop and after a while disconnect them from my laptop and reconnect them to my smartphone. This was rather frustrating because my laptop wanted to reconnect to the earphones and I had to turn off the Bluetooth of my laptop.
I think you got my point. I'm not trying to badmouth Windows machines. I'm even using one and still quite happy about the switch from Apple to Windows, based on other reasons. What I wanted to highlight is the specific strength of Apple. Smooth connectivity and user experience. I think that in the next few years this strength of Apple will play a major role for IoT devices and I also believe that Apple can leverage their strength and enter a whole new business segment with their already strong ecosystem.
If Apple starts to leverage their expertise on connectivity and user experience by marketing it stronger to manufacturers and developers they could leverage their strengths, improve their sales in "remote control" products like the iPad, and create a whole new business segment.
Apple already is offering developers an MFi licensing program that enables others to create products that were specially made for iPad, iPhone (that's where the MFi comes from) but I don't see the drive to use this strength and build on top of that. Apple might not be able to leverage this segment well enough to the extent necessary to make an impact on revenue and profitability. Apple can undoubtedly grow their sales, but that's not enough in the long term. To leverage the IoT business segment they have to intelligently open up their ecosystem and invest into the right places with the right people.
Conclusion
A lot of times, people don't know what they want until you show it to them.
- Steve Jobs -
I like this quote because it's one of the pillars on which Steve Jobs built the success of Apple. I recently read a lot of articles that explain how Apple should go with the flow, invest into growth like content delivery or the healthcare industry or change pricing to capture emerging markets. But that's not Apple. The founders of Apple created a culture that does not need to go with the flow. They know that it takes time until customers appreciate the simple things and I think that they should continue to build on that culture.
In the future, I don't think that we will use smartphones like they are today but shift to a combination of wearables like the Apple Watch together with earphones like the AirPods for our day-to-day use. I think Apple is well-positioned to become a major provider for those wearables, but they have to put more emphasis on that product line and Siri to make it work, more natural, and easy to use.
Apple, at its current valuation and its current business model, is not a buy. On a scale from 0 to 10 where 10 is definite buy recommendation and 0 a definite sell recommendation, I would value Apple's shares as 3.5. I base this valuation on too much dependency on iPhone sales and weak Mac and iPad sales. Apple is missing something, and as long as I don't see a clear idea of what the executives and managers are trying to accomplish I won't feel comfortable to buy shares as they are currently valued.
I always welcome constructive criticism and open discussions. Please feel free to comment or PM me about my calculations and/or sources that I use in my articles.
Author note: Seeking Alpha offers me the opportunity to articulate my thoughts and share them with other investors to get feedback and create constructive discussions about anything I say. I am not a financial advisor, and the information provided in my articles should not be used to make investment choices. Due diligence and/or consultation with your investment adviser should be undertaken before making any financial decisions, as these decisions are an individual's responsibility.
This article was written by
Analyst’s Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.
Seeking Alpha's Disclosure: Past performance is no guarantee of future results. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. Any views or opinions expressed above may not reflect those of Seeking Alpha as a whole. Seeking Alpha is not a licensed securities dealer, broker or US investment adviser or investment bank. Our analysts are third party authors that include both professional investors and individual investors who may not be licensed or certified by any institute or regulatory body.
Comments (52)
2. Apple has not lost their premium appeal. We don’t know how many iPhone units they sold last quarter but several tracking companies have estimated that they sold 66-72 million units last quarter, based on activation figures, despite a slump in China sales due to sociopolitical factors. I suspect that the reason for the 15% decline global iPhone revenues is because they have been selling more old iPhone models (6S, 7, and 8’s), as well as refurbished units. This reduced average sales prices. Apple tried a new sales strategy in Q1’19, to increase market share, by putting older models and refurbished phones on sale. They started by introducing the new and most expensive models (XS, XSM) first, then the less expensive new model (XR), and then the older models (6S, 7, 8), and then the refurbished older models. While this sold more units, it brought in less revenues and competed with new Apple iPhones. I suspect that this was a sales strategy advocated by Angela Ahrendt and one of the reasons why she is leaving Apple.
3. It is not true that Apple is unable to provide an increasing return on their increasing assets. They have been making more and more money every year. However, expectations for Apple to grow at >20% in all its segments are unrealistic. All their new products are growing at annual double digit percentage increase, i.e. Watch, AirPods, Homepods, and Services. Until this past quarter, their iPhone revenues have been growing at 15% or higher rates. I don’t know why everybody is harping about unit sales. Revenue increase is the only thing that matters and Q1’19 was the first year in a decade where Apple has had a revenue decline. A careful look at that decline shows that it was mostly (80%) due to a slump in China sales.The repeated claims that Apple has no room to grow are simply not true. In emerging markets, there is plenty of room for growth. Apple also can take market share from Android me-too smartphones made by Korean and Chinese companies. Apple dominates the watch market, selling more watches than Switzerland, and making more profit from their Watches than all the watch companies combined. Apple’s annual revenue growth rate for wearables exceeds 30%.Times are a’changing, however. The US/China trade war now poses a substantial risk to Apple’s manufacturing strategy. Apple must distribute and reduce that risk. Somehow, Apple dodged the bullets for over a year and was lucky that its products were not subject to tariffs in the United States or China. To be fair, this risk was not apparent 2 years ago. Who could have believed back then that we would have a president that would start a unilateral trade war with all our trading partners around the world, imposing 25% tariffs on steel, electronic, and other products? Until these risks are mitigated, investors are unlikely to push Apple stock prices back to $230 in the next 2 quarters. But eventually Apple do so. When Apple returns, it will do so with vengeance. No company in the world or coming decades will be able to challenge Apple’s pre-eminent position as the most profitable computer, smartphone, smartwatch, earphone, and smart speaker maker. Over the long term, Apple stocks will increase more than the other darlings of Wall Street (Amazon, Google, Facebook).The privacy issues of internet will grow. Apple is the only company to address both privacy and security with powerful combination of hardware and software solutions that no other manufacturer has. The secure enclave is Tim Cook’s major contribution to Apple besides supply chain management. Lack of privacy is in the DNA of Android just as security and privacy is in the DNA of Apple products. A zebra can’t change its stripes, just hide them. The business model of Google and Facebook is invasion of people’s privacy and selling their private information. They don’t know how to do it any other way. Their first goal is to find out information about their clients. To make money, they must sell that information. That information will be misused and abused, not just by Google but by the companies and governments they sell that the information to. I predict that the privacy issue will cause the downfall of Android. Apple is thus a good long term buy. People who have Apple stock should hold them. People who want to buy Apple stock should buy on stock dips. The time to buy was two weeks ago when Apple shares were 142. At 172, the time to buy has passed. The next time to buy is just before the Trump administration announces a US/China trade deal. The next time after that is a court victory over Qualcomm. By the way, Apple won a victory this week because the judge decided that Qualcomm cannot seek damages for Apple activities before the court case.
Thank you for your detailed comment. Let me try to comment appropriately:
1. What I tried to say with the cash pile is that the amount of cash they had and have on hand did not show any major changes. Sure, they are returning a lot to investors and reinvesting tons of money into their company but when you are the size of Apple what should you or can you invest in to increase your $250billion revenue to $300billion or $350 billion? What I tried to stress is that this undertaking is not an easy one.
2. Hmm maybe we just have different opinions on the premium appeal but let me try to explain what I mean. Here I compare Apple directly with their competitors who are creating products that come very close to Apple's workmanship. Sure, there is the software that distinguishes the iPhone from their competitors, and I am not trying to reduce the benefit of their iOS against Android (great trash management, durable, crash resistant...). Apple's competitors recreated a lot of their build quality, and that is visible now.
3. In comparison to the consumer electronics industry, Apple is far ahead when it comes to return on assets. What I tried to emphasize is that their return on assets is decreasing which is visible in the graph provided and an indication that they continuous investments into their business are not as fruitful as in the past. I agree to a few of your other comments like Apple's emphasis on privacy and that their business model is about great products and not the data of their customers. I think that will a key changer in the future when people become more aware of their personal data.
I would buy their stock again if I see a good entry point because if anything, their stock will at least cover inflation and grant the investor security in their portfolio and continue to grow at a modest rate.
All streaming services offer everything, I see little differentiation between the likes of Spotify, Amazon and Apple Music, this will limit margins and moat for Apple. - Video: Apple will enter this in CY2019 in a major revamp as we all know (add own content). However, the long-term economics of NFLX show that this is expensive and may not bring the margins Apple shareholders are accustomed too - also, Apple's services are not as device-agnostic as those of NFLX, this will limit growth beyond the Apple eco-system.- Gaming. Apple could launch a streaming gaming service (as Sony and others did years ago), but once again the competition is already there...
I can increase the margins for the 4th and 5th year and update the DCF analysis. I would post the results here in the results if you are interested.
If desired I can increase the margins for those years and update the projected share price value here in the comments.
2. Borrowing to fund share buybacks (that are accretive to EPS), because their was no foreign money repatriation conclusion yet.
3. They wanted to reward shareholders and buy the stock back cheap, both of which they did.There is no Issue having $100 Billion in debt, when you also make $55-60 Billion per year in net profit, and $230 Billion in cash. Their debt shouldn't be mischaracterized. | AAPL | 185.55 |
https://www.foxbusiness.com/technology/microsoft-fends-off-apple-remains-most-valuable-us-company | Microsoft fends off Apple, remains most valuable US company | MICROSOFT CORP. 333.56, -4.49, -1.33%. AAPL, APPLE INC. 183.96, -1.05,
-0.57%. AMZN, AMAZON... | Feb 4, 2019 | Fox Business | Microsoft fends off Apple, remains most valuable US company
Microsoft retained its title as the most valuable publicly traded U.S. company on Monday despite a surge in Apple shares that briefly saw the iPhone maker overtake its tech rival during the trading session.
|Ticker||Security||Last||Change||Change %|
|MSFT||MICROSOFT CORP.||335.01||-4.70||-1.38%|
|AAPL||APPLE INC.||186.68||-0.32||-0.17%|
|AMZN||AMAZON.COM INC.||129.27||-0.88||-0.68%|
|GOOGL||ALPHABET INC.||122.34||-0.81||-0.66%|
|BRK.B||BERKSHIRE HATHAWAY INC.||335.33||-1.61||-0.48%|
Microsoft closed with a market capitalization of $811.3 billion after shares rose nearly 3 percent in trading on Monday, according to FactSet data. Apple finished the day in second place with a valuation of $807.5 billion.
Apple shares are up more than 10 percent since last week, when the company reported first-quarter results that were stronger than Wall Street expected. The company has been under pressure in recent months after it warned that revenue would fall short of projections amid slowing demand for iPhones and economic factors in emerging markets, especially China. Apple briefly overtook Microsoft before giving back the lead.
E-commerce giant Amazon closed as Wall Street’s third-most valuable company, with a market cap of $802.3 billion. Shares have fallen in recent days after Amazon provided soft first-quarter revenue guidance, even as the company reported more than $200 billion in revenue in fiscal 2018.
Google parent Alphabet, which reported earnings on Monday, ranked fourth with a valuation of $790.8 billion. Warren Buffett’s Berkshire Hathaway rounded out the top five with a $512.9 billion valuation for its Class B stock.
CLICK HERE TO GET THE FOX BUSINESS APP
Microsoft, Apple and Amazon have battled for the top spot in recent months amid overall pressure on tech stocks. U.S. equities markets were up slightly in trading Monday. | AAPL | 185.55 |
https://wccftech.com/softbank-bullish-on-china-considering-1-5-billion-investment-in-guazi/ | SoftBank Bullish on China – Considering $1.5 Billion Investment in Guazi | The slowing Chinese economy has been reported by several companies as being
the cause of slashed earnings targets with both Apple (covered here
NASDAQ:AAPL)... | Feb 2, 2019 | Wccftech | This is not investment advice. The author has no position in any of the stocks mentioned. Wccftech.com has a disclosure and ethics policy.
Although there are rumblings that the global economy may be on the brink of starting to struggle, led by China – US trade war, US government shutdown, slow Chinese economic growth and Brexit among other themes, Softbank (TYO:9984) continues looking for new tech companies to invest in at pace with Chinese used car trading website Guazi.com currently the target of its affections.
The slowing Chinese economy has been reported by several companies as being the cause of slashed earnings targets with both Apple (covered here NASDAQ:AAPL) and NVIDIA (covered here NASDAQ:NVDA) feeling the brunt of the Chinese slowdown this quarter but there do seem to be a few drivers behind SoftBank’s continued interest in Chinese technology companies.
First up, a “slowdown” in Chinese growth now has the country’s GDP growing at an annualised 6.5%, still significantly faster than most western nations. Granted, these are official figures which are doubtless massaged somewhat but the overall trend is still significantly positive, albeit shrinking (China was up around 10%/year until 2012 and since then has been on a trajectory from 8% down to the current 6.5%). The Chinese almost 1.4 billion population still has significant growth left to give with GDP per capita at a little under $9,000/year).
Secondly, there are (admittedly mixed) messages of positivity emanating from both Beijing and Washington D.C with regards to ongoing negotiations to end the trade dispute before the more punitive 25% tariffs by the US kick in on the 1st of March, which would inevitably lead to more damage to prospects for renewed economic growth should they come about.
Third, much of China is still without automotive transportation. 2018 estimates put the number of cars in the country at approximately 240 million. Given that about 65% of the population is between 16 and 60 that means that a staggering 650 million people of driving age don’t have a car (rough number given that driving age is 18). Whatever way you cut it, that’s one hell of a second hand market that cars will be filtering down through in the coming decades.
Couple that with the declining new car sales numbers of the world’s number one car market and it makes for tantalising reading for SoftBank. Chinese used car sales are continuing to increase with an 11.5% jump in 2018 from 2017. Additional Chinese governmental incentives to both loosen regulatory restrictions on selling used cars as well as targeted subsidies to boost rural sales will also help.
Guazi.com – SoftBank Sets the Scene
According to the usual “people familiar with the matter”, SoftBank has also been in talks with Guazi competitor Renrenche which is funded in part by Chinese Uber equivalent Didi Chuxing. Given that Softbank owns a stake in Didi, it must have seen something it didn’t like in Renrenche for it to turn its back on the firm and pursue Guazi. It’s also interesting to note that SoftBank’s Chinese competitor (in some ways) Tencent (HKG:0700) currently has a stake in both Guazi and Renrenche.
The talks suggest that the $1.5 billion boost to Guazi would value the firm at approximately $8.5 billion, a significant boost on the $6.6 billion it was valued at during it fund raise just a few short months ago in November. SoftBank still has its ambitions of course and a sizeable coffer with which to pursue long term investments. Warren Buffett’s preferred holding period of “forever” is a useful perspective to look at though when dealing with the kinds of investments that SoftBank is making so short term market hits due to economic cycle and other events are less likely to worry them. With new car sales in China falling, the used car market will mature and given the commission charged by Guazi to sellers, SoftBank appears to think that’s where there is a lot of money to be made as a hedge against its investments in automakers.
Comments | AAPL | 185.55 |
https://appleinsider.com/articles/19/02/01/apple-removes-siri-team-lead-as-part-of-ai-strategy-shift | Apple removes Siri team lead as part of AI strategy shift | AAPL: 187 ( +3.04 ). Toggle navigation Close Nav. AppleInsider Logo · News
· How-Tos. Apple A-Z. AirPods · Apple TV · Apple Watch · HomePod · iPad... | Feb 1, 2019 | AppleInsider | Apple removes Siri team lead as part of AI strategy shift
Apple executive Bill Stasior, who has led the Siri team since joining the company in 2012, has been removed as head of the project in a sweeping strategy shift favoring long-term research over incremental updates, according to a report on Friday.
Citing people familiar with the matter, The Information reports Stasior is no longer in charge of Apple's virtual assistant team, though the executive is still employed at the company. In what capacity Stasior now works is unclear.
Apple SVP of machine learning and AI John Giannendrea reportedly made the decision in an attempt to shift the Siri program toward research and away from minor upgrades typically pushed out in annual releases. Giannandrea is anticipated to start a search for a new head of Siri, the report said, though a timeline for replacement is unknown.
Hired by former Apple executive Scott Forstall to run point on Siri, Stasior was previously attached to Amazon's A9 search arm. During his tenure, Stasior had to manage not only the development of a premiere consumer AI product, but infighting within his own ranks as the project began to focus more intently on search capabilities.
Siri was at one point the focus of late Apple CEO Steve Jobs who, along with Forstall, envisioned a true conversational AI not restricted to web searches and device controls, but something close to human interaction. That vision waned with Jobs' passing and Forstall's ouster.
Stasior's removal as head of Siri comes at a critical point in the voice-enabled assistant's timeline. The first AI assistant to see wide adoption thanks to its inclusion in 2011's iPhone 4S, Siri now sees stiff competition from the likes of Amazon and Google, both of which found great success in building their respective technologies into smart speakers and home appliances. Apple's own foray into the smart speaker space, HomePod, launched to mixed reviews, many of which dinged the device for Siri's comparatively limited feature set.
Apple is now looking to Giannandrea in hopes of pulling ahead in the AI space.
Hired early last year, Giannandrea previously worked on artificial intelligence projects at Google. In December, he was promoted to SVP and put in charge of Apple's AI and Machine Learning programs, including Core ML and Siri.
Apple saw a number of high profile exits under Giannandrea, including the departure Tom Gruber, the last of Siri's co-founders to leave Cupertino. Vipul Ved Prakash, who served as Apple's search lead after his startup Topsy was acquired in 2013, left at around the same time that Gruber retired. | AAPL | 185.55 |
https://seekingalpha.com/article/4255729-apple-think-different-in-terms-of-valuation | Apple: Think Different... In Terms Of Valuation (NASDAQ:AAPL) | Apple: Think Different... In Terms Of Valuation. Apr. 22, 2019 12:54 PM
ETApple Inc. (AAPL)45 Comments 10 Likes. Oleh Kombaiev profile picture. | Apr 22, 2019 | Seeking Alpha | Apple: Think Different... In Terms Of Valuation
Summary
- Revenue is the key driver for Apple’s capitalization growth.
- The deceleration phase has clearly occurred in the life cycle of Apple.
- Depending on the life cycle phase, investors tend to value the company in different ways. So, this characteristic should be used for valuation.
What do you pay attention to first of all when you see the figures of Apple's (NASDAQ:AAPL) or any other company's quarterly reports? Certainly, to the revenue. And then, you probably calculate how the revenue has changed relative to the corresponding quarter a year earlier. In other words, you find out the revenue growth rate.
But, let's look at the revenue dynamics in a different way. And, for this, we are going to calculate not just the rate of its change but also the rate of its change, or simply speaking, acceleration. To do this, let's find the difference between the annual revenue growth rate in this quarter and the revenue growth rate in the quarter a year earlier:
The resulting graph clearly describes the acceleration and deceleration phases in the life cycle of Apple. I also want to note that, judging by the results of the last quarter and forecasts for the next three quarters, the deceleration phase has clearly occurred.
It is logical to assume that, depending on the life cycle phase, investors tend to value the company in different ways. So, this characteristic should be used for valuation.
And now, we'll do the following... Based on the history of the last 10 years, let's build a statistical model that forecasts Apple's capitalization in terms of (1) absolute revenue and (2) acceleration. I do not ask to regard this model as an analogue of the "crystal ball". Treat it as a kind of smart average.
Also note that the model forecasts Apple's capitalization, not share price. Therefore, the result of modeling is not affected by Apple's buyback activity.
Here are the key parameters of the model:
You have to admit that all key model quality assessments are high: R2 = 0.86 and p-value<0.05.
And, here, the model itself:
So, at a glance, the model performs well as a smart average and Apple's current capitalization is rated as overvalued. But, for more clarity, let's look at a few more graphs.
Here is the distribution of deviations of Apple's actual capitalization from the forecasted one:
As we can see, Apple's current capitalization deviates from the balanced state less than the standard deviation, so there is no critical overvaluation.
But now, we'll add Apple's revenue forecast for the next three quarters to the model:
In this case, the balanced level of the company's capitalization within the bounds of the model will drop to $800 bn by the end of the year, which will exceed the border of the standard deviation.
I also want to note one more detail. Considering the history of the deviation of the actual capitalization from the forecasted one, there stands out the fact that during the deceleration growth phase of the revenue growth, the actual capitalization was below the forecasted level. As far as the current deceleration phase is concerned, this rule is not executed for the time being. But how long???
My conclusions
(1) Apple's profitability has not changed considerably for a long time, and therefore, revenue essentially determines all key financial results, which means it is a key driver.
(2) Apple's revenue has entered a slowdown phase ‒ this is an objective fact that cannot be denied and new Apple Services will not have time to influence this in the near future.
(3) Apple's capitalization has no fundamental potential for growth in the offing of the current year.
This article was written by
Analyst’s Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.
Seeking Alpha's Disclosure: Past performance is no guarantee of future results. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. Any views or opinions expressed above may not reflect those of Seeking Alpha as a whole. Seeking Alpha is not a licensed securities dealer, broker or US investment adviser or investment bank. Our analysts are third party authors that include both professional investors and individual investors who may not be licensed or certified by any institute or regulatory body.
Comments (45)
Of course in this era when everybody with an internet connection thinks they know it all and are locked into a hugbox - well they don't want to hear anybody that contradicts their views or they start seeing conspiracies everywhere.
So lets not pretend they are any better than mistaken experts.
Surprisingly, within ten minutes I was talking to a sales person and some had a new iPad Pro 11 in my hands.
buy the new 5G when it comes out after the bugs are found.
They're losing market share...
They're not growing anymore...Stock and yearly revenue keeps moving up.They've now produced an EKG watch that will continue to grow massively and pretty soon their AR glasses are going to make everyone forget about folding phones all together. But in 5 years from now, people will still be saying the same stuff.
What do you make of that?...signs of plateau phase in the life cycle of Apple.
like Apple so much ! | AAPL | 185.55 |
https://www.fool.com/investing/2019/04/22/3-dividend-stocks-that-should-pay-you-the-rest-of.aspx | 3 Dividend Stocks That Should Pay You the Rest of Your Life | We asked three of our contributors which stocks they think will be the next
century's Dividend Aristocrats, and General Mills (GIS -0.09%), Apple
(AAPL... | Apr 22, 2019 | The Motley Fool | A handful of stocks have paid a dividend for 100 years or more, and those are well into Dividend Aristocrat status -- a title any dividend company would love to have. But the next 50 or 100 years may be dominated by a new generation of aristocrats, and previous ones may not be where investors want to look for stable dividends.
We asked three of our contributors which stocks they think will be the next century's Dividend Aristocrats, and General Mills (GIS 0.03%), Apple (AAPL -0.17%), and Microsoft (MSFT -1.38%) made the top of the list. Two tech stocks, in particular, may sound surprising until we dig deeper into the reason tech is so attractive right now.
A classic packaged-foods play
Leo Sun (General Mills): General Mills, the packaged-foods giant that produces Cheerios, Yoplait, and Haagen-Dazs, has raised its dividend annually for 15 straight years. It spent just 55% of its free cash flow on that dividend over the past 12 months -- which gives it plenty of room for future increases -- and it currently pays a forward yield of 3.8%.
General Mills is a slow-growth company and reported nearly flat organic sales growth over the past year. Many of its classic brands struggled with softer sales as consumers pivoted toward healthier foods.
However, General Mills has offset those declines with three main strategies: acquisitions (including organic-food maker Annie's and premium pet-food maker Blue Buffalo), new variations of classic brands (including Go-Gurt and Yoplait Whips), and price increases. Acquisitions boosted its sales growth as its organic growth stalled out, and price increases offset its slowdown in unit sales.
General Mills' decision to raise prices boosted its gross margin in recent quarters, and its operating margin expanded as it cut costs. By comparison, Kraft Heinz (KHC -0.44%), which faces similar headwinds, slashed its prices to boost sales -- a move that crushed its margins last quarter.
For fiscal 2019, which ends on May 27, General Mills anticipates flat to 1% organic sales growth, 9%-10% constant currency sales growth (fueled by its purchase of Blue Buffalo), and flat to 1% adjusted EPS growth on a constant currency basis. Those growth rates are slow -- but General Mills' stock looks cheap at 15 times forward earnings, and its high yield should limit its downside potential.
Tech's new Dividend Aristocrat
Travis Hoium (Apple): Apple is relatively new to paying dividends, but I think it's positioned to be a long-term Dividend Aristocrat. Not only is it one of only a few technology companies with the scale to compete effectively in the global market, but it's also a cash flow machine.
Apple's business today begins with the iPhone, arguably the most profitable product ever launched. The iPhone is not only highly profitable with each sale, but it also marks the starting point of locking customers into the Apple ecosystem of hardware and software products. The App Store, iTunes, iCloud, Apple Music, and other services add value for consumers, but they make it hard to switch to other devices. From there, iPads, Macs, AirPods, and other products become very attractive, deepening the lock Apple has on consumers.
The business Apple has built ends up being a cash flow machine. Apple generated $62 billion of free cash flow, adding to nearly $250 billion of cash already on the balance sheet.
Technology is sure to change over the next few decades, but Apple has the balance sheet and innovative chops to lead the industry forward. With the cash it's bringing in now and the balance sheet strength no company can match, this is a Dividend Aristocrat for years to come.
Don't underestimate the staying power of this technology bellwether
Todd Campbell (Microsoft): The technology titan was late to embrace the shift from traditional PCs to the internet, but it's made up for lost time. The company's revamped its entire suite of products and services to bring them into the 21st century, and that's translating into significant growth and shareholder returns.
Microsoft's shares have risen about 86% in the past two years because of its pivot to cloud-based solutions and a subscription revenue model. The ability to access its productivity tools online from anywhere has resonated with employers, workers, and gamers. As a result, sales have marched steadily higher.
In its most recently reported quarter, productivity and business processes sales increased 13% to $10.1 billion, intelligent cloud revenue climbed 20% to $9.4 billion, and personal computing sales rose by a solid 7%, despite the ongoing slowing of demand for traditional PCs. In all, Microsoft's sales improved 12% year over year to $32.5 billion, its operating income grew 18% to $10.3 billion, and its adjusted net income increased 14% to $8.6 billion.
Those results are impressive for a company this big, but there's reason to believe its financials will get even better. Its fastest-growing solutions include Office 365, with commercial growth of 34%; LinkedIn, which grew revenue 29%; and Azure, which saw sales increase 76% in the quarter from one year ago. Its Xbox Live subscription service saw year-over-year sales increase 31% last quarter, too.
Since demand for access-anywhere software is likely to grow, not shrink, in the future, I think Microsoft could be a great stock to own in forever-style portfolios.
Times have changed
Even five years ago, you may not have thought technology stocks would offer some of the most stable dividends on the market, but that's where we are today. Apple and Microsoft have such large and powerful positions in the economy that it's hard to imagine they'll slip very far at all. That's why they, along with General Mills, are our top dividend stocks for very, very long-term investors. | AAPL | 185.55 |
https://seekingalpha.com/article/4255620-qualcomm-why-success-story-just-begins | Qualcomm: Why The Success Story Just Begins (NASDAQ ... | Qualcomm: Why The Success Story Just Begins. Apr. 22, 2019 3:34 AM
ETQUALCOMM Incorporated (QCOM)AAPL, INTC, NXPI149 Comments 80 Likes. | Apr 22, 2019 | Seeking Alpha | Qualcomm: Why The Success Story Just Begins
Summary
- Founded in 1985 in San Diego, California, Qualcomm is the world's leading chip designer for wireless technologies including 3G, 4G and 5G.
- Now that the license dispute with Apple has been settled, Qualcomm can focus almost entirely on its operating business.
- The 5G generation in mobile communications is currently in the roll-out phase, so that it can be assumed that profits and cash flows will increase in the foreseeable future.
- Qualcomm has a favourable valuation compared to the peer group and is fundamentally undervalued despite the share price rally due to the Apple settlement.
- In addition, there is a pending share buyback program of around $7.8 billion and the dividend of currently over 3%, which also speak for an attractive shareholder value in the future.
The key to making money in stocks is not to get scared out of them. – Peter Lynch
Founded in 1985 in San Diego, California, Qualcomm (NASDAQ:QCOM) is the world's leading chip designer for wireless technologies, including 3G and 4G/LTE. The company also has ambitions to be the leader in 5G.
The emphasis here is on designer, because unlike traditional chip manufacturers such as Intel (INTC) and Samsung (OTCPK:SSNLF) (OTCPK:SSNNF), Qualcomm does not (yet) have its own manufacturing facilities and has its chips produced by contract manufacturers such as Taiwan Semiconductors (TSM), or provides licenses to produce and use its intellectual property in smartphones, tablets and smartwatches, for example (so-called "fabless production model").
As a sign of its technology leadership, companies that manufacture or use chips in their devices in the above-mentioned mobile communications areas are said to be required to obtain a patent license from Qualcomm. So it's no wonder that Qualcomm's customers include global technology leaders and smartphone manufacturers such as Apple (AAPL), Samsung, Huawei, LG, Oppo, Sony (SNE) and Xiaomi (OTCPK:XIACF) (OTCPK:XIACY). Qualcomm speaks in its Annual Report of over 210 companies using Qualcomm technologies in their products and paying royalties to Qualcomm.
In addition, Qualcomm's Snapdragon LTE modem is widely recognized as the most powerful chip in the LTE market. An attempt by Apple in iPhone 7 production to replace Qualcomm chips with Intel chips to solve its dependency on Qualcomm resulted in performance problems for many iPhones. To avoid this performance problem in its LTE-enabled Apple Watch Series 3, Apple fully relied on Qualcomm's Snapdragon chips.
According to a report published last week by the Washington Post, Apple’s hardware executives used phrases like "the best" to describe Qualcomm’s engineering. Another Apple memo characterizes Qualcomm as having a "unique patent share."
Qualcomm's business consists of the three segments QCT (Qualcomm CDMA Technologies), QTL (Qualcomm Technology Licensing) and QSI (Qualcomm Strategic Initiatives). QCT and QTL are the revenue generating segments, while QSI makes strategic investments and can be ignored in this context.
The majority of Qualcomm's revenues are generated from the sale of mobile communications chips (QCT). The majority of the profits are generated by the higher-margin business with patent rights and licenses of Qualcomm's 3G, 4G/LTE and 5G technology (QTL). Depending on the source, QTL revenues account for approximately 3-7% of the wholesale price of a smartphone sold worldwide.
While the QCT segment contributed 76% of revenues in fiscal 2018, the QTL segment accounted for 54% or more than half of pre-tax earnings (EBT) (see following chart).
Qualcomm's segment results in FY 2016-2018. Source: 2018 Annual Report of Form 10-K
Qualcomm faced headwinds in various court cases that have been going on since 2014, alleging that the company abused its monopoly position to inflate prices.
On the one hand, Qualcomm has been exposed to numerous lawsuits with Apple and its suppliers, as well as Huawei, which have suspended royalty payments until the lawsuits are over.
On the other hand, Qualcomm has been fined billions of dollars as a result of various global court orders.
All of these factors have resulted in a decline in Qualcomm's revenues and profits over the past five years, and the share price has come under massive pressure for fear of further revenue declines. Nevertheless, the shareholders were remunerated with a dividend of around five percent during this period.
The last five years of the stock are literally like a roller-coaster ride (see figure below):
Qualcomm's stock chart for the period from April 2014 to April 2019. Source: YCharts.
A short review
Most recently, on May 3, 2018, I published an article about Qualcomm on Seeking Alpha, "Why It's A Bargain Right Now," and presented two scenarios for short-term and long-term investors.
On the one hand, I discussed the long-term prospects in connection with a potential takeover of NXP (NXPI), according to which a leading chip company in the areas of mobile communications technology, the automotive industry, and digital payment solutions will be created.
On the other hand, I spoke about the upside potential of the stock price in the context of an announcement of a tremendous share buyback program in the amount of $20 to $30 billion which would correspond to 27-40% of the market capitalization at that time. At the same time, I discussed the sense and nonsense of this potential share buyback program.
While the NXP acquisition was cancelled due to a delay in the approval process by the Chinese regulatory authorities, the company announced a $30-billion share buyback program on July 25, 2018 (of which $7.8 billion was still pending as of December 31, 2018).
This announcement of the share buyback program catapulted the stock from $59 to $74 within a few days (representing a 25% rise in the share price).
In the course of the general stock market correction, the uncertainties surrounding a trade deal with China and the legal dispute with Apple, the stock bottomed again at around $49 at the end of January 2019.
Furthermore, in my article of May 3, 2018, I added that Qualcomm's management aims to resolve the license disputes with Apple by the end of the year and preferably out of court. In this context, it was also announced that the Qualcomm licensing model was revised. The price cap for calculating royalties was dropped from the original $500 to $400 per device (smartphone manufacturers must provide a given percentage of the device price to Qualcomm).
In this context, I added that the revision of the licensing model should help to resolve the current licensing disputes with Apple and Huawei in a timely manner, and also prevent further license disputes and legal disputes with other Licensees. Therefore, assuming a positive development of the points already outlined, the Qualcomm course should arise from its Sleeping Beauty sleep.
I assumed that the price rises that we have seen during the Broadcom takeover battle have been a little preview of what the actual worth of Qualcomm is.
So what happened recently?
On April 16, 2019, it was announced that Apple and Qualcomm agreed to dismiss all litigation worldwide in a settlement that involves Apple paying Qualcomm. The companies also have reached a six-year license agreement, effective as of April 1, 2019, including a two-year option to extend and a multiyear chipset supply agreement.
As a result of this announcement, Qualcomm's share price exploded again, rising by around 45 percent within a few days (see chart below):
Qualcomm's share price soars following announcement of agreement with Apple. Source: YCharts.
While no information has been provided about the amount of the actual payment, UBS analyst Timothy Arcuri estimates that Apple paid $5 to $6 billion to Qualcomm to settle the global litigation.
In a regulatory filing related to the agreement, Qualcomm reveals it expects incremental EPS of about $2 as product shipments ramp. This expectation is in line with the 2019 guidance announced by Qualcomm in April 2018. As a result, the settlement of the licensing dispute with Apple would have a positive impact of $1.50 to $2.25 on Non-GAAP EPS (see following figure).
Fiscal 2019 EPS guidance. Source: Qualcomm Inc. 2018 Q2 - Results - Earnings Call Slides
At the same time, Intel has announced that it drops 5G smartphone modem business after Qualcomm-Apple truce. Instead, Intel will focus on 4G and 5G modems for PCs, IoT, and other data-centric devices. This should make it obvious that the 5G modems for the iPhones (as well as probably for the iPads and Apple Watches) will be delivered by Qualcomm from 2020. In any case, Qualcomm is considered the leading designer of 5G modems and already has a 5G modem in its portfolio, the so-called Snapdragon X50.
As expected, the settlement of the Apple-Qualcomm dispute resulted in numerous analyst upgrades.
First, Stifel leaves Qualcomm's sidelines for a Buy rating ($100 PT) and says management's $2/share earnings increase projection suggests no or only a slight discount to Qualcomm's licensing fee.
Second, Evercore steps from In-Line to Outperform calling Qualcomm shares "investable" again after the Apple settlement. The firm raises its target from $60 to $90.
Third, JPMorgan (JPM) cites Qualcomm's "strong 5G positioning" in its move from Neutral to Overweight.
I assume that further analysts will follow with bullish comments.
How attractive is Qualcomm's current valuation?
While it is currently difficult to make a valuation based on cash flows without additional guidance from management, the EPS guidance for the fiscal year can be used to make a current valuation compared to the peer group.
As mentioned earlier, Qualcomm management expects earnings per share of $4.47 to $5.22 for fiscal 2019. As the licensing dispute with Huawei is still pending, I take a conservative approach to the valuation basis and expect a GAAP EPS of $5. Based on the closing price of $79.89 from Thursday last week, the P/E ratio would be 16 for fiscal year 2019. Based on the non-GAAP EPS cap of $7.50, the P/E ratio of 10.65 is even lower.
Looking at the peer group valuation, it is noticeable that despite Qualcomm's market leadership and quasi-monopoly position in the 5G sector, the licensing disputes with Apple and Huawei caused it to trade at a discount. For example, Texas Instruments (TXN) (22.04), Taiwan Semiconductor Manufacturing (22.13) and Xilinx (XLNX) (34.88) have a P/E ratio at least 37.5% higher than Qualcomm.
On the other hand, companies such as Intel (INTC) (12.98) and Micron (MU) (6.82) have lower P/E ratios. However, this is not surprising, as Micron produces rather inferior chips with NAND and DRAM in comparison to Qualcomm, and Intel generates its sales predominantly in the PC sector, which is losing more and more importance. In addition, the results of these two companies are influenced by factors such as the slowdown in China and weakening NAND and DRAM demand.
In contrast, the 5G segment is still in the starting stages, so Qualcomm's future earnings do not yet appear to have been included in the current valuation. This could mean, among other things, that the stock is currently attractively priced, despite the recent stock price rally.
The following figure illustrates the peer group valuation.
P/E ratios im Peer Group Vergleich. Source: YCharts.
In order to evaluate how attractively Qualcomm is currently valued, assumptions must first be made. According to Q1 2019 results, management expects a 5% increase in 3G/4G/5G device shipments in 2019. The year 2019 will also be the roll-out year for 5G (see following figure).
Qualcomm's global 3G/4G/5G device shipment estimates. Source: Qualcomm Inc. 2019 Q1 - Results - Earnings Call Slides
If it is now assumed that device shipments will experience acceleration from 2020 and grow by 10%, Qualcomm's results will be affected accordingly. Let's say Qualcomm's results would grow by only 10% per year over the next five years for the sake of simplicity (I assume that Qualcomm's results will be boosted by the 5G rollout and the settlement of the Apple and Huawei dispute, but we need a basis to make a useful valuation with the information available).
I have prepared two valuation models for this scenario. In the first valuation model, earnings per share for the next five years are discounted at 8% and a terminal value is calculated. In this model, no growth is assumed from last year onwards. Since the chip sector is subject to cycles, this approach can make sense. Finally, the fair value is determined on the basis of earnings per share for the next five years and the terminal value.
In the second valuation model, earnings per share for the next five years are also discounted at 8%. In comparison to the first model, however, no terminal value is calculated, but the result of the fifth year is multiplied by the average P/E ratio of the last five years, which according to Morningstar is 19.4 (see red mark in the following figure).
Qualcomm's valuation as of April 19, 2019. Source: Morningstar.
Based on the first valuation method, the fair value is $120.68, which corresponds to an undervaluation of the stock of 51% (see figure below).
Fair value calculation, method I. Source: Author's calculation.
Based on the second valuation method, the fair value is $96.65, which corresponds to an undervaluation of the stock of 21% (see figure below).
Fair value calculation, method II. Source: Author's calculation.
Regardless of which model is used as the valuation basis, it should be noted that Qualcomm has a pending $7.8 billion share buyback program as of December 2018 (see following figure).
Qualcomm's stock repurchases since FY 2003. Source: Qualcomm Inc. 2019 Q1 - Results - Earnings Call Slides.
In addition, Qualcomm had short and long-term debt totaling $16.39 billion as of Q1 2019. In contrast, cash and marketable securities totaled $10.32 billion. If the $5-6 billion proceeds from Apple are added to this, Qualcomm has a net debt-free balance sheet (see following figure).
Qualcomm's key figures as of December 2018. Source: Qualcomm Inc. 2019 Q1 - Results - Earnings Call Slides.
Furthermore, investors are rewarded with a dividend yield of currently 3.10% on Thursday's closing price (most recently increased from $0.54 by 9% to $0.62 per share and quarter). Nevertheless, until two years ago the dividend was increased by double-digit growth rates. Now that the legal dispute with Apple has been settled, I assume that the legal dispute with Huawei will also be resolved in the short term and that Qualcomm will again increase the dividend by double-digit growth rates in the future.
The following chart illustrates Qualcomm's dividend performance since 2009:
Qualcomm's quarterly dividend payments since FY 2009. Source: Qualcomm Inc. 2019 Q1 - Results - Earnings Call Slides.
What additional growth factors could Qualcomm have?
1) The semiconductor sector in general
Nowadays, almost every electronic device contains chips, no matter whether television, smartphone, tablet, smartwatch, automobile or coffee machine. But they are not just simple chips. The technology is now so mature that these devices have to communicate with each other and are becoming increasingly powerful (keyword: "Internet of Things").
In my view, the semiconductor sector is almost a consumer goods market that will grow even faster in the future, driven by developments such as electric cars, autonomous driving, robotics, artificial intelligence and wearables. My assumption is confirmed by an article in the German-language magazine Focus Money, according to which the global semiconductor market will grow by 16.8% to more than 400 billion dollars. The share of semiconductors in electronic devices is expected to rise to a record 28.1% and beyond (Focus Money, Issue No. 43/2017).
An additional boost is coming from emerging markets such as China and India. For example, 41.5% of all semiconductors were installed in China in 2015 (Focus Money, Issue No. 34/2017).
The chart below shows that after the financial crisis broke out in 2007, there was only a small drop in semiconductor sales, but in 2010 there was a strong recovery, confirming my thesis.
Revenues in the semiconductor industry worldwide. Source: taken from Focus Money, Issue No. 43/2017.
2) Broad product range in future-oriented markets
According to Qualcomm management, commercial deployment of the 5G technology is expected to begin in the first half of 2019. 5G is a key technology on the way to the age of the "Internet of Things", such as autonomous driving, "Internet of Things" and the increasing digitalization of areas of life. At the same time, 5G will contribute to the spread of ultra-high definition (4K) video streaming and virtual reality.
It is certainly understandable what immense potential lies behind 5G technology and Qualcomm as the designer and beneficiary of this technology.
A competitive advantage of Qualcomm, in addition to its strong positioning in mobile communications, is its broad product range in future-oriented markets such as augmented reality and virtual reality.
The areas of Virtual Reality and Augmented Reality offer immense potential and represent a huge future market. Qualcomm's new and most powerful chip "Snapdragon 845," unveiled in December 2017, can be used in VR/AR headsets as well as smartphones.
Qualcomm has developed a reference headset for this purpose, which was presented at the Mobile World Congress held in Barcelona from February 26 to March 1, 2018.
The first customers in the AR/VR headset segment are Oculus (a Facebook company) and HTC, which are also among the largest suppliers in this segment.
Thus Qualcomm is represented not only on 5G and Internet of Things, but also in the future markets of Virtual Reality and Augmented Reality.
3) Increasing expansion of mobile communications technologies in emerging markets
Demand for 3G and 4G/LTE is growing, particularly in emerging markets such as China and India. In India, Qualcomm has entered into a cooperation with Reliance Industries Limited, the most valuable Indian company in terms of market capitalization. Mukesh Ambani, CEO of Reliance Industries Limited, has set himself the goal of providing mobile communications throughout India. To this end, in 2016 he launched the telecoms group "Jio" and acquired more than 100 million customers within ten months. Within the next few months, the customer base is expected to grow to 250-300 million customers.
This means that in addition to China, more and more people in India will be turning to smart devices. In addition, the in-house "Jio Phone," launched in September 2017 and designed to be an affordable smartphone for the Indian population, is equipped with Qualcomm's 4G technology, which should have an impact on Qualcomm's revenues in the coming quarters.
India has a population of 1.3 billion. Assuming you equip only half of India's population with smartphones and Qualcomm earns the lower limit of 3% of the retail price on each device at an average retail price of USD 300 per device, this would be an additional $5.85 billion in revenue for Qualcomm. This, in turn, would mean a 25% increase in revenue based on 2018 revenue. This example only applies to smartphones. This calculation does not take into account the fact that more and more smart devices are being equipped with LTE and 5G modems in future. The price of USD 300 is very realistic, even relatively low, since Apple in India, for example, offers refurbished iPhones at this price.
Qualcomm also has a strong presence in the Chinese smartphone market, the largest in the world. The vendors Huawei, Oppo and Vivo, which are competing head-to-head in China with market shares of 19%, 18% and 17%, respectively, closely followed by Xiaomi and Apple, are all Qualcomm customers.
All of these factors represent Qualcomm's technological leadership and "moat" in the current marketplace, while at the same time indicating its likely role in the increasingly digitized and networked world of the future.
4) Potential acquisition of Dutch chip manufacturer NXP Semiconductors
Qualcomm CEO Steve Mollenkopf gave an interview on CNBC after settling the dispute with Apple. He was confronted with the question of whether a potential acquisition of NXP Semiconductors was still in the pipeline, as China would have given the go-ahead for a potential acquisition during negotiations with the US government. Steve Mollenkopf commented: "We're grateful to learn of it, but the time has passed. The clock has run out."
While at first glance it looks as if the CEO has closed the doors, this could also be a negotiation tactic.
In my opinion, Qualcomm could use the money available on the balance sheet and the Apple deal inflows to acquire NXPI. This acquisition could make sense for a number of reasons.
NXPI is one of the largest European chip manufacturers and, with a market share of over 14%, the market leader in the automotive sector for connected and autonomous cars, ahead of the German company Infineon (OTCQX:IFNNF).
Market shares of semiconductor manufacturers in the automotive sector. Source: Statista.
Furthermore, NXPI's Mifare smart card technology is considered as one of the most widely used contactless smart card technologies in the world. According to NXPI, it has sold over 10 billion cards and over 150 million card readers. In terms of market share, NXP ranks second behind Infineon, but ahead of Samsung.
The combination of Qualcomm and NXPI would achieve annual revenues of more than USD 30 billion and a leadership position in markets such as mobile communications, the Internet of Things, security solutions, and the automotive industry. The total volume of these markets is expected to reach USD 138 billion by 2020, providing ample growth potential.
In addition, the NXP acquisition will enable Qualcomm to achieve greater diversification of its revenue sources, reduce its dependence on the smartphone business and even have its own manufacturing facilities. As a result, Qualcomm will be less dependent on individual sectors and will be able to create synergies and reduce costs through in-house production, which may result in higher margins in the QCT business. In this way, profits have further growth potential.
Another key competitive advantage of the NXP acquisition would be that Qualcomm could better protect its technologies and thus its competitive advantage by eliminating contract manufacturers and allowing chips to be manufactured in its own manufacturing facilities.
5) A potential trade deal with China
A potential trade deal with China could give the Qualcomm shares another boost, as 67% of revenues in 2018 were generated with Chinese partners (see chart below).
Regional breakdown of Qualcomm revenues in FY 2018. Source: 2018 Annual Report of Form 10-K
At this point it is worth mentioning that in China the vendors Huawei, Oppo and Vivo deliver a head-to-head race with market shares of 19%, 18% and 17%, respectively, closely followed by Xiaomi and Apple. Excitingly, these companies are all Qualcomm customers.
Furthermore, a trade deal could help Qualcomm and Huawei to settle their license dispute and allow Qualcomm management to focus fully on operations in the future.
This deal could also help Qualcomm better protect its intellectual property in the future and maintain its market leadership in various sectors.
All the above mentioned potential growth factors represent Qualcomm's technological leadership and "moat" in the current environment and at the same time demonstrate its likely role in the increasingly digital and networked world of the future.
Conclusion
Know what you own and why you own it. – Peter Lynch
The largest price gains are often made in a short period of time, as was recently the case with Qualcomm. So it's important to make assumptions and be patient until the assumptions come true. In my opinion, this is one of the key factors for success on the stock market.
The legal dispute with Apple - one of Qualcomm's most prestigious and important customers - has now been resolved, allowing the company to focus fully on operational performance in the future.
The 5G generation in mobile communications is currently in the roll-out phase, so that it can be assumed that profits and cash flows will increase after the second half of 2019. Irrespective of this, Qualcomm continues to have solid fundamentals at the moment.
Further growth potential is offered by its strong positioning in the areas of the Internet of Things and Augmented/ Virtual Reality. The increasing expansion of mobile devices in emerging markets should also boost growth. A potential trade deal between the US and China could drive the stock higher, as currently more than 60% of Qualcomm's revenues come from Chinese partners.
Qualcomm has a favourable valuation compared to the peer group and is fundamentally undervalued by over 20% despite the share price rally due to the Apple settlement.
In addition, there is a pending share buyback program of around $7.8 billion as well as the dividend yield of currently over 3%, which also speak for an attractive shareholder value in the future.
In connection with the dividend, it is worth mentioning that it grew at double-digit rates until two years ago. Now that the legal disputes have been settled and as a result cash flows should increase, it can be assumed that the dividend will again grow at double-digit rates in the future.
This makes Qualcomm interesting not only for value investors, but also for dividend income investors.
Wish you much success with your investments!
This article was written by
Analyst’s Disclosure: I am/we are long QCOM, AAPL. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.
Seeking Alpha's Disclosure: Past performance is no guarantee of future results. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. Any views or opinions expressed above may not reflect those of Seeking Alpha as a whole. Seeking Alpha is not a licensed securities dealer, broker or US investment adviser or investment bank. Our analysts are third party authors that include both professional investors and individual investors who may not be licensed or certified by any institute or regulatory body.
Comments (149)
Not a good news for QCOM. That is why I stay away from QCOM stock, because QCOM don't have much flexible in pricing power if Apple buy Intel's 5G.
Thank you for your comment and the compliment! I have already explained the reasons for my assumption in the article. Nevertheless, I also respect divergent opinions. Best regards,
Güner
thank you for your comment!I could imagine that Apple will release 5G iPhones earlier than expected to push sales due to weakening iPhone sales. Best regards,
Güner
Best regards,
Güner
Sold my shares though at 81,50$
As everyone at once get's bullish after a run up of about 50% it is time to take profit
Best regards,
Güner
Best regards,
Güner
1. FTC off the back
2. Huawei settlement
3. Real constituents of the $2 EPS estimate. If they are not including litigation cost savings and chip savings, that would be awesome.
4. Revised PE estimate likely once the 5G cycle attains critical mass.
5. Likely that many QCOM 5G devices will go with QCOM RF components. So, this is an additional benefit.
6. Re-entry to server chip trials with 5G attach.
7. Fingerprint sensors. The latest Galaxy phones have this. Most likely in the next cycle, other manufactures too will get it.
8. AI/VR/AR investments will slowly start contributing to top line.
9. Automotive segment seems to be steadily growing.
10. 5G could be a super cycle for many device manufacturers in many geographies.I might have missed fee but the message is clear. This is a keeper as of now. Current value is still way underpriced.
Note that Samsung and Huawei developed their own chips and are increasingly making use of this.
Also they will develop their own modems, and as their piece of the smartphone market grows this is a negative for Qualcomm. I think right now with 5-g in the near future (1-2 years till it takes off) the valuation of Qcom is pretty rich compared with competitors(Intel)
Best regards,
Güner
Monday (4/22/2019): Qualcomm Inc. (QCOM) Opened at $79.83, a gap down of -$0.06 from Thursday’s close, and closed Monday at $81.97, up $2.08, or up +2.6 percent. Year to date (ytd), Qualcomm is now UP +28.04 percent. Qualcomm closed above its 50-day Simple Moving Average (sma) of $56.884, and above its 200-day sma of $60.475. Qualcomm’s 50-day sma is in an uptrend, while Qualcomm’s 200-day sma turned up Friday 4/12/2019. Of Special NOTE: As of Monday’s close, Qualcomm is now $22.453 above its 50 day Simple Moving Average (sma) or plus 39.47 percent. For Tuesday's (4/23/2019) DAILY trading:
Qualcomm’s Resistance (r2) is $84.432
Qualcomm’s Resistance (r1) is $83.201
Pivot Point is ............. $81.269
Qualcomm’s Support (s1) is ... $80.038
Qualcomm’s Support (s2) is ... $78.107I compare these performance numbers ... Daily Note: thru Monday (20190422):
(a) Qualcomm’s intraday HIGH was +$0.950 above Resistance (r2 = positive)
(b) Qualcomm’s intraday HIGH was +$1.780 above Resistance (r1 = very positive)
(c) Qualcomm closed +$2.600 above its Pivot Point (very positive)
(d) Qualcomm’s intraday LOW was +$0.797 above Support (s1 = positive)
(e) Qualcomm’s intraday LOW was +$2.147above Support (s2 = very positive) In looking at whether the markets, especially the computer algos, are positive or negative, Bullish or Bearish, on Qualcomm, I look not only at the Qualcomm stats for previous years, but also at the stats for the QQQ ETF (tracking Error to the Nasdaq 100 = 0.07) and the SPY ETF (tracking Error to the S&P 500 = 0.05) of which Qualcomm is a component.
Year to date, on average, Mr. & Ms. Fickle Markets are ‘buying’ into Qualcomm when the intraday LOW is +$0.282 above support (s1) and ‘selling’ when the intraday HIGH gets +$0.308 above Resistance (r1). Qualcomm Sentiment has changed to STRONGLY BULLISH with ‘profit taking’ selling occurring above Resistance (r2). In 2018, on average, Mr. & Ms. Fickle Markets were ‘buying’ into Qualcomm when the intraday LOW was -$0.011 below support (s1) and ‘selling’ when the intraday HIGH was -$0.009 below Resistance (r1). In 2017, on average, , Mr. & Ms. Fickle Markets were ‘buying’ into Qualcomm when the intraday LOW was -$0.013 below support (s1) and ‘selling’ when the intraday HIGH was -$0.016 below Resistance (r1).
Looking at QCOM (ytd) versus the SPY ETF (ytd): Year to date, on average, Mr. & Ms. Fickle Markets are ‘buying’ into SPY when the intraday LOW is $0.327 above support (s1) and ‘selling’ when the intraday HIGH gets +$0.309 above Resistance (r1). QCOM: intraday HIGH gets +$0.308 above Resistance (r1)
SPY: intraday HIGH gets +$0.309 above Resistance (r1) See, … the computer algos are paying attention to the Pivot Point, Supports (s1, s2) and Resistances (r1, r2) to WITHIN a penny on average … as am I. More homework to do ...
Best regards,
Güner
I hope you can cover more tech stocks. good job.
Güner
Best regards,
Güner
Güner
Best regards,
Güner
The 'Daily' Projected lower target thru Friday 4/26/2019: $73.75 The 'Weekly' Projected upper target ( 4 to 6 weeks ): $92.28
The 'Weekly' Projected lower target Weekly ( 4 to 6 weeks ): $68.60Hope this helps :-} | AAPL | 185.55 |
https://appleinsider.com/articles/19/04/21/northern-california-apple-store-thefts-restart-100k-in-iphones-lifted-from-best-buy-more | Northern California Apple Store thefts restart, $100K in iPhones lifted
from Best Buy & more | AAPL: 186.7 ( -0.3 ). Toggle navigation Close Nav. AppleInsider Logo · News
· How-Tos. Apple A-Z. AirPods · Apple TV · Apple Watch · HomePod · iPad... | Apr 21, 2019 | AppleInsider | Northern California Apple Store thefts restart, $100K in iPhones lifted from Best Buy & more
San Francisco Bay Area Apple Store thefts restart, plus iPhone thefts around the world including one in which the thieves came back to ask for the passcode, and another by a man who had gotten out of jail moments earlier — all on the Apple Crime Blotter.
The Apple Store in Palo Alto
The latest in an occasional AppleInsider series, a look at the world of Apple-related crime.
Apple Store thefts return to the Bay Area
The massive ring that carried out dozens of Apple Store thefts throughout California last year was busted in the fall, but that doesn't mean such crimes are a thing of the past. In fact, four such incidents have been reported just at the 4th Street Apple Store in Berkeley in the last week. Each time the thieves, according to CBS San Francisco, came into the store, stole the items, and "used brute force" to grab them.
Also this week, thieves shattered the doors of the Apple Store in Palo Alto in a late-night theft, coming away with nine MacBooks. The thieves, however, dropped two of the computers on their way out the door, per Palo Alto Online.
No jail for Belfast Apple Store thieves
Two students from London who were arrested last year for stealing "thousands of dollars" worth of equipment will not receive jail time. According to the News Letter newspaper, the theft was described by one of their lawyers as a "hare-brained scheme," and they received suspended sentences.
iPhone thieves demand phone's passcode
Three men in Wisconsin are accused of stealing a man's iPhone- and then returning to the scene of the crime to ask for the phone's code. Per The Journal Times, one of the thieves went up to a man, asked what gang he was part of, and then punched him, stealing the contents of his pockets which included an iPhone. Then, they drove back and demanded the password.
The three accused thieves are a 21-year-old and two juveniles. The 21-year-old was charged with both robbery with the use of force and two counts of intentionally contributing to the delinquency of a minor.
Indian officer's phone stolen while he was distracted
Thieves in India used a distraction tactic in order to steal a police officer's iPhone. According to the New Indian Express, the officer was distracted when a man began banging on his door. While he was distracted, an accomplice banged on the opposite window.
While he was distracted by the second man, the first man reached in and grabbed the officer's phone.
Trio took $100,000 in iPhones from Louisiana Best Buy
Three men were arrested last month for stealing over 100 iPhones, valued at over $100,000 from a Best Buy in Baton Rouge, La, and police believe they were also responsible for similar thefts in other states. According to WAFB, the three men were caught on store surveillance stealing the items from a cabinet and filling a trash can with them. The men were arrested at a motel after police ran the license plates for their car; they were found at a motel along with the stolen iPhones.
Similar burglaries were reported in Texas and Alabama, as well as Lake Charles, Louisiana.
Phone store owners arrested for selling stolen iPhones and iPads
The owners of a Michigan cell phone store have been arrested for buying hundreds of stolen Apple products and selling them nationwide. According to Click On Detroit, the owners of Ace Future Wireless bought items that included the 40 iPads that were stolen from a local schools, and they also bought iPhones that were taken from stores.
They were caught after attempting to buy from an undercover officer.
Florida man steals iPhone from car immediately after jail release
A man in Florida made headlines last week when he stole an iPhone and other items from a car- one that was parked immediately outside the jail from which he had been released moments earlier. According to The Daily Mail, the 34-year-old man walked about 20 feet from the Port St. Lucie jail he'd just gotten out of when he began scoping out cars. Police found the iPhone 7 in his pockets, as well as $547 in cash, a debit card and a driver's license that wasn't his.
He was re-arrested and charged with burglary, grand theft and possession of stolen property.
iPhone thief caught taking selfies
In other South Florida iPhone theft news, a man had his iPhone taken from his work truck while getting gas. Per The Palm Beach Post, the owner of the phone began monitoring his iCloud account remotely, and noticed the thief taking selfies and videos.
iPad helps catch men accused of stealing golf clubs
Three men in New Mexico were served with arrest warrants last week after police say they stole golf clubs from a local golf course, according to the Santa Fe New Mexican.
The three men reportedly stole an iPad, and cash, from a restaurant at the golf course. They went to a pawn shop owned by a former manager of the course, while wearing clothes associated with the golf course. The trio ran away when they noticed the owner was suspicious.
The iPad led authorities to their apartment.
Do you have a story about Apple-related crime? Tell us about it here. | AAPL | 185.55 |
https://www.macobserver.com/reviews/quick-look/review-logitech-slim-folio-pro/ | Logitech's Slim Folio Pro is the Backlit Keyboard you Need for ... | Tips How-To AirPods Cool Stuff Found Apple TV+ Apple Watch Series 7 AAPL
Security Privacy · Mac · M1 M1 Pro M1 Max Apple Silicon macOS Ventura
macOS... | Apr 22, 2019 | The Mac Observer | Logitech sent me its new Slim Folio Pro keyboard to review, and after using my iPad exclusively as my main computer for a little over two weeks, here are my thoughts.
[Logitech Announces Slim Folio Pro Keyboard Case]
Specs
- Compatible with iPad Pro 11-inch and iPad Pro 12.9-inch (3rd gen)
- Fixed viewing angles: Type Mode: 58°. View Mode: 10°
- Bluetooth Low Energy connectivity
- Dimensions for 11-inch Slim Folio Pro: Height: 7.68 in (195 mm); Width: 9.96 in (253 mm); Depth: 0.89 in (22.55 mm); Weight: 1.22 lb (552.42 g). Dimensions for 12.9-inch Folio: Height: 9.06 in (230 mm); Width: 11.30 in (287 mm); Depth: 0.88 in (22.46 mm); Weight: 1.56 lb (707.43 g)
- Battery Life: Up to 3 months, based on two hours of typing per day
- USB-C
Slim Folio Pro
I’ll say up front that this is actually my first iPad keyboard case. I can’t compare it to Apple’s Smart Keyboard or other models. For that I recommend Juli Clover’s review at MacRumors.
What I can tell you is that the Slim Folio Pro is a bit bulky, but that’s understandable for one that is backlit. As you can see in my photo, folded up it’s definitely thicker than a MacBook Pro. It also adds considerable weight to the device. It’s a sturdy case though, and I’m not afraid to put it in my backpack with a bunch of other stuff.
In one of my photos, you’ll see that when you close the case, there is a magnetic flap that holds it together. Underneath that flap there is a slot for the Apple Pencil.
Typing on it is great. My fingers are slightly cramped, but I do have an 11-inch iPad Pro, so any keyboard would probably be cramped. The keys have decent travel, and although it took a bit to get used to, I can type as fast as I can using my MacBook Pro.
The function keys at the top of the keyboard are nice. There are 13 keys: Home, Backlit Down/Up, Search, Onscreen keyboard, Previous Track, Play/Pause, Next track, Volume mute, Volume down, Volume up, Lock, Bluetooth connect, Keyboard battery check.
It was a bit difficult to get the iPad into the case at first, and you’ll want to be careful snapping the rubber corners on. The corners are rigid, which makes it hard to press the iPad’s power button and volume up/down keys, especially if I want to take a screenshot.
I wish there were more viewing angles. There is only one for typing. It’s a comfortable angle to use at a desk, but much of the time I’m typing with the iPad in my lap, at which point the angle becomes uncomfortable.
Conclusion
Overall, I’m pleased with the case. Eventually I’m sure I’ll explore other cases, but for my first one the Slim Folio Pro is a great start. Starting at US$119, it’s cheaper than Apple’s Smart Keyboard. And the backlit keys make it possible to type into the night.
It’s only available in a dark, industrial gray, like the Smart Keyboard. I personally like gray but others will probably want more color options.
One thought on “Logitech’s Slim Folio Pro is the Backlit Keyboard you Need for your iPad”
Can’t understand why they didn’t use the smart connector. | AAPL | 185.55 |
https://finance.yahoo.com/news/apple-stock-may-jump-by-as-much-as-530-despite-trumps-trade-war-on-china-162558139.html | Apple stock could jump by as much as 530%, despite Trump's trade war on
China | Apple's (AAPL) stock has formed what traders call a “golden cross” chart
pattern. The formation — typically a bullish signal —happens when a
short-term... | May 17, 2019 | Yahoo Finance | Apple stock could jump by as much as 530%, despite Trump's trade war on China
At least from a technical analysis perspective, Apple’s stock is poised to laugh in the face of President Donald Trump’s raging trade war with China.
Apple’s (AAPL) stock has formed what traders call a “golden cross” chart pattern. The formation — typically a bullish signal —happens when a short-term moving average crosses over a longer term moving average.
One could see that formation below for Apple, compliments of Miller Tabak strategist Matt Maley. It’s interesting that the stock has made this pattern considering the fundamental risk to Apple’s business model from the now heightened U.S.-China trade war.
Maley notes that Apple’s stock has acted very well after its last three golden cross patterns. Actually, the gains that have ensued border on insane — Maley’s research shows gains of 530%, 110% and 130% (see prior rallies below), respectively, over the past decade.
“If things calm down [on the trade front] (which might be a BIG "if"), the upside could be quite bright for this Apple,” Maley says.
Maley isn’t all in on Apple, however. While the stock may be poised to rally, it’s not without greater than normal risk for the tech giant.
“Given the fundamental issues surrounding the stock, investors should keep tight stops on any new long position in Apple, but if history is any guide, it could rally quite a bit from current levels,” Maley adds.
Caution on global behemoth Apple makes sense. Apple not only sources a majority of its components from China, but has made a retail store push in the country. The yawning trade war between the two mega countries could severely raise Apple’s cost of doing business and weaken store traffic and in turn, hit profits.
“The trade war has already undercut U.S. and global growth. Prolonged brinkmanship creates further damage. A major tail risk is that tariffs extend to all Chinese products at the end of June, more than doubling the trade war shock,” cautions BAML strategists.
“I don’t envy Apple’s chief operating officer right now,” remarked Weeden & Co. Chief Global Strategist Michael Purves on Yahoo Finance’s The First Trade.
Brian Sozzi is an editor-at-large and co-host of ‘The First Trade’ at Yahoo Finance. Follow Brian Sozzi him on Twitter @BrianSozzi
Read Sozzi’s latest: | AAPL | 185.55 |
https://9to5mac.com/2019/05/18/boycott-apple-china-movement/ | 'Boycott Apple' movement gains new traction in China as US ... | Companies in China boycotting Apple, reportedly threatening to fire iPhone
users · AAPL issues rare revision to earnings guidance, lowering
expectations due to... | May 18, 2019 | 9to5Mac | While Apple, aside from some accessories, has escaped the effects of the ongoing trade tensions between the United States and China, customers in China are growing increasingly anti-Apple. A new report from BuzzFeed News explores an increase in the “Boycott Apple” in China.
In addition to the trade dispute, President Trump this week also signed an executive order that bans U.S. telecommunication companies from buying foreign equipment that is a potential national security threat. Further, he has also banned Huawei from buying U.S. technology without prior government approval.
According to BuzzFeed News, Chinese consumers have taken to Weibo to express their disdain with Apple during the trade tensions. One user questioned why people were buying iPhones when Huawei technology was equally as capable. Another joked about Huawei’s logo:
“The functions in Huawei are comparable to Apple iPhones or even better. We have such a good smartphone alternative, why are we still using Apple?”
“I think Huawei’s branding is amazing, it chops an apple into eight pieces.”
Another user said they felt “guilty” watching the trade war and plans to switch from their iPhone when they can afford to do so. “I feel guilty watching the trade war. Once I have money I will change my smartphone,” the user wrote via Weibo on their iPhone.
This isn’t the first time that the “Boycott Apple” movement has gained traction in China. In December, a report suggested that companies in China were boycotting Apple and reportedly threatening to fire iPhone users. In such instances, companies were said to be offering employees large subsidies on Huawei products as alternatives.
Additionally, analysts speculated in January that Apple was facing an “informal boycott” from shoppers in China and India as a result of the trade dispute. A drop in China sales was the primary reason for Apple’s major decline in iPhone shipments during the first quarter of 2019, though things did improve during the second quarter.
Read more:
- Apple might be suffering from an ‘informal’ consumer boycott in China, analysts say
- Companies in China boycotting Apple, reportedly threatening to fire iPhone users
- AAPL issues rare revision to earnings guidance, lowering expectations due to ‘fewer iPhone upgrades’ & China struggles
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Comments | AAPL | 185.55 |
https://9to5mac.com/2019/05/20/apple-toshiba-memory/ | Report: Apple to sell back its stake in Toshiba Memory as part ... | AAPL Company. Breaking news from Cupertino. We'll give you t… Author.
Avatar for Benjamin Mayo... | May 20, 2019 | 9to5Mac | In June last year, Toshiba sold its memory division to a four-company consortium that included Apple. However, now, Toshiba is going to buy back the shares it sold off to Apple, Dell, Kingston, and Seagate – as reported by The Wall Street Journal. The companies are expected to collect a tidy profit from their investment.
You may be wondering why the unit wants to buy back its shares only a year after they were sold and split up from the parent company. The initial deal was put in place to prevent a partial takeover from Western Digital, which would have further reduced market competition.
A few months on from the turmoil, Toshiba Memory is looking to refinance and has negotiated $11.8 billion in loans from Japanese banks, as it looks to become publicly listed. This gives it enough capital to buy out the American company shares.
The Journal says the four companies will make a few hundred million dollars in profits from the deal, representing a solid return for an investment that only lasted about 12 months.
All told, Apple’s investment helped to sustain a more competitive memory chip environment — which will ultimately lead to lower supply-chain prices for components used in its product — and will record a decent financial profit on its books.
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Comments | AAPL | 185.55 |
https://finance.yahoo.com/news/mission-bay-san-francisco-192501532.html | San Francisco's tech workers are flocking to this neighborhood | ... the site of at least a dozen luxury condominium buildings sporting
high-end finishes and amenities that appeal to tech workers employed by
Apple (AAPL),... | May 17, 2019 | Yahoo Finance | San Francisco's tech workers are flocking to this neighborhood
San Francisco has notoriously expensive housing, but that hasn’t stopped affluent tech workers from snapping up real estate in the city’s Mission Bay neighborhood.
In more recent years, Mission Bay has become the site of at least a dozen luxury condominium buildings sporting high-end finishes and amenities that appeal to tech workers employed by Apple (AAPL), Facebook (FB), Google (GOOG, GOOGL), Lyft (LYFT), Pinterest (PINS), Square (SQ), Uber (UBER), and other Silicon Valley companies, according to data provided exclusively to Yahoo Finance from real estate firm Compass.
The 303-acre stretch of urban land is also extremely desirable because of upcoming developments, as well as its close proximity to tech companies in the city and I-280 and US-101 — the two most frequently used highways for getting to tech companies in the San Francisco Bay Area’s South Bay, including Apple, Facebook, and Google.
“A lot of tech employees prefer that their homes be in pretty close proximity to their work,” explains Compass big data realtor Deniz Kahramaner of this real estate phenomenon. “Mission Bay is a newer, up-and-coming area that hits that sweet spot for many of them, with a lot of high-end residential constructions located a walk or quick Uber or Lyft ride away from their company headquarters.”
During 2018, at least 89 tech workers purchased homes in Mission Bay, according to Kahramaner — a 134% increase in purchases by tech workers year-over-year — followed by 54 homes purchased in the South Beach neighborhood and 39 homes purchased in South of Market, or SoMa, during the same time period. To be sure, though, one luxury condo in Mission Bay finished in 2018 is responsible for 45 of the 89 units sold in the neighborhood last year.
Amenities, amenities
Matt Fuller, co-founder of Jackson Fuller Real Estate, compares these luxury high-rise buildings and their comprehensive amenities to “vertically-gated communities.”
“Many of these tech workers like ‘turnkey’ homes: properties they can just immediately live in with community-oriented set of amenities where someone else takes care of the maintenance,” explains Fuller. “They can just drag their laptop to a common area and go to work.”
The most popular residential property in the neighborhood? One Mission Bay.
The 350-unit luxury condominium building, which is over 90% occupied, sold 45 units in 2018 to tech workers, according to public filings. It includes a heated outdoor pool and poolside cabanas, private dining rooms, chef’s catering kitchen, library, fitness center and sauna, courtyard lounge and firepits, as well as nearly 16,600 square-feet of retail space. While studios and one-bedroom units are among the units entirely sold out, two-bedrooms remain available, starting at $1.56 million for a 1,173-square-foot, two-bedroom, two-bathroom unit. Available three-bedrooms, meanwhile, start at just over $2 million for a 1,639-square-foot three-bedroom, two-bathroom unit.
Arden, another development in Mission Bay with 267 condos, sold 15 units in 2018, ranging from $1.32 million for a 1,230-square-foot two-bedroom to $2.85 million for a 1,844-square-foot three-bedroom unit, MaxReal realtor Jane Hopkins tells Yahoo Finance. Arden also includes a 75-foot rooftop pool, two-story gym, and recreational lounge with pool table, TVs, and sofas.
Meanwhile, The Madrone, another Mission Bay condominium development with 263 units and amenities comparable to One Mission Bay and Arden, currently lists available units ranging from $1.69 million for a 1,252-square-foot two-bedroom to nearly $3.28 million for a 1,921-square-foot three-bedroom with views of the San Francisco-Oakland Bay Bridge.
A quickly-evolving neighborhood
Since Mission Bay became the focus of a redevelopment project by San Francisco city officials in 1998, the area has transformed from a relatively sparse stretch of land dominated by shipyards, warehouses, and old canneries into a neighborhood with high-end condo buildings, shops, and institutions including the UCSF Benioff Children’s Hospital San Francisco, named for Salesforce CEO Marc Benioff and his wife Lynne, who have pledged over $389 million to UCSF overall since 2005.
This September, Mission Bay will also become the official home of the NBA’s Golden State Warriors, with the opening of the Chase Center, a privately financed, $1 billion, 580,000-square-foot arena with seating capacity for 18,000 people. According to the NBA, the arena’s first game in early October, will mark the first professional basketball game since 1971.
Realtors like Vanguard Properties’ Ronnie Escalante and Skybox Realty’s Paul Hwang expect Mission Bay real estate prices to appreciate significantly after the Chase Center opens.
“With the new Warrior Stadium's arena, a lot of clients are looking to live and invest in a few properties by the Stadium right before it opens,” explains Escalante.
Hwang puts an even more positive spin on Mission Bay’s prospects.
“With UCSF and the Golden State Warriors, all the smart people are coming to Mission Bay,” adds Hwang.
Kahramaner and his data team at Compass reviewed all the public filings of San Francisco escrow closings that occurred in 2017 and 2018. The team excluded escrow filings with identical property buyer names that may have been duplicates. They also excluded filings where the properties were purchased by Limited Liability Companies, or LLCs, that did not disclose the individual identities of the property buyers.
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More from JP: | AAPL | 185.55 |
https://9to5mac.com/2019/05/20/over-the-rainbow/ | Apple accused of 'massive music piracy' by estate of Over The ... | AAPL Company. Breaking news from Cupertino. We'll give you t… Apple Music.
Apple Music... | May 20, 2019 | 9to5Mac | Apple, Amazon, Google, Microsoft and Pandora are all being sued by the estate of Harold Arlen, the composer of Over the Rainbow and many other classic songs.
A 148-page lawsuit accuses the tech companies of being involved in a ‘massive music piracy operation’ …
The Verge reports that the case is based on a claim that the companies are selling pirated versions of both albums and songs written by the composer, and that there does appear to be evidence to support this.
It’s possible to see some of the unauthorized versions cited in the lawsuit in online stores. For example, there are two copies of the album Once Again… by Ethel Ennis available to stream on Apple Music, but the cover of one has been edited to remove the RCA Victor logo.
In another case, we can see a clear price difference between two digital copies of an original cast recording of the musical Jamaica being sold on Amazon. What appears to be an authorized version from the Masterworks Broadway label prices the full album at $9.99 for download, and individual tracks for $1.29, while a seemingly unauthorized copy from Soundtrack Classics lists them for $3.99, and $0.99 respectively. Like the Ethel Ennis album, the RCA Victor logo on the unauthorized cover also appears to have been edited out.
The lawsuit does, however, make a rather less credible: that Apple and the other defendants were not only aware of the piracy, but are motivated to permit it. Per Forbes.
The lawyers for Arlen claim that the online retailers “have had knowledge of their own infringing conduct and that of the many of the pirate label and distributor defendants for several years, and have continued to work with them.” “The more recordings and albums the online defendants make available in their stores and services, the better they are able to attract buyers and subscribers,” they explained.
It’s obvious that none of the companies involved would knowingly allow pirated content in their online stores and streaming services; a claim of wilful infringement simply makes the lawsuit potentially more valuable.
In addition to putting an end to the alleged copyright infringement, the legal representatives of the late songwriter are seeking damages under the federal copyright statute. The total bill for all of the defendants could top $4.5 million.
“Anything less than maximum statutory damage awards would encourage infringement, amount to a slap on the wrist, and reward multibillion and trillion dollar companies that rule the digital music markets for their willful infringement on a grand scale,” the lawyers insisted.
Over the Rainbow is the best-known song referenced, but Arlen composed many others.
While Arlen wrote the music for thirteen shows on the Great White Way, he is perhaps best known for his work in Hollywood. In addition to penning songs for Blues in the Night, Star Spangled Rhythm, and the 1954 remake of A Star is Born, Arlen composed The Wizard of Oz. Its iconic tune “Over the Rainbow” won the Academy Award for Best Original Song in 1939, and was later named the “Song of the Century.”
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Comments | AAPL | 185.55 |
https://www.fool.com/investing/2020/02/04/apple-makes-dent-in-key-market-iphone-11-smash-hit.aspx | Apple Makes a Big Dent in This Key Market as the iPhone 11 ... | Apple (AAPL -0.57%) returned to the top of the global smartphone sales
chart in the fourth quarter of 2019, according to tech-focused market
research firm... | Feb 4, 2020 | The Motley Fool | Apple (AAPL -0.17%) returned to the top of the global smartphone sales chart in the fourth quarter of 2019, according to tech-focused market research firm Canalys. The company shipped 78.4 million iPhone units during the quarter, an increase of 9% over the prior-year period. But more importantly, Apple managed to corner 21.4% of the global smartphone market in the fourth quarter.
This helped Apple score a comfortable lead over second-place Samsung, which had a market share of 19.2% during the quarter. With these results, it can be said that Cupertino's new pricing strategy has helped its latest generation of smartphones regain popularity among customers. And the biggest evidence that the strategy is working wonders for Apple can be gleaned from the company's terrific growth in India -- the world's second-largest smartphone market.
Apple makes a massive comeback in India
According to Canalys, Apple shipped around 925,000 iPhones in India during the fourth quarter of 2019. While that might not be a huge number in the context of worldwide figures, the fact that Apple's shipments in the region jumped 200% year-over-year is significant. India is a price-sensitive market where Apple has historically failed to make a dent because of its premium pricing.
But things have changed with the iPhone 11. A lower price point, bigger battery, and better camera seem to have tilted the balance in Apple's favor, allowing the company to finish 2019 with two million iPhone shipments in India, up from 1.6 million in 2018. This is great news for Apple since success in India will be key to the company's long-term growth. India's smartphone space is one of the few bright spots in an otherwise dull market.
According to Counterpoint Research, smartphone shipments in India grew 7% in 2019 to 158 million units, while the global smartphone market shrank 1.3%. Even with the recent success of the iPhone 11, Apple is still competing only in the premium smartphone segment -- which it dominates -- but the company is now looking to address an even bigger audience with a cheaper device this year.
More growth in the cards
According to reports from Phone Arena, Apple is reportedly set to begin the production of a cheaper iPhone in 2020. Cupertino has begun trials of the device with full-scale production expected to begin in mid-February. Apple also plans to build around 30 million units of the new entry-level smartphone, which is expected to be priced at $399.
This is not the first time rumors of an entry-level iPhone have surfaced. Noted Apple analyst Ming-Chi Kuo has been suggesting that a budget device like the iPhone SE could hit the market in 2020. And if Apple ends up actually launching such a device, it will be in a great position to tap into the fastest-growing smartphone segment in India. According to International Data Corporation, shipments of smartphones priced between $300 and $500 doubled during the third quarter of 2019 from the prior year.
In all, Apple looks set to build upon the success of the iPhone 11 by tapping into a larger pool of customers in this international market. Success in India's smartphone race will help Apple remain a top tech stock given the opportunity for growth in the region. | AAPL | 185.55 |
https://appleinsider.com/articles/20/02/05/all-the-changes-in-ios-134-carkey-icloud-folder-sharing-memoji-more | All the changes in iOS 13.4: CarKey, iCloud folder sharing, Memoji, & more | AAPL: 187 ( +3.04 ). Toggle navigation Close Nav. AppleInsider Logo · News
· How-Tos. Apple A-Z. AirPods · Apple TV · Apple Watch · HomePod · iPad... | Feb 5, 2020 | AppleInsider | All the changes in iOS 13.4: CarKey, iCloud folder sharing, Memoji, & more
Apple has seeded the first beta of iOS 13.4 to developers and in it come a slew of changes, many of them quite substantial. Let's take a look at what you can expect when it is eventually released.
The first major change to iOS 13.4 is the return of iCloud folder sharing. This was a feature promised for iOS 13, but it was removed and users never quite got to take advantage of it. However, the feature has now returned in iOS 13.4.
By going to a folder within iCloud Drive and tapping Share, users can either add specific people to view a folder, share a link, and allow those users to make changes or just to view the folder's contents.
Another big change is the ability for developers to offer a single app purchase that works not only across iPhone and iPad, but iPhone, iPad, Mac, and Apple TV. This will ease the burden on consumers who don't like having to purchase the same app multiple times.
A big new feature, that we still don't know much about, is called CarKey. This is a new API for iOS and watchOS that will allow you to lock, unlock, and start your car with your iPhone and Apple Watch. Even the ability to share NFC keys with others.
Again, this feature was just discovered and we will likely have to continue digging until we hear from Apple on how this feature will be rolled out and what vehicles may be eventually supported.
Other additions in this beta include nine new Memoji stickers, a rearranged Mail toolbar, new keyboard shortcuts on iPad within the Photos app for navigating and editing, TV app now shows Family Sharing under the Library tab, new call controls and third-party navigation options in CarPlay, and the authorization prompt will appear immediately after granting Always for location access.
As always, this list is non-exhaustive so if you find any other changes in the beta, be sure to let us know and we'll update the list accordingly. | AAPL | 185.55 |
https://realmoney.thestreet.com/investing/stocks/let-s-unpack-what-just-happened-in-tuesday-s-rally-15229942 | Let's Unpack Tuesday's Rally -- and Some Parabolic Moves | You might recall I compared it to Apple (AAPL) , which folks were convinced
had gone parabolic but I disagreed. Tesla I thought was getting there. | Feb 5, 2020 | RealMoney | Well, at least we can say it was a relatively interesting day in the market.
Breadth improved, but it wasn't as good as it should have been with the S&P 500 up nearly 50 and the Russell 2000 joining the fray. But it was the best breadth we've seen in weeks. It wasn't enough to turn the McClellan Summation Index from down to up. That would require another day of really good breadth.
Aside from that, there wasn't much to note statistically. What we did see though, sentiment-wise is as we expected, the Investor's Intelligence bulls backed off even more. They are now at 47.6%. Two weeks ago they were kissing 60%, so there has been quite a turn in sentiment. The last time the bulls were this low was October. They were just under 45% in August. I put this on the positive side of the ledger.
Sticking with sentiment, I want to note that the Daily Sentiment Indicator (DSI) for the Volatility Index (VIX.X) is back at 15. If we get a few more days up that is likely going to fall under 10, which might just give us another push down. Remember, up and down is my expectation. So far all we've gotten is the up from the oversold condition.
Clearly, the chatter was all about Tesla TSLA once again. As I said before, I won't know when the end is, but a few weeks ago, in mid-January when the stock ran from $500 to $600 (blue arrow on the chart) I said I thought the stock was getting into a parabolic move. You might recall I compared it to Apple (AAPL) , which folks were convinced had gone parabolic but I disagreed. Tesla I thought was getting there. It has obviously since exploded into a parabolic move.
It might be hard for you to imagine, but that 20% move in a week in Tesla is obviously more explosive than Microsoft's (MSFT) has been over the last week. But MSFT is up about 13% in a week. To me this is what the Tesla chart looked like a few weeks ago.
I think they are very different companies, but I promised to report to you if I saw other stocks starting to move like this was 1999 and Microsoft is verging on it. Remember it hasn't done anything wrong -- that uptrend is very much intact -- but I am on the lookout for charts that have a nice up-sloping pattern and then all of a sudden start to go vertical. | AAPL | 185.55 |
https://finance.yahoo.com/news/fidelity-high-dividend-etf-fdvv-152603138.html | Is Fidelity High Dividend ETF (FDVV) a Strong ETF Right Now? | When you look at individual holdings, Apple Inc (AAPL) accounts for about
4.12% of the fund's total assets, followed by Microsoft Corp (MSFT) and
Jpmorgan... | Feb 5, 2020 | Yahoo Finance | Is Fidelity High Dividend ETF (FDVV) a Strong ETF Right Now?
Designed to provide broad exposure to the Style Box - All Cap Value category of the market, the Fidelity High Dividend ETF (FDVV) is a smart beta exchange traded fund launched on 09/12/2016.
What Are Smart Beta ETFs?
The ETF industry has long been dominated by products based on market cap weighted indexes, a strategy created to reflect the market or a particular market segment.
Because market cap weighted indexes provide a low-cost, convenient, and transparent way of replicating market returns, they work well for investors who believe in market efficiency.
On the other hand, some investors who believe that it is possible to beat the market by superior stock selection opt to invest in another class of funds that track non-cap weighted strategies--popularly known as smart beta.
This kind of index follows this same mindset, as it attempts to pick stocks that have better chances of risk-return performance; non-cap weighted strategies base selection on certain fundamental characteristics, or a mix of such characteristics.
Methodologies like equal-weighting, one of the simplest options out there, fundamental weighting, and volatility/momentum based weighting are all choices offered to investors in this space, but not all of them can deliver superior returns.
Fund Sponsor & Index
The fund is sponsored by Fidelity. It has amassed assets over $554.20 M, making it one of the larger ETFs in the Style Box - All Cap Value. Before fees and expenses, this particular fund seeks to match the performance of the Fidelity Core Dividend Index.
The Fidelity Core Dividend Index is designed to reflect the performance of stocks of large and mid-capitalization dividend-paying companies that are expected to continue to pay and grow their dividends.
Cost & Other Expenses
Expense ratios are an important factor in the return of an ETF and in the long-term, cheaper funds can significantly outperform their more expensive cousins, other things remaining the same.
With on par with most peer products in the space, this ETF has annual operating expenses of 0.29%.
FDVV's 12-month trailing dividend yield is 3.91%.
Sector Exposure and Top Holdings
While ETFs offer diversified exposure, which minimizes single stock risk, a deep look into a fund's holdings is a valuable exercise. And, most ETFs are very transparent products that disclose their holdings on a daily basis.
When you look at individual holdings, Apple Inc (AAPL) accounts for about 4.12% of the fund's total assets, followed by Microsoft Corp (MSFT) and Jpmorgan Chase + Co (JPM).
Its top 10 holdings account for approximately 27.75% of FDVV's total assets under management.
Performance and Risk
Year-to-date, the Fidelity High Dividend ETF has added about 0.43% so far, and is up roughly 14.83% over the last 12 months (as of 02/05/2020). FDVV has traded between $28.38 and $33.16 in this past 52-week period.
The ETF has a beta of 0.87 and standard deviation of 11% for the trailing three-year period. With about 134 holdings, it effectively diversifies company-specific risk.
Alternatives
Fidelity High Dividend ETF is a reasonable option for investors seeking to outperform the Style Box - All Cap Value segment of the market. However, there are other ETFs in the space which investors could consider.
Invesco High Yield Equity Dividend Achievers ETF (PEY) tracks NASDAQ US Dividend Achievers 50 Index and the iShares Core S&P U.S. Value ETF (IUSV) tracks S&P 900 Value Index. Invesco High Yield Equity Dividend Achievers ETF has $939.17 M in assets, iShares Core S&P U.S. Value ETF has $6.76 B. PEY has an expense ratio of 0.53% and IUSV charges 0.04%.
Investors looking for cheaper and lower-risk options should consider traditional market cap weighted ETFs that aim to match the returns of the Style Box - All Cap Value.
Bottom Line
To learn more about this product and other ETFs, screen for products that match your investment objectives and read articles on latest developments in the ETF investing universe, please visit Zacks ETF Center.
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
Fidelity High Dividend ETF (FDVV): ETF Research Reports
JPMorgan Chase & Co. (JPM) : Free Stock Analysis Report
Apple Inc. (AAPL) : Free Stock Analysis Report
Microsoft Corporation (MSFT) : Free Stock Analysis Report
iShares Core S&P U.S. Value ETF (IUSV): ETF Research Reports
Invesco High Yield Equity Dividend Achievers ETF (PEY): ETF Research Reports
To read this article on Zacks.com click here.
Zacks Investment Research | AAPL | 185.55 |
https://www.bloomberg.com/news/articles/2020-02-04/google-says-developers-can-now-purchase-latest-smart-glasses | Google Says Developers Can Now Purchase Latest Smart ... | AAPL. APPLE INC. 185.01. USD. +0.09+0.05%. Open. Google is making it easier
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https://coincodex.com/article/7377/how-to-buy-apple-stock-on-etoro/ | How to Buy Apple Stock on eToro? eToro Trading Guide | Apple's market capitalization is larger than $1 trillion. Now, let's get
started with buying some Apple (AAPL) stock on the eToro platform. | Mar 19, 2020 | CoinCodex | Key highlights:
- eToro is one of the most popular platforms for investing online
- eToro offers users the ability to trade stocks, commodities, ETFs, cryptocurrencies and more
- This step-by-step guide will show you how to buy Apple stock on eToro
Thanks to the rise of online brokers, it's easier than ever to invest your money in Apple and other leading companies. If you've been thinking about buying Apple stock and researching different brokers online, you have most likely already heard of eToro.
Your capital is at risk. Other fees may apply. For more information, visit etoro.com/trading/fees.
eToro was created in 2007 and has since become one of the most popular brokers for trading and investing online. eToro has more than 10 million registered users and is regulated in Cyprus, Australia and the United Kingdom. In addition to giving users the ability to buy and sell stocks, their platform actually provides a diverse suite of other trading products. Let’s quickly run through a list of the defining features of eToro:
- Trade stocks and other traditional financial instruments
- Trade cryptocurrencies
- Copy the portfolios of successful traders
- Test trading strategies with demo trading
- Trade with leverage
Now, let’s check out the main advantages and disadvantages of trading stocks on eToro:
The pros of trading on eToro:
- Large selection of assets available for trading
- Social trading features
- Demo trading support
The cons of trading on eToro:
- Forex trading fees are relatively high
- Withdrawal and inactivity fees
Buy Apple (AAPL) stock on eToro
Alongside Google, Amazon and Microsoft, Apple is part of the "Big Four" tech companies. Founded in 1976 by Steve Jobs, Steve Wozniak and Ronald Wayne, the company has become a leader in the consumer electronics and software sectors through popular products including the iPhone, the Macbook series, and the macOS operating system. The company has more than 135,000 employees and its revenues in 2019 exceeded $260 billion. Apple's market capitalization is larger than $1 trillion.
Now, let's get started with buying some Apple (AAPL) stock on the eToro platform.
1. Create eToro account
Creating an eToro account is very simple, and you’ll be able to log in to your newly-created eToro account within minutes.
Your capital is at risk. Other fees may apply. For more information, visit etoro.com/trading/fees.
If you just want to take a look at what the eToro platform has to offer, the only information that’s required to create an account is an e-mail and a phone number. However, if you want to deposit money and actually start trading, you will have to provide some additional personal information to verify your identity.
2. Complete your eToro profile
After you’ve created your eToro account, you will have to complete your eToro profile before you can start trading. This information is required so that eToro can comply with the applicable AML and CTF regulations. Click “Complete Profile” under your username and follow the presented steps.
3. Fund your eToro account
After you’ve completed the necessary verification, you can fund your eToro account.
The minimum deposit currently accepted by eToro is $200, or equivalent in other currencies. The platform actually offers seven different deposit methods, so choose the one that suits you best:
- Credit / Debit card
- PayPal
- Wire Transfer
- Skrill
- Neteller
- WebMoney
- UnionPay
As with any investment, don’t invest more than you’re willing to lose.
TIP: If you don’t feel ready to trade stocks with real money yet, you can use eToro’s virtual portfolio feature to test out some trading strategies risk-free. You can switch from your real portfolio to your virtual portfolio by clicking the icon under your profile name. You will be given $100,000 in virtual money that you can use to trade any instrument that’s offered by eToro.
4. Buy Apple stock
Once your account is funded, you can start with trading stocks on eToro. You can either buy a stock or short it, depending on how you believe the market is going to behave moving forward. In this guide, we’ll be showing a of buying Apple (AAPL) stock.
Head over to the search bar on the top of the eToro interface and type in the name or the ticker of the stock you wish to buy, in this case Apple. In addition to the price chart, you will also be able to find key information about the stock, including balance sheet, income statements and more. For some stocks, research is also provided.
Click the “Trade” button to place your order for AAPL stock. Now, a window will open where we can tweak all the parameters of our trade. In this example, we’re going to invest $1,000.
By switching between “Trade” and “Order” on the top right, you can either buy the stock at the current best available price, or specify the exact price at which you want to buy the stock. We’ll keep it at “Trade”, as its the fastest and simplest way.
Under “Amount”, we’ll set the amount that we wish to invest – in this case, $1,000. Below, we can see what percentage of our total equity we are using.
In the section on the bottom, you can set your stop loss, leverage and take profit levels. Stop losses are used to define the maximum loss you’re willing to take in the trade, while take profits are used to realize gains by automatically closing the position once it reaches a specified value above our entry price. As far as the leverage is concerned, we’ll be keeping it at 1x, as higher leverage would introduce additional risks to our trade.
After you click “Open Trade”, your order will be submitted and your trade should be executed shortly.
5. Monitor your AAPL stock performance
Once your order is completed, you will be able to follow the status of your trade in the “Portfolio” section. Here, you can also update your stop loss and take profit levels (pink) if you’re not happy with the levels set previously.
If you want to exit the trade, click the X icon on the right (blue).
Do you own the stocks you buy on eToro?
Yes - when you buy a stock such as Apple on eToro, you are making an investment in the underlying asset. However, there are a few caveats to this. Users of eToro Australia are actually purchasing a CFD (contract for differences) when buying a stock on eToro.
If you’re using eToro to buy stocks that are listed on Borsa Italiana, Helsinki Stock Exchange, Stockholm Stock Exchange or Oslo Stock Exchange, you are also actually purchasing a CFD.
When using CFDs, you are getting exposure to the underlying asset’s price movements, but don’t actually own the asset itself.
Now, we’re ready to get on with our step-by-step guide on how to get started with trading stocks on eToro.
What is copy trading on eToro?
eToro bills itself as a “social trading” platform, and these social features give eToro an unique dimension compared to most other online trading platforms. eToro’s copy trading feature lets you copy the trades made by other eToro users.
You can access this feature by heading over to the “Copy People” section in the navigation bar. The different traders that you can copy are sorted by risk level, so you can choose how risky of a trading strategy you’re comfortable with.
For each trader, you can see detailed statistics on how they have performed in a selected trade period and the changes they’ve made to their portfolio. You can copy up to 100 different traders at once. The minimum amount you can invest in a single trader is $200.
Trading stocks on eToro
Of course, eToro offers plenty of other stocks for trading in addition to AAPL. The company offers around 800 different stocks listed on a variety of global stock exchanges. Here's a few examples of the stocks you can buy on eToro:
The bottom line on buying Apple (AAPL) stock on eToro
If you want to invest in Apple stock through an online platform, eToro is certainly worth checking out. The platform offers an extensive suite of features while providing an intuitive and beginner-friendly user interface at the same time. Not only does the platform allow you to trade traditional financial instruments like stocks, ETFs and indices, but you can also trade cryptocurrency on eToro.
The copy trading feature is also great for users who would like to invest in a diversified portfolio of stocks, but would rather leave the exact composition of the portfolio to a more experienced investor.
Your capital is at risk. Other fees may apply. For more information, visit etoro.com/trading/fees. | AAPL | 185.55 |
https://9to5mac.com/2020/03/19/5g-iphone-12-fall-release-coronavirus/ | Bloomberg: 5G iPhone 12 still on track for fall release despite ... | AAPL Company. Breaking news from Cupertino. We'll give you t… COVID-19... | Mar 19, 2020 | 9to5Mac | Even though Apple has reopened its retail stores in China, many of its supply chain operations are still in flux. A new report from Bloomberg details some of those struggles, but says the 5G iPhone 12 is still on track for this fall.
Citing anonymous sources, the report explains that as of right now, the next flagship iPhones with 5G capabilities are “still on schedule to launch in the fall.” Mass production, however, isn’t slated to begin until May, so delays could still materialize once that process begins.
On the flip side, Apple this week unveiled a new iPad Pro and MacBook Air, but production of these devices “likely started in early January, before the worst effects of China’s virus lockdown.” The report does suggest that delays are the reason the Magic Keyboard for iPad Pro isn’t shipping until May.
Even though the iPhone 12 is on track, one source told Bloomberg that Apple’s supply chain is still not moving at its normal pace due to a slow down in component shipments:
One person who works in Apple’s supply chain said not all operations are moving at normal speed because the flow of components to assemble is still slow. It will take another month or more to get parts moving steadily through the system, the person added.
For example, key Apple suppliers in Malaysia have halted production due to a two-week lockdown in the country because of COVID-19. Apple suppliers and teams in other countries, including South Korea, the UK, United States, Italy, and Germany have also been affected.
In the United States, Apple relies on Broadcom for wireless chips, but Broadcom CEO Hock Tan has already said that COVID-19 “is going to have an impact on our semiconductor business, in particular in the second half of the fiscal year.”
But despite many of these constraints, Apple was able to build test versions of the iPhone 12 last month:
These struggles have yet to severely derail the 5G iPhone launch in the fall. During China’s factory shutdown in February, Apple was able to build a limited number of test versions of the new models, one of the people familiar with the company’s supply chain said.
Apple finalizes the majority of design features for new iPhones between November and December of the year prior to launch, the people said. It begins mass-producing new casings around April and then starts a late manufacturing stage called Final Assembly, Test and Pack in about May.
You can read the full report at Bloomberg.
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Comments | AAPL | 185.55 |
https://www.reuters.com/article/us-health-coronavirus-apple-idUSKBN2170DS | Apple limits online iPhone purchases to two per person amid ... | SHANGHAI (Reuters) - Apple Inc AAPL.O is limiting customer purchases of
iPhones over its online stores in many countries including the United
States and... | Mar 19, 2020 | Reuters | SHANGHAI (Reuters) - Apple Inc AAPL.O is limiting customer purchases of iPhones over its online stores in many countries including the United States and China to a maximum of two handsets per person, checks on its website on Friday revealed.
The purchase caps come just after the hardware maker closed all of its brick-and-mortar stores outside China, as the coronavirus spreads globally and forces lockdowns and limitations on public movement to contain it.
Checks on Apple’s website reveal that in numerous countries, a drop-down menu prevents customers from buying more than two of the same model iPhone, across all models. The last time it did so was in 2007, when the iPhone was first introduced, to stop people from reselling them.
In mainland China, Hong Kong, and Taiwan, and Singapore, a message appears above iPhone listings informing customers that purchases will be limited to two devices per order.
Apple declined to comment.
The purchase limits come as Apple braces for a blow due to the coronavirus’ impact on sales, both due to supply chain disruptions and weak demand.
As the illness swept China, Apple closed all of its brick-and-mortar retail outlets in the country, only reopening all of them by March 13. Foxconn 2317.TW, its most important manufacturing partner, temporarily halted operations, though founder Terry Gou has said that production has now returned to normal.
In February, Apple CEO Tim Cook wrote a letter warning investors the company would unlikely meet its initial revenue projections for the its calendar Q1 earnings guidance due to the virus.
Now, while China’s factories have resumed operations, Apple and other hardware companies face weakening demand as the countries around the world shutter retail stores and enforce social distancing.
The coronavirus, which originated in China in late December, has since spread to 178 countries, infecting over 240,000 and killing about 10,000 globally.
On March 13, Apple announced that all of its Apple Stores outside of China would shut down to fight the spread of the virus.
According to Nicole Peng, who tracks the smartphone sector at research firm Canalys, Apple is likely limiting online orders to prevent scalpers from stockpiling devices and re-selling them on the grey market.
“This happened in the past in Asia when there is a new iPhone launch and scalpers saw an opportunity to sell to mainland China, where the new phones were harder to buy at the time,” she said.
“Now that stores all over the world are closed, online scalpers see a similar opportunity.”
Reporting by Josh Horwitz and Brenda Goh; Additional reporting by Krystal Hu in New York; Editing by Kim Coghill
Our Standards: The Thomson Reuters Trust Principles. | AAPL | 185.55 |
https://investorplace.com/2020/03/cheaper-price-ericsson-stock-attractive/ | At These Cheaper Prices, Ericsson Stock Is Even More Attractive | Consumers with lower disposable income are less likely to upgrade to 5G
phones from the likes of Apple (NASDAQ:AAPL). That, in turn, could lead
mobile... | Mar 18, 2020 | InvestorPlace | Investors making the case that this broad market sell-off has gone too far can point to 5G (fifth-generation) wireless stocks like Ericsson (NASDAQ:ERIC) as evidence. Nothing really has changed in terms of the long-term outlook for the industry. Yet Ericsson stock, and its peers, have been hammered.
Even after a 12% bounce on Friday, ERIC is down 24% from where it traded on Feb. 12. Rival Nokia (NYSE:NOK) has declined 38% over the same stretch. Qualcomm (NASDAQ:QCOM) is off 17%, and Cisco Systems (NASDAQ:CSCO) 25%.
There’s been no real news to support those declines. In fact, there’s been no real news at all.
Cisco did report earnings after the close on Feb. 12, but the report and forward guidance both were basically in line with expectations. Nokia’s chief executive officer stepped down earlier this month, but after years of poor execution, that’s hardly a negative development.
The rising risk of a global recession presumably could have a fundamental impact. Consumers with lower disposable income are less likely to upgrade to 5G phones from the likes of Apple (NASDAQ:AAPL). That, in turn, could lead mobile operators to slow 5G rollouts.
But in that scenario, it’s QCOM stock that should underperform, rather than ERIC and NOK. Qualcomm, after all, has direct exposure to handset unit sales.
And even delayed spending by operators on 5G equipment hardly suggests a one-fourth haircut to the Ericsson stock price. It’s not as if 5G deployments will be canceled.
On the whole, these stocks simply don’t look all that much different in mid-March than they did in mid-January. Given that they looked cheap then, and that I argued last month that Ericsson stock is the best play on 5G, I see the opportunity in ERIC as only more attractive.
Three Reasons for Optimism
Again, not all that much has changed since Ericsson reported fourth-quarter earnings in January. But there have been a few pieces of somewhat minor news that, taken together, provide some support for the bull case.
First, at least relative to Nokia, Ericsson has an apparent early lead in 5G deployments. Ericsson said in a presentation earlier this month that it had 81 5G agreements with wireless network operators. Nokia, in its fourth-quarter release in early February, cited 66 such deals.
To be sure, both companies are dealing with intense competition from China’s Huawei. That firm has managed to grow despite pressure from the U.S. government. But in 5G, Ericsson has managed to carve out 37% market share globally, according to this month’s presentation.
Second, Ericsson announced along with its annual report that it planned to increase its dividend by 50%. On Mar. 31, shareholders will vote to approve a dividend of 1.50 SEK ($0.15), paid in April and October.
Even with ERIC stock down amid this sell-off, that dividend doesn’t exactly make Ericsson an income darling. But it will yield over 2% this year — hardly immaterial at a time when the 10-year Treasury bond yields less than 1%. And the hike comes only a few months after Nokia had to eliminate its own dividend after disappointing results. (Nokia is hoping to restore the payout, potentially by the end of this year.)
Ericsson Stock Gets Cheaper
The third reason to be more bullish on ERIC is simply that the stock is cheaper. The 25% haircut means that even after Friday’s bounce, the fundamentals here look attractive.
Wall Street expects earnings per share of 51 cents in 2020, which looks roughly in line with the company’s guidance given with Q4 results in January. That estimate values ERIC at less than 14x earnings this year.
But growth shouldn’t suddenly end. Ericsson has guided for operating margins to reach 12-14% against a sub-10% figure in 2019. Revenue should grow along with 5G deployments as well. Wall Street expects 18% profit growth in 2021 — and Ericsson stock trades at less than 12x current consensus EPS for 2021.
That is an attractive multiple for a company driving that kind of growth. And it’s not as if the 5G tailwind suddenly fades. Ericsson forecasts that by 2025, only 55-65% of the world population will be covered by 5G. Equipment deployments for the new technology thus are going to persist for basically this entire decade.
To be sure, some of those sales are going to ‘cannibalize’ current sales of 4G equipment. Still, on a net basis, 5G is going to be a tailwind for Ericsson for years to come. At less than 12x forward earnings, Ericsson stock certainly is not priced as such.
Buy the Dip in Ericsson Stock
And so ERIC looks like one of the more attractive opportunities created by this sell-off. Coronavirus concerns simply are not going to have a material impact; Ericsson itself said just three weeks ago that it hadn’t seen any material effect on first-quarter results.
The stock is cheap. The balance sheet is in excellent shape, with cash net of debt equal to about $1 per share. The dividend hike shows increasing confidence from the board of directors. Nokia’s own figures show that Ericsson has the early lead in 5G.
This simply looks like a good business at an excellent price. And it looks like a better stock than it was just a few weeks ago — even disregarding the fact that it’s a cheaper stock, too. Add it up, and ERIC remains a buy, and remains the best play out there on 5G growth.
Vince Martin has covered the financial industry for close to a decade for InvestorPlace.com and other outlets. He has no positions in any securities mentioned. | AAPL | 185.55 |
https://www.trefis.com/stock/el/articles/460114/what-to-expect-from-estee-lauders-q2/2019-02-04 | What To Expect From Estee Lauder's Q2 | ABBV logo. Should You Pick AbbVie Stock Over LLY? Latest Analysis. Better
Bet Than EL Stock: Pay Less Than Estee Lauder To Get More From Stocks VRTX,
FDX,... | Feb 4, 2019 | Trefis | What To Expect From Estee Lauder’s Q2
Estee Lauder (NYSE:EL) is scheduled to release its Q2 fiscal 2019 results on February 5. It has had a robust 2018, primarily driven by strong performance in its Skin Care and Makeup segments and the same growth momentum continued in its Q1 2019 earnings. During Q1, the company reported a 8% jump in sales to $3.52 billion from $3.27 billion in the same period last year, and diluted net earnings per common share increased 17% to $1.34. This growth was driven by strong performance in the skin care segment globally, growth from online and travel retail segments, and emerging markets particularly Asia / Pacific region (esp. China). The performance this quarter reflected robust global demand across their portfolio, with virtually all their brands posting sales growth. Each of its biggest brands, including MAC, La Mer, Tom Ford, and Origins, grew globally, with exceptional growth in Estée Lauder.
Driven by this strong Q1 performance and exciting upcoming launches and programs, Estee Lauder has forecast growth in its Q2 2019 sales to increase between the band of 8% – 9% (Excluding a 2% impact from currency translation and a 2% impact from the adoption of ASC 606) and net earnings per share between $1.47 and $1.50. The continued emphasis on a “digital-first” approach and on fast-growing markets and channels is also expected to contribute to the company’s growth. Please refer to our dashboard analysis on What To Expect From Estee Lauder’s Q2 Earnings.
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Listed below are key drivers that we believe will continue to steer Estee Lauder’s growth this Q2 and for full year 2019:
Skin care and Make up segments will continue to drive sales – These segments will likely continue to post strong performance in the coming quarters. The skin care segment posted 17% growth in sales in the Q1. Going forward, its skin care segment’s exceptional performance will be driven by strong innovations, increasing demand from younger consumers, and gains from its hero products: Estée Lauder, La Mer, Origins, and Clinique brands. Driven by continued success of the recent launches — Advanced Night Repair Eye Concentrate Matrix — the Estee Lauder brand is likely to witness strong growth from China and travel retail. Apart from skin care, Estee Lauder’s recent acquisition of high-end fragrance and lifestyle brands will aid its growth.
The makeup segment will witness increased sales as a result of the acquisitions of Too Faced and BECCA from the previous fiscal year. Its 2% growth in Q1 was driven by strong performance from brands such as Estée Lauder and Tom Ford, Too Faced, BECCA, and La Mer.
Growth in online & travel retail – Growth in the travel retail business is a major driving factor for Estee Lauder. During Q1 2019, travel retail sales continued to accelerate backed by broad-based growth across countries and brands. Currently, the channel continues to benefit from a unique product range, impressive marketing strategies, higher conversions through better customer insights, and ongoing strong passenger traffic growth in the emerging markets. Driven by rising income levels and increasing disposable income in these markets, passengers in these markets are increasingly turning into buyers. This trend is likely to keep the company’s travel retail sales soaring for Q2 and further in 2019.
Asia-Pacific region to continue to boost the sales – In the previous quarter, sales from the Asia-Pacific region led to a 24% rise in its top-line growth. Europe, Middle-East and Africa also saw sales rise by 14%. We anticipate rising disposable incomes in the Asia-Pacific markets (especially China) to continue to boost the company’s sales and contribute to its top-line. Management thus anticipates continued strength from sales of luxury products, prompting it to continue to invest in these regions.
EL’s growth drivers and aggressive growth strategies for coping with changing consumer preferences will continue to help it in maintaining its dominance in the beauty market. The company has successfully expanded its online business footprint in about 40 countries. It plans to continue boosting sales in this channel by adding new sites and expanding retailer distributions. The investment in DECIEM, a fast-growing multi-brand company, is further likely to aid EL’s beauty sales.
In all, we expect Estee Lauder to continue its growth momentum in the coming earnings and in the remainder of FY 2019.
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https://www.mercadoeeventos.com.br/noticias/servicos/unedestino-academia-lanca-revista-reflexao-e-analise/ | Unedestinos Academia lança Revista Reflexão e Análise | ABBV promove seminário neste fim de semana em São Paulo. 01/04/2023. Fórum
de Meio Ambiente registra avanços na despoluição de lagoas da Zona Oeste do
RJ. | Feb 4, 2019 | M&E | Mercado e Eventos | A Unedestinos – União Nacional de CVBs e Entidades de Destinos acaba de publicar a Revista Reflexão e Análise, que conta com a participação de consultores técnicos especializados e referências no setor.
A revista é mais uma das frentes para a divulgação de conteúdo nas mais diversas áreas do setor e de seus inúmeros segmentos, como academia, captação, promoção, marketing, tecnologia, feiras, comunicação e empreendedorismo.
Nesta publicação, cada especialista pôde explorar seu domínio em textos que passam por diferentes temas, como processo de sucessão, cidade criativa, buscadores digitais, turismo de negócios, bleasure, mercado de eventos, geração de receita, capacitação e economia.
Sob essa demanda, surge então a marca Unedestinos Academia, que passa a representar esta e as demais ações que buscam a capacitação e o nivelamento dos produtos e serviços oferecidos pelas Organizações de Visitors e de Conventions associados. A Unedestinos Academia terá papel fundamental na compilação, curadoria e divulgação do conteúdo gerado pelos membros associados, conselho e consultores.
Veja a publicação no link. | ABBV | 137.3 |
https://www.trefis.com/stock/atvi/articles/464139/here-are-activision-blizzards-key-sources-of-revenue/2019-03-29 | Here Are Activision Blizzard's Key Sources of Revenue | Latest Analysis · Better Bet Than ATVI Stock: Pay Less Than Activision
Blizzard To Get More From Stocks COST, MRK, ABBV, HD, PFE · Better Bet Than
ATVI Stock: Pay... | Mar 29, 2019 | Trefis | Here Are Activision Blizzard’s Key Sources of Revenue
Activision Blizzard (NASDAQ:ATVI) generates its revenues primarily from its Activision, Blizzard, and King segments, along with its distribution business. Below we share more information on these segments. We have created an interactive dashboard ~ What Are Activision Blizzard’s Key Sources of Revenue. Also, here is more Information Technology data.
Activision Revenues
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Activision segment includes console games from Activision such as Call of Duty, Destiny, and Skylanders.
- Revenues of $2.7 billion, representing 37% of the company’s total revenues in 2018.
- Added $277 million from 2015 to 2018 at a CAGR of a little under 4%.
- Revenue growth in the recent past was primarily led by the Call of Duty franchise.
- Call of Duty: Black Ops 4 units sold so far ~ 9.3 million.
- Next release for Call of Duty franchise is scheduled for Q4 2019.
- Expect revenue growth of $41 million or 1.5% in 2019 led by modest growth in Monthly active users (MAUs) and ARPU.
- MAUs ~ 49 million, and ARPU of $56 in 2018 grew at a CAGR (2015-2018) of 5%, and -1% respectively.
Blizzard Revenues
Blizzard’s portfolio of console games include franchises such as Overwatch, Diablo, World of Warcraft, and Hearthstone.
- The Blizzard segment revenues of $2.3 billion accounted for roughly 30% of the company’s total revenues in 2018.
- Added $687 million from 2015 to 2018 at a CAGR of 12%.
- The revenue growth in 2018 was led by World of Warcraft franchise.
- However, revenues will likely see a sharp decline in 2019, given that there is no release planned for World of Warcraft franchise.
- MAUs ~ 37 million, and ARPU of $62 in 2018 grew at a CAGR (2015-2018) of 20% and -4% respectively.
King Revenues
King’s casual mobile gaming portfolio includes games, such as Candy Crush, Farm Heroes, Pet Rescue, and Bubble Witch.
- King revenues of $2.1 billion accounted for a little under 30% of the company’s total revenues in 2018.
- Of late, it is benefiting from its new game ~ Candy Crush Friends.
- We expect the active user base to see growth in the coming quarters, led by the new launches in the Candy Crush franchise, and an uptick in advertising revenues.
- Monthly active users (MAUs) ~ 271 million, and ARPU of $8 in 2018 grew at a CAGR (2015-2018) of -14% and 29% respectively.
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https://finance.yahoo.com/news/natalie-portman-bummed-poor-response-star-wars-prequels-185227642.html | Natalie Portman was 'bummed' out by the poor response to 'Star Wars'
prequels | (ABBV) and Honeywell International Inc. (HON). 7h ago. Investor's Business
Daily... | May 4, 2019 | Yahoo Finance | Natalie Portman was 'bummed' out by the poor response to 'Star Wars' prequels
Natalie Portman has opened up about the poor critical response to the Star Wars prequels, in which she played Padme Amidala across the trilogy.
“It was hard. It was a bummer because it felt like people were so excited about new ones and then to have people feel disappointed. Also to be at an age that I didn’t really understand that’s kind of the nature of the beast. When something has that much anticipation it can almost only disappoint.”
Read More: Natalie Portman plays an astronaut in existential crisis in first ‘Lucy in the Sky’ trailer
Portman was cast to play Amidala back in 1997 at the age of just 15, with The Phantom Menace eventually being released in May, 1999, to a tepid critical response.
The film still managed to gross over £780 million worldwide, while Portman reprised her role in 2002’s Attack Of The Clones and 2005’s Revenge Of The Sith, which grossed a combined total of over £1.1 billion, but were met with just as disappointing reviews.
But Portman told Empire that, in her opinion, time has been much kinder to the prequel trilogy.
“With the perspective of time, it’s been re-evaluated by a lot of people who actually really love them now. There’s a very avid group of people who think they’re the best ones now! I don’t have enough perspective to weigh in.”
But while Portman might have been disappointed by the poor reviews for the Star Wars prequels they certainly played their role in making her one of the most popular actresses of the last 20 years.
Read More: Natalie Portman says she was ‘unaware’ of whitewashing in new movie ‘Annihilation’
Not only did she pick up a Best Actress Oscar for her performance in Black Swan, but she was also a member of the Marvel Cinematic Universe, playing Jane Foster in Thor and Thor: The Dark World. She also popped up in Avengers: Endgame, too, however the directors of the film, The Russo Brothers, have now revealed that she didn’t actually film any new scenes for it.
“All she did new for this movie was —” started Anthony, before Joe added, “The voice.” Anthony then told EW, “A little bit of voice-over when she’s talking in the distance, that’s it.” | ABBV | 137.3 |
https://www.kiplinger.com/slideshow/investing/t018-s001-7-high-yield-dividend-stocks-with-more-to-give/index.html | 7 High-Yield Dividend Stocks With More to Give | Market value: $115.2 billion; Dividend yield: 5.4%; DIVCON rating: 4;
AbbVie (ABBV, $77.91) offers up one of the highest dividend yields in the... | May 10, 2019 | Kiplinger | 7 High-Yield Dividend Stocks With More to Give
Income investing can sometimes feel like a give-and-take situation.
Income investing can sometimes feel like a give-and-take situation. You can get red-hot dividend growth from stocks, but those stocks often start at paltry yields that take a while to plump up. But high-yield dividend stocks have their own problems – some high yields are a warning flare from troubled companies, and other high yields are safe but stuck in neutral.
But there are a few “Goldilocks” dividend stocks that offer just the right blend of ample current yield and the potential for income growth.
The DIVCON system from exchange-traded fund provider Reality Shares can, among other things, help identify already high-dividend stocks that have the financial wherewithal to keep pushing their payments higher. DIVCON’s dividend health methodology measures factors such as free cash flow, prior earnings growth and even bankruptcy risk to determine whether stocks are likely to increase their dividends – or even if they’re at risk of cutting them. The result is a rating between 1 and 5, with low ratings (1-2) indicating shaky dividends, and high ratings (4-5) indicating healthy payouts that likely will expand in the future.
Here are seven high-yield dividend stocks that DIVCON’s ratings suggest have a good likelihood of future rate increases.
Disclaimer
Price, market value and yield data is as of May 9. DIVCON ratings and measurement data such as earnings growth, levered free cash flow (LFCF)-to-dividend ratio and Altman Z-score is as of May 1. Dividend yields are calculated by annualizing the most recent monthly payout and dividing by the share price. You can view other DIVCON ratings on the Reality Shares provider site.
Watsco
- Market value: $6.0 billion
- Dividend yield: 4.0%
- DIVCON rating: 4
- Watsco (WSO, $157.74) distributes air conditioning, heating and refrigeration equipment. It’s not the most scintillating business in the world, but it’s something everyone needs. And that built-in demand has helped the company (and its shares) improve steadily for years.
It does have an odd dividend history to contend with. In the final quarter of 2012, Watsco announced that despite a track record of more than 35 consecutive years of dividend increases and 11 consecutive annual dividend raises, the company would “continue to pay quarterly dividends, but on a more moderate basis beginning in 2013.” Watsco followed up by clipping its quarterly payout by nearly 60%, from 62 cents per share in 2012 to just 25 cents in 2013.
But at the same time it announced it would moderate payments, Watsco also announced a generous $5-per-share special dividend (its regular payouts that year totaled just $2.48). It then proceeded to start hiking its dividend again in 2013 (to 40 cents per share), and expanded its payout by 37.3% on average through last year. Watsco has bumped the dividend another 10% higher in 2019.
One concern: a payout ratio of 95% of this year’s projected earnings. But Watsco has seemed content to keep expanding its payout along with profits. On that front, WSO’s earnings have grown every year since 2014, by a cumulative 60%, and analysts expect average annual profit growth of 15% over the next half-decade.
Earnings growth is one of the strongest factors in Watsco’s DIVCON 4 rating, which indicates a company is “likely to increase their dividends in the next 12 months.” So is a high Altman Z-score. Altman Z uses five factors to measure a company’s credit strength, and any score above 3 indicates a low likelihood of bankruptcy; WSO scores a lofty 9.1.
Huntington Bancshares
- Market value: $14.2 billion
- Dividend yield: 4.0%
- DIVCON rating: 4
- Huntington Bancshares (HBAN, $13.58) is the holding company for The Huntington National Bank, which operates more than 950 branches across eight states, primarily in Ohio and Michigan. The large regional bank offers the typical array of services: savings/checking accounts, mortgages, small business lending and commercial loans, among others.
The bank has been a beacon of growth over the past few years. Net interest income (what revenues it brings in on products such as mortgages and commercial loans versus what it costs to service products such as savings accounts) has expanded by nearly 19% annually since 2014. Total profits have ballooned by almost 22% annually.
Huntington, like many other banks, did have to cut its dividend in the midst of the 2007-09 financial crisis and bear market; HBAN went from a 13.25-cent quarterly payout at the end of 2008 to a mere penny per share in 2009. But the dividend went back to growing in 2011, and the company even eclipsed its pre-crisis payout with a 27% hike to 14 cents per share last year.
When it comes to financial stocks, DIVCON steers away from Altman Z and instead looks at net income-to-total assets (NITA), a measure of how profitable its assets are. Huntington’s 1.3 score is close to the financial-sector average. The company also delivers far more of its cash in the form of repurchases rather than dividends, giving it plenty of wiggle room to reduce buybacks should HBAN want to get even more aggressive about its payout. And it's among 12 bank stocks that Wall Street loves the most.
International Paper
- Market value: $18.2 billion
- Dividend yield: 4.3%
- DIVCON rating: 4
- International Paper (IP, $45.71) might seem like a dinosaur considering that “going paperless” is a dominant trend in everything from managing an office to paying your bills. But while those trends aren’t great for IP’s paper business, the company is being bolstered by another trend – the rise of Amazon.com (AMZN) and e-commerce.
International Paper also is a major player in packaging products. And as consumers transition from in-store purchases they tote out in plastic bags to online purchases that are delivered to their door, International Paper is among the companies that benefit.
These and other trends have acted as checks against one another, leading to an up-and-down performance over the past decade that has disappointed shareholders with roughly breakeven returns. Moreover, analysts are looking for profitability to slip both this year and next – just a couple percent each year, but clearly the wrong direction.
But the potential for dividend growth remains healthy. The dividend has expanded by an average of 8.5% annually over the past half-decade, and International Paper still is only paying out about 46% of its profits in the form of dividends. It also spends more on buybacks than cash distributions, so if it needed to, it could pull the brakes on repurchases to focus even more on its regular dividend.
Exxon Mobil
- Market value: $324.8 billion
- Dividend yield: 4.3%
- DIVCON rating: 4
- Exxon Mobil (XOM, $76.77) is one of the world’s largest integrated energy companies, spanning every segment of the oil-and-gas “stream” – exploration/production, processing/transporting and refining/retailing. It’s one of the two energy components of the Dow Jones Industrial Average, and it’s also a member of the Dividend Aristocrats – 57 dividend stocks that have increased their annual payouts for at least 25 consecutive years.
Exxon renewed its membership for another year when it announced its 37th consecutive dividend raise in April. XOM boosted the payout 6.1% to 87 cents per share quarterly.
Exxon’s fates hinge on commodity prices, so typically higher is better, which is why XOM dropped like most other stocks when oil collapsed in 2014-15. But its refining operations, which can actually benefit from lower oil prices, help provide some buffer that many pure-play exploration-and-production companies don’t have. That, as well as Exxon’s sheer scale, have contributed to a seemingly bulletproof dividend that has grown through thick and thin.
XOM also boasts the highest Bloomberg Dividend Health reading (54.8) of all companies on this list, and its Altman Z-score of 3.9 is a promising sign of fundamental financial strength.
Simon Property Group
- Market value: $61.8 billion
- Dividend yield: 4.7%
- DIVCON rating: 4
- Simon Property Group (SPG, $173.77) is a real estate investment trust (REIT) that owns 206 retail properties in the U.S. – including 107 malls and 69 outlet malls – as well as 28 sites across Asia, Europe and Canada. In an age where Amazon.com is eating many brick-and-mortar retailers alive, Simon would seem to be an obvious shun.
And yet, Simon is arguably in better shape than it has ever been.
Simon spun off many of its strip malls and smaller malls into a separate company, Washington Prime Group (WPG), in 2014. The company also has been aggressive about redeveloping vacancies left by the likes of Macy’s (M) and Sears (SHLDQ), and even expanded its properties – 30 such projects were underway as of the quarter ended in March.
The result? Simon put together a record 2018 that included an 8.2% improvement in funds from operations (FFO) – a vital profitability metric for REITs that also helps determine dividend health. SPG followed that up with a strong first quarter that saw FFO climb 5.9%, and SPG affirmed 2019 estimates for another year of growth.
Simon’s full-year results also included a 2.5% improvement to the dividend – the company’s ninth quarterly payout hike since the beginning of 2015. That payout is well funded, too, at about 84% of its FFO from the past four quarters, which is healthy by REIT standards.
The company’s DIVCON 4 rating includes strong free-cash coverage of its payout, healthy earnings growth and stellar dividend-growth track record.
AbbVie
- Market value: $115.2 billion
- Dividend yield: 5.4%
- DIVCON rating: 4
- AbbVie (ABBV, $77.91) offers up one of the highest dividend yields in the pharmaceutical space and generally has been a strong dividend growth stock.
Many investors know AbbVie as the company behind blockbuster drug Humira, which can treat a number of ailments, including arthritis, Crohn’s disease, plaque psoriasis and ulcerative colitis. However, it’s been worries about Humira that have mostly steered the ship of late – the stock is down more than 20% over the past year as part of its European patent protection expired, and as it stares down other patent expirations a few years down the road.
That said, the company still boasts other strong drugs including cancer treatement Imbruvica and endometriosis-pain drug Orilissa. AbbVie also has a strong pipeline that includes upadacitinib (in late-stage trials to treat rheumatoid arthritis), and it recently celebrated FDA approval for Skyrizi for moderate to severe plaque psoriasis.
AbbVie is royalty among dividend stocks, hiking its payout 11.4% earlier this year to mark its 47th consecutive payout increase, which includes the many decades before its split from Abbott Laboratories (ABT). That raise followed two dividend hikes in 2018.
But ABBV isn’t overstretching to reward shareholders. The company is paying out less than half of its profits in the form of dividends, and DIVCON shows that its dividend is covered more than twice over by leveraged free cash flow. It also has a healthy Altman Z-score of 3.8 that serves as further proof of the company’s strong financial foundation.
Six Flags Entertainment
- Market value: $4.6 billion
- Dividend yield: 6.2%
- DIVCON rating: 4
- Six Flags Entertainment (SIX, $55.14) is the No. 2 amusement park operator in the world, behind only Walt Disney (DIS). The company boasts 26 parks across the U.S., Mexico and Canada, with plans to expand in China.
Unfortunately, those plans have hit a speed bump. Six Flags announced earlier this year that it expected its first high-end parks to open in mid- to late 2020 instead of this year. It also pushed back other parks from 2020 to 2021. Moreover, excitement about these parks’ potential have cooled off thanks to the country’s GDP growth deceleration and the weight of the U.S.-Chinese trade conflict.
The good news is, analysts still expect the company to extend a long streak of annual revenue growth, not just this year but next. Those same pros see profits pulling back in 2019, but rebounding somewhat in 2020 as those Chinese parks begin to open.
In the meanwhile, DIVCON gives Six Flags a strong DIVCON rating of 4 that implies another dividend hike in the next 12 months is likely. Six Flags doesn’t have a long dividend history – its payout was initiated in 2010 – but it has upped the ante every year since 2011. And its levered free cash flow is enough to cover the payout, and then a little more.
Given the potential for a profit pullback in 2019, if Six Flags does raise its payout again within the next year, it might be a token increase. But Wall Street has seen a bright sign in the company’s performance during the typically slow first quarter, with B. Riley FBR and Oppenheimer analysts reiterating their “Buy” calls following Six Flag’s report.
Eric Ervin founded Reality Shares, a firm known for ETF industry innovation. He led the launch of investment analytics tools, including Blockchain Score™, a blockchain company evaluation system; DIVCON®, a dividend health analysis system; and the Guard Indicator, a directional market indicator. These tools were designed to help investors access innovative investment strategies as well as provide alternative dividend investment solutions to manage risk.
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stocks to sell In a difficult market like this, weak positions can get even weaker. Wall Street analysts believe these five stocks should be near the front of your sell list.
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https://www.marketwatch.com/story/here-are-the-stocks-to-buy-if-an-all-out-us-china-trade-war-erupts-says-goldman-2019-05-08 | Here are the stocks to buy if an all-out U.S.-China trade war erupts, says
Goldman | ABBV. -0.25% · TMO. +2.88% · NVDA. -0.80%. As uncertainty over the outcome
of Sino-American trade talks grows, so does the possibility of... | May 14, 2019 | MarketWatch | As uncertainty over the outcome of Sino-American trade talks grows, so does the possibility of longer-than-expected negotiations or an all-out trade war.
On Monday, Chinese officials announced retaliatory tariffs against the U.S., announcing $60 billion in annual exports to China with new or expanded duties that could reach 25% on June 1. Hu Xijin, editor in chief of China’s Global Times, a daily Chinese tabloid with ties to the Communist Party, reported on Twitter Monday morning that China may take further steps in the coming days and weeks.
The moves by Beijing comes after the Trump administration on Friday raised tariffs on $200 billion of Chinese imports to 25% from 10%, the White House said it was ready to impose higher tariffs on another roughly $300 billion of goods, or nearly all the remaining products Americans buy from the second-largest economy.
See: ‘China has chosen to retreat’ — the U.S. view as negotiations reach critical juncture
Goldman’s analysts, led by chief equity strategist David Kostin, are recommending that investors target services firms, which they describe as less exposed to trade policy (including retaliatory moves) and have better corporate fundamentals, as a group that could help to insulate investors from tariff-fueled volatility.
Goldman expects companies within services to outperform those that provide goods, including consumer products and hardware, like iPhone maker Apple Inc. US:AAPL and Johnson & Johnson US:JNJ, for example. Shares of Apple have gained nearly 30% this year, while those for J&J are up 8.8%.
Here’s how Goldman describes their thinking around services:
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|
Services stocks have less foreign input costs that might be subject to tariffs and are also less exposed to potential trade retaliation given they have less non-US sales exposure than Goods companies. Services stocks have faster sales and earnings growth, more stable gross margins, and stronger balance sheets. The relative valuation of Services vs. Goods is slightly elevated versus history.
The Goldman strategists go on to say:
|
|
Services stocks have faster sales and earnings growth, more stable gross margins, and stronger balance sheets. The relative valuation of Services vs. Goods is slightly elevated versus history.
The analysts say that within the services sector, software companies, media and entertainment names, and retailers and banks, could be solid investment bets.
Opinion: Greek bonds now yield less than Treasurys, and that’s as irrational as it was in 2007
More specifically, the bank spotlights Google-parent Alphabet Inc. US:GOOG US:GOOGL Microsoft Corp. US:MSFT, and Amazon.com Inc. US:AMZN as top names. Shares of Alphabet’s class A and C shares are up by about 13% so far this year, those for Microsoft are up 24%, while Amazon shares have climbed 28.4% over the same period.
Underlining their point, Goldman analysts included a chart showing the relative performance of services against returns for goods during periods of escalating U.S.-China trade tensions:
Here’s a fuller list of the largest companies in Goldman’s services group:
|Company||YTD RETURN|
|Facebook Inc. US:FB||44.7%|
|Berkshire Hathaway Inc. Cl B US:BRK||3.2%|
|JPMorgan Chase & Co. US:JPM||16.3%|
|Visa Inc. US:V||22.3%|
|Bank of America US:BAC||22%|
|Cisco Systems Inc. US:CSCO||24.3%|
|Verizon Communications Inc. US:VZ||0.5%|
|Walt Disney Co. US:DIS||23.4%|
|Home Depot Inc. US:HD||14%|
|Mastercard Inc. US:MA||30.6%|
|AT&T Inc. US:T||6.4%|
|UnitedHealth Group Inc. US:UNH||-3.6%|
|Wells Fargo & Co. US:WFC||2.4%|
|Comcast Corp. Cl A US:CMCSA||25.3%|
|Netflix Inc. US:NFLX||35.7%|
|Citigroup Inc. US:C||32%|
|McDonald’s Corp. US:MCD||12%|
|Source: Goldman Sachs and FactSet data|
Here’s a look at the top companies that fall in Goldman’s goods category:
|Company||YTD RETURN|
|Exxon Mobil Corp. US:XOM||13%|
|Procter & Gamble Co. US:PG||14.7%|
|Intel Corp.||7%|
|Pfizer Inc. US:PFE||-6.2%|
|Chevron Corp.||8.5%|
|Merck & Co. Inc. US:MRK||2.8%|
|Boeing Co. US:BA||11.3%|
|Coca-Cola Co. US:KO||1.4%|
|PepsiCo Inc. US:PEP||14.4%|
|Abbott Laboratories US:ABT||5.8%|
|Philip Morris International Inc. US:PM||25.8%|
|Honeywell International Inc. US:HON||29.2%|
|Broadcom Inc. US:AVGO||20.2%|
|Medtronic PLC US:MDT||-2%|
|AbbVie Inc. US:ABBV||-15%|
|United Technologies Corp. US:UTX||29.1%|
|Thermo Fisher Scientific Inc. US:TMO||21.6%|
|Nvidia Corp. US:NVDA||31.7%|
|Source: Goldman Sachs and FactSet data| | ABBV | 137.3 |
https://finance.yahoo.com/news/meghan-markle-surgery-woman-112545796.html | Meghan Markle fan has £23,000 worth of surgery to look like her royal idol | Today's Research Daily features new research reports on 16 major stocks,
including PepsiCo, Inc. (PEP), AbbVie Inc. (ABBV) and Honeywell
International Inc. | May 13, 2019 | Yahoo Finance | Meghan Markle fan has £23,000 worth of surgery to look like her royal idol
A woman has spent £23,000 on cosmetic surgery in a bid to look like Meghan Markle.
Tanya Ricardo, 30, had extensive surgical procedures on both her face and body in order to make her look more like the Duchess.
This included liposuction to transfer fat to her buttocks, fat grafts to her cheeks, further liposuction under the cheeks and chin, breast augmentation from a C-cup to a D-cup, lip fillers and other injectable treatments.
Ricardo, a land technician from Houston, Texas, says, even before her surgery, she has “always resembled” the Duchess – “We both have dark hair, big brown eyes and a structured fine nose”.
Now, she thinks her dramatic transformation takes the likeness one step further.
“But now that I had had a couple of surgeries on my face it accentuates her look on me even more [...] I see it in the shape of my face.”
READ MORE: Mum spends £28,000 to look like Barbie
“When people say they see the resemblance, which for me makes me feel like it was mission accomplished,” she adds.
Ricardo’s surgery on her breasts and buttocks was also inspired by Markle’s curvier frame.
Growing up, she was accused of having anorexia due to her slimness – which she says is natural.
“I have always been a very skinny girl, so I never really felt like I was a woman and surgery has been on my mind.
“People have teased me for my whole life, even to this day, they say things like ‘Eat a cheeseburger’ or they accuse me of having an eating disorder.
READ MORE: Woman dies after undergoing nose job
“This wasn’t and has never been the case, I eat and I love food.”
A single mother of one, it took turning 30 to motivate Ricardo to change the way she looked.
“I feel like a different person and happy, hopefully the negative comments will stop and won’t affect me.
“They transferred some of the extra baby fat in my stomach from pregnancy into my butt.
“I never had a but before, I felt like I never had curves when I was young so it’s great.
“I’ve not fully healed so haven’t seen myself full but my face and top half is great, I can’t wait to show it off at the beach.
READ MORE: Lip fillers advert banned
“My family were concerned initially because they always thought I was beautiful, but after seeing what a wonderful job Dr. Rose did they are happy too.”
She adds: “Now I’m ecstatic, I can’t wait to be able to hit the gym with extra weight in the right places and then I’ll be good to marry another Prince.”
Ricardo isn’t the first woman to spent tens of thousands on surgery to resemble the Duchess.
Earlier this year, Xochytl Greer, 36, underwent five and a half hours of cosmetic surgery to undergo a nose job, liposuction on her stomach and thighs and a buttock lift – all in the name of resembling Markle. | ABBV | 137.3 |
https://finance.yahoo.com/news/daisy-may-cooper-bin-bag-dress-baftas-095844934.html | Actress praised for wearing £5 bin bag dress to BAFTA TV Awards | Today's Research Daily features new research reports on 16 major stocks,
including PepsiCo, Inc. (PEP), AbbVie Inc. (ABBV) and Honeywell
International Inc. | May 13, 2019 | Yahoo Finance | Actress praised for wearing £5 bin bag dress to BAFTA TV Awards
Last night’s BAFTA TV Awards saw celebrities don their best fashion looks for the red carpet.
However, one actress used a totally different tactic to stand out.
‘This Country’ star Daisy May Cooper made a red carpet statement in a gown made from a bin bag.
“[I’m wearing] a sixteen litre bin bag…,” the star of the BBC Three mockumentary series told press at the event.
It cost "about £5", she added.
Cooper’s bin bag dress represented a lot more than just a zany departure from style norms.
The actress saved on her look so that she might donate money to the less fortunate.
"The reason I'm wearing this is if I wore a normal dress, that would cost a lot of money and I thought I'd donate that money to a local food bank and wear bin bags instead,” she explained.
Click below to see the best fashion from this year’s BAFTA TV awards:
Twitter users have praised Cooper for her unusual style and the charitable rationale behind it.
Be the Daisy May Cooper you need to see in the world https://t.co/EZdLnJ1VOA
— Mollie Goodfellow (@hansmollman) May 12, 2019
the fact that daisy may cooper turned up to #baftatv in a bin bag dress made by her mum and donated what she would have spent on a dress to a food bank... the definition of iconic pic.twitter.com/yKW1VoX55l
— liv🌜 (@ahumanmoon) May 12, 2019
Daisy May Cooper you're my idol for a lot of reasons but I'll add this one to the list while im there https://t.co/LZ1iJ6Yu6K
— Lucy Girling (@lucegirling) May 13, 2019
There is so much to love about this but top of my list is how gorgeously confident Daisy May Cooper is in her bin bag dress. Just wonderful. https://t.co/hgB2l8DclC
— Hannah Williams (@flamingnora) May 13, 2019
Bloody brilliant ... what a superb thing to do ... ❤️
— Deb (@Flowermumm) May 12, 2019
Brilliant from Daisy May.
Other celebrities and the media should take note. #BAFTATV
— stroller (@nigeynugs) May 12, 2019
This isn’t the first out-there red carpet ensemble Cooper has worn.
At last year’s BAFTA TV Awards, she wore an asymmetric red dress fashioned from a Swindon football shirt. | ABBV | 137.3 |
https://www.andrezadicaeindica.com.br/quantos-custam-os-produtos-nas-lojas-da-disney-com-video.html | Quanto custam os produtos nas lojas da Disney (com vídeo) | footer-selo-abbv footer-selo-rbbv footer-selo-plagio. © Andreza Dica e
Indica Disney. Todos os direitos reservados. Direitos autorais: todos os
textos deste... | May 27, 2019 | Andreza Dica e Indica Disney | No nosso último post/vídeo sobre as 5 melhores lojas do Magic Kingdom, muita gente nos pediu para ver preços dos produtos vendidos nas lojas da Disney. E eu fiquei meio que numa sinuca de bico, pois os preços dos produtos variam muito. Às vezes um mesmo tipo de produto tem muita variação de preço; pode custa 2, 3 vezes mais.Então tivemos a ideia de fazer um vídeo exatamente sobre isso: preço dos produtos da Disney.
Nós vamos deixar aqui o vídeo completo que gravamos na World of Disney em Disney Springs e mostramos a seleção de 10 tipos de produtos, mostrando como eles podem variar. Não deixe de seguir nosso canal no Youtube, pois semanalmente temos vídeos novos.
Nesse vídeo você vai ver preços dos seguintes produtos Disney:
- camisetas
- chaveiros
- orelhas da Minnie
- bonés
- lápis e canetas
- pelúcias
- vestidos de princesas
- canecas
- porta-retrato
- bolsas
Preços dos produtos Disney
Nós mostramos, por exemplo que uma camiseta pode ter variação de mais de 100% comparada a outra. As pelúcias variam de US$19,99 a US$69,99. E as canetas podem variar mais de 1000%.
Já as orelhas da Minnie são praticamente tabeladas, a menos que seja alguma especial e edição limitada, então não tem muito o que pesquisar.
Mas veja no vídeo como são as variedades de preços para entender do que estamos falando. Vale dar uma bela olhada nos valores dos itens antes de escolher uma lembrancinha. É claro que alguns, mesmo sendo mais caros, são irresistíveis, mas se não se encantou por nada específico, procure os itens mais em conta.
E lembre-se: não deixe de ver o nosso vídeo com os valores dos produtos Disney na loja. | ABBV | 137.3 |
https://www.thepharmaletter.com/article/abbvie-builds-on-skyrizi-data-with-wdc-findings | AbbVie builds on Skyrizi data with WCD findings | US drugmaker AbbVie's (NYSE: ABBV) hopes that Skyrizi (risankizumab) will
help to replace revenues lost when Humira (adalimumab) competition starts
to bite,... | Jun 11, 2019 | The Pharma Letter | 11-06-2019 Print
US drugmaker AbbVie’s (NYSE: ABBV) hopes that Skyrizi (risankizumab) will help to replace revenues lost when Humira (adalimumab) competition starts to bite, have been boosted further.
The company has announced new two-year data on its use in plaque psoriasis at the World Congress of Dermatology (WCD).
Findings show that Skyrizi can not only offer skin clearance at two years of treatment for the majority of patients, but re-treatment complete following…
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Chairman, Sanofi Aventis UK
AbbVieBiotechnologyBoehringer IngelheimConferencesDermatologicalsDrug TrialInflammatory diseasesResearchSkyriziUSAWCD | ABBV | 137.3 |
https://www.kiplinger.com/slideshow/investing/t052-s001-beware-the-risks-in-these-13-blue-chip-stocks/index.html | 13 Blue-Chip Stocks With Risks You Need to Watch | AbbVie (ABBV, $76.95) is another blue-chip pharma stock and the owner of
Humira, the world's No. 1 selling prescription drug. Humira generated sales
of more... | Jun 11, 2019 | Kiplinger | 13 Blue-Chip Stocks With Risks You Need to Watch
Every company faces headwinds at some point.
Every company faces headwinds at some point. Even the bluest of blue-chip stocks must tackle a serious threat from time to time.
Dangers can come from anywhere. They can be industrial accidents such as the 2010 Deepwater Horizon oil spill that cost BP plc (BP) nearly $65 billion in legal fees, settlements and cleanup costs as of 2018. There are technological squabbles, such as Apple’s (AAPL) 2017 patent infringement lawsuit settlement with Nokia, which forced the iPhone maker to pay $2 billion upfront as well as ongoing royalties from iPhone sales. Pfizer (PFE) was weighed down considerably in 2011 as it was about to lose market exclusivity on its blockbuster cholesterol drug Lipitor – this so-called patent cliff is a frequent headwind for pharma stocks.
Some blue chips, such as Apple and Pfizer, take the hit and keep on chugging. Others, like BP, take much longer to recover – if they ever do.
You can get some insight into potential headwinds by reading the “Risk Factors” section of each company’s annual 10-K filing. Companies are required to list, by order of importance, the most significant risks challenging future profits or stock performance. Some risks apply to the entire economy, some to that particular industry and a few are unique to that company.
Here are 13 blue-chip stocks that currently are navigating their way around a landmine or two. This isn’t necessarily a list of stocks to sell, however. Great companies can often overcome major setbacks, and many of these companies are working toward that. But retirees need to be especially aware of forces that threaten substantial shorter-term losses. And even the most ardent bull should acknowledge and understand significant risks – even if they merely set a stock up for a dip-buying situation.
Disclaimer
Data is as of June 10. Dividend yields are calculated by annualizing the most recent payout and dividing by the share price.
- Market value: $499.0 billion
- Dividend yield: N/A
- Facebook (FB, $174.82) disclosed in its first-quarter results that it anticipates paying fines of up to $5 billion to settle lawsuits from federal regulators. The company has been negotiating with the Federal Trade Commission to settle charges that it violated a 2011 consent decree requiring that consumers be provided with “clear and prominent notice” before sharing customer data. Regulators say Facebook violated the agreement by not informing users that it was sharing their data with Cambridge Analytica during the 2016 presidential campaign. The company had set aside $3 billion to cover payment.
Facebook also faces big fines from the European Union under new privacy laws. Regulators in France, Belgium, Germany and Austria may fine Facebook, and its Instagram and WhatsApp services, up to 4% of annual revenues for privacy violations, which could result in additional fines of up to $1.63 billion for each business.
And just this month, Facebook was among four prominent blue-chip stocks in the tech sector – along with Apple, Amazon.com (AMZN) and Google parent Alphabet (GOOGL) – facing potential antitrust scrutiny, according to various media reports.
Facebook’s ability to grow going forward will be tied to just how well it can continue monetizing its 2.7 billion monthly active users – across all its apps, including Instagram, Messenger and WhatsApp – under tighter scrutiny of its privacy and data-use practices. CEO Mark Zuckerberg has some solutions, as he always does, including drawing in more than 3 million advertisers for its Stories visual product.
Legal costs do add up, though. Facebook grew first-quarter revenues 26%, but corporate expenses swelled by 80% because of the funds set aside for a potential lawsuit settlement. That helped drag operating margins down from 46% to 22%, slashing profits by 51% to $2.43 billion.
Eli Lilly
- Market value: $110.6 billion
- Dividend yield: 2.3%
- Eli Lilly (LLY, $113.93), along with rivals Sanofi (SNY) and Novo Nordisk (NVO), are defendants in class-action lawsuits challenging their insulin pricing practices. These three companies supply most of the world’s insulin.
The suits stem from 2017, when the plaintiffs claimed those companies colluded to boost list prices of insulin, The plaintiffs originally sued the three drugmakers in 2017, alleging they colluded to boost list prices of insulin, which the American Diabetes Association said tripled between 2002 and 2013, and which the nonprofit Health Care Cost Institute says doubled between 2012 and 2016. Some patients with no insurance or large deductibles have been stuck with out-of-pocket costs for insulin as high as $900 per month.
Racketeering charges have been dismissed, but other parts of the lawsuit are moving forward. Commenting recently on insulin pricing, FDA Commissioner Scott Gottlieb said his agency would push for the development of lower-cost biosimilar versions of insulin.
Lilly’s insulin drug (Humalog) is its second-highest revenue generator, accounting for more than $2.9 billion of global sales. Lilly hopes to soften criticism of its pricing by launching a generic version of Humalog that will cost half as much. The new drug (Insulin Lispro) is priced at $137 versus $275 for Humalog.
Goldman Sachs analyst Terence Flynn assigned a “Buy” rating on LLY in late May. He not only praised product cycles in four growing categories, but said Wall Street is sleeping on Lilly’s longer-term potential in diabetes.
Bayer AG
- Market value: $55.7 billion
- Dividend yield: 5.2%
German blue-chip Bayer AG (BAYRY, $14.93) unwittingly acquired a potential ticking time bomb when it purchased Monsanto, the maker of Roundup weed killer, in 2018 for $63 billion. Since acquiring Monsanto, Bayer has been hit by thousands of Roundup lawsuits posing risks that have cut its share price by nearly half.
A U.S. jury recently awarded a couple $55 million for pain and suffering and $2 billion in punitive damages after concluding Roundup exposure caused their cancer. This was the third Roundup lawsuit Bayer has lost. The first two resulted in jury awards of $78.5 million and $80 million, respectively.
Bayer plans to challenge the verdicts, based on recent findings by the Environmental Protection Agency that glyphosate, the main ingredient in Roundup, is not a carcinogen.
More than 13,400 plaintiffs have filed Roundup lawsuits in state courts, and a mediator has been appointed to oversee another 900 Roundup lawsuits at the federal level. The next federal Roundup trial has been scheduled for February 2020.
Bayer remains the market leader in agricultural chemicals and a major player in pharmaceuticals, with blockbuster prescription drugs such as Xarelto and Eylea and over-the-counter drugs like Bayer aspirin, Aleve and Claritin. That’s enough to keep analysts interested, despite all the legal uncertainty. The stock has 13 “Buy” or “Overweight” ratings, 11 “Holds” and just one “Sell,” according to The Wall Street Journal. Zacks Research is tracking steadily rising analyst EPS estimates, too, and has upgraded its BAYRY rating to “Strong Buy.”
Johnson & Johnson
- Market value: $369.1 billion
- Dividend yield: 2.7%
- Johnson & Johnson (JNJ, $139.02) is the world’s largest health care company and an industry leader in prescription drugs, medical devices and consumer health care. The company owns oncology drugs Darzalex, Imbruvica and Zytiga, as well as immunology drugs Stelara and Tremfya. J&J also is launching a nasal spray for treating depression (Spravato) this year that analysts say eventually could produce $3 billion in annual sales.
Its consumer health product line is robust, too, including household names like Listerine, Band-Aid, Aveeno and Tylenol. But JNJ’s problems actually stem from this division.
The company’s well-known Johnson’s Baby Powder product has become a major drag on earnings. JNJ faces more than 14,000 lawsuits claiming that its talcum baby powder causes cancer, and so far, awards from litigation have been enormous. Last year, a Missouri jury awarded nearly $4.7 billion – nearly 6% of 2018’s full-year revenues – to a group of 22 women last year, and the company suffered a $29.4 million verdict in California this March. JNJ plans to appeal these verdicts but still faces more than a dozen new trials, primarily in California, over the next few months.
The company’s mounting legal costs contributed to a 14% decline in first-quarter earnings per share.
Despite these challenges, JNJ remains one of the best-known Dividend Aristocrats, with 57 consecutive years of dividend growth. And while analysts are mixed on JNJ, the largest number (nine) of 19 covering analysts say it’s buy-worthy. Goldman Sachs started the company at “Buy” in late May, touting its diversified portfolio and low exposure to Medicare/Medicaid, which should make it less vulnerable to policy arguments heading into 2020 elections.
Wells Fargo
- Market value: $208.0 billion
- Dividend yield: 3.9%
Once considered America’s most valuable bank brand, serving one in three U.S. households, Wells Fargo (WFC, $46.27) now has a tarnished reputation after opening millions of fraudulent accounts, allowing illegal lending practices and knowingly selling sub-standard mortgages. The bank recently paid shareholders $240 million to settle a lawsuit over millions of bogus customer accounts created to boost performance metrics. Wells Fargo has already paid $160 million in government fines and a settlement of $480 million to institutional investors over the fake accounts and expects to pay out $2.7 billion more, exceeding previous estimates.
In addition to a substantial fine, the Federal Reserve restricted the bank’s growth by imposing a cap on assets. This cap will remain in place under Fed officials are convinced the bank’s governance and internal controls have improved.
Over the past two years, Wells Fargo has closed hundreds of branches and decided to cut more than 26,000 employees. This year, WFC shares are barely above breakeven while blue-chip bank stocks such as Bank of America (BAC, +13.9%) and Citigroup (C, +28.9%) have soared. Analysts have soured on the stock, with 15 of 31 covering Wells Fargo calling it a “Hold,” and another four in the “Sell” camp.
Goldman Sachs’ Richard Ramsden was one of several analysts to downgrade the stock in April following Wells Fargo’s first-quarter earnings report, citing lower guidance for net interest income and the sudden departure of CEO Tim Sloan.
Roche Holdings
- Market value: $233.7 billion
- Dividend yield: 3.1%
Swiss drugmaker Roche Holdings (RHHBY, $34.22) is taking a steep dive off the patent cliff with three of its top-selling drugs (Rituxan, Herceptin and Avastin) all on target to lose patent exclusivity during the second half of 2019. These oncology drugs accounted for $18.8 billion and 43% of the company’s revenues last year.
Roche has dominated the cancer drug market since 2002 largely thanks to its Genentech acquisition, but faces increased competition as some of its key drugs decline and rivals such as Bristol-Myers Squibb (BMY) battle for share. Market research firm EvaluatePharma projects a 12% decline in revenues from Roche’s cancer franchise over the next six years, even as the overall cancer drug market is poised to double in size.
The company is counting on new drugs in non-oncology areas to help close the revenue gap. One such drug is multiple sclerosis treatment Ocrevus, which analysts expect eventually will generate $5 billion in peak annual sales. Roche is also utilizing M&A to build its presence in new disease areas. Its planned purchase of Spark Therapeutics, a leader in gene therapies, will help Roche build a major presence in hemophilia treatments.
Analyst appear optimistic that Roche will be able to replace revenues lost from expiring drugs with sales of new drugs. The consensus rating among the 22 analysts following RHHBY is “Buy,” and their consensus estimates are for low-single-digit sales and EPS growth this year.
Allergan
- Market value: $41.5 billion
- Dividend yield: 2.3%
Drugmaker Allergan (AGN, $126.61) tried to extend the patent life of its blockbuster eye drug Restasis – at $1.2 billion in 2018, it’s Allergan’s second-biggest moneymaker behind wrinkle treatment Botox – by transferring ownership of its patent to an American Indian tribe. Despite this unusual step, a U.S. Appeals Court ruled the company’s patents invalid last year, and the Supreme Court refused to hear the case in April, paving the way for new generic competitors.
Allergan still enjoys strong sales of Botox, which rose 9% in the first quarter and contributed $868 million to revenues. The company also has a clear winner in Vraylar, an antipsychotic that is the fastest-growing branded drug in its category. Vraylar revenues have expanded by double digits every quarter since its launch, including 70% sales growth during Q1 2019. Allergan anticipates launching Vraylar for a new indication (bipolar depression) later this year.
The company has other drugs in the pipeline poised for launch or other important trial dates over the next 18 months, including abicipar (macular degeneration), bimatoprost (glaucoma) and ubrogepant (migraine). It also expects to launch a device – CoolTone, a muscle stimulator – in the second half of 2019.
Allergan recently raised 2019 sales and earnings guidance and expects cash flow to top $5 billion this year, providing ample fodder for share repurchases, dividend growth and acquisitions.
AGN’s expanding pipeline and cash flow generating abilities have the majority of covering analysts optimistic about the stock’s prospects. Allergan is rated “Buy” or “Strong Buy” by 14 analysts and “Hold” by nine. Cantor Fitzgerald analyst Louise Chen – one of the “Holds” – recently called Allergan one of the highest-quality, most innovative companies in the pharmaceutical industry. She is remaining on the sidelines, however, while she looks for improved earnings visibility.
AbbVie
- Market value: $113.8 billion
- Dividend yield: 5.6%
- AbbVie (ABBV, $76.95) is another blue-chip pharma stock and the owner of Humira, the world’s No. 1 selling prescription drug. Humira generated sales of more than $20 billion in 2018, which represented more than half of AbbVie’s revenues.
But Humira’s day is coming. The drug already went off-patent in the European Union last year. The company has fended off eight would-be biosimilar competitors in the U.S., keeping them at bay through 2023. Nonetheless, this is an eventual major threat – one that AbbVie plans to address by building a rich drug pipeline.
The company has big expectations for oncology drugs Imbruvica and Venclexta, which already contribute $4 billion to sales and could surpass $9 billion by 2025. Other top performers are immunology drugs upadacitinib and risankizumab, which may add $10 billion to sales in the next six years. In all, AbbVie anticipates sales of non-Humira drugs rising to $35 billion by 2025, more than offsetting declining Humira sales.
AbbVie’s yearly $4 billion to $5 billion investments in drug R&D are paying off. Research firm EvaluatePharma recently rated its clinical pipeline the second best in the pharma industry. AbbVie has more than 20 new products (or new indications of existing drugs) positioned for a 2020 launch.
AbbVie split from Abbott Laboratories (ABT) in 2013, with both companies keeping the title of Dividend Aristocrat following the breakup. ABBV has kept up the annual payout hikes since then, registering its 47th consecutive year of dividend increases in April with a substantial 35% improvement to 71 cents per share.
Nonetheless, ABBV shares are off more than 16% this year. Most of the losses came in January, when the company announced a $4 billion write-down of an acquisition, then followed that up with disappointing fourth-quarter earnings.
General Electric
- Market value: $87.6 billion
- Dividend yield: 0.4%
Under a barrage of bad news and mounting debt, General Electric (GE, $10.05) – arguably relegated to former blue-chip status at this point – suffered a meltdown in 2017 that sent its profits and shares plunging. The company is on its third CEO in two years, and it’s working to spin off various units to generate more value.
The next big challenge facing General Electric is its woefully underfunded pension plan. About 70% of GE’s retired and active workers are covered by plans that require funds be set aside for future payments. The company’s workers are guaranteed $92 billion in payments, but the company has set aside only $69 billion to meet its obligations.
General Electric contributed $6 billion to the plan in 2018, which could cover required cash contributions through 2020, but is gambling on a rising stock market. The company’s pension burden increases when the stock market falls, since the value of plan assets shrinks. A prolonged bear market could create major liquidity problems for GE.
However, UBS analyst Peter Lennox-King thinks GE’s pension costs will fall in coming years, boosting EPS as a result. He looks for a $1 billion to $3 billion drop in General Electric’s pension costs by 2020, which could add 29 cents per share to earnings – considerable given consensus estimates for 75 cents. Lennox-King, who rates GE a “Buy,” reasons that the company’s non-ERISA (Employee Retirement Income Security Act of 1974) pension obligations can be funded from current cash flow and don’t require pre-funding.
Indeed, General Electric’s ERISA-based obligation is about 80% funded. The average pension plan across the Standard & Poor’s 500-stock index was 85% funded as of December 2018 – not much of a discrepancy.
Delta Air Lines
- Market value: $35.8 billion
- Dividend yield: 2.6%
- Delta Air Lines (DAL, $54.73), one of a handful of blue-chip stocks in the airline space, also faces challenges from its massively underfunded pension plan. The company had pension obligations totaling $19.8 billion as of the end of last year, but funding of only $13.5 billion. Delta’s 68% funding ratio gave it one of the weakest coverage ratios in the S&P 500. The company said it would contribute $500 million in 2019, but that still puts it well shy of its obligation.
Delta’s pension woes are the result of many years of overly rosy estimates of what it could earn from invested pension assets. From 2008 to 2017, the company anticipated investment returns totaling $7.7 billion, but actual returns were only $5.8 billion.
Its overly optimistic assumptions are a threat to future earnings since every 50-basis point decline in plan returns adds $73 million to pension expense. Using the more conservative return assumptions employed by other S&P companies would add as much as $438 million to Delta’s pension expense. David Trainer, CEO of independent research firm New Constructs, LLC, estimated last year that the hit to earnings would come to 48 cents per share.
Despite its pension issues, however, Delta has delivered seven consecutive quarters of better-than-expected financial results, and Wall Street is highly bullish about this blue-chip airline stock. Among the 22 analysts following Delta, 16 have “Buy” or “Strong Buy” ratings, while six say it’s a “Hold.” A slew of analysts reiterated their “Buy” calls a couple months ago following the company’s earnings report. That includes Cowen analyst Helane Becker, who raised her price target given Delta’s solid core business and the renewal of a credit card partnership with American Express (AXP).
Lockheed Martin
- Market value: $99.3 billion
- Dividend yield: 2.5%
- Lockheed Martin (LMT, $351.60), the largest of the defense-industry blue chips, also has issues with a poorly funded pension plan. Lockheed Martin was forced to contribute $5 billion to its pension plan in 2018 – roughly equivalent to a full year of earnings – to reduce a pension funding gap that had swelled to $15.6 billion, or approximately 16% of the company’s current market value. The 2018 contribution was a big change from LMT’s typical contribution, which has averaged only about $50 million annually in recent years.
Even with the $5 billion infusion, Lockheed Martin’s plan remains noticeably underfunded. The company ended 2018 with pension obligations totaling $43.3 billion and pension assets valued at $32.0 billion, creating a funding gap of $11.3 billion.
Regardless of pension challenges, Lockheed Martin is off to a roaring start in 2019. A broader bull run and better-than-expected first-quarter results (EPS of $5.99 beat consensus analysts by nearly 40%) have sent LMT shares 34% higher. produced a 30% year-to-date share price gain.
A major growth driver for Lockheed Martin is its F-35 fighter jet program. Poland formally ordered 32 fighter jets in May, and other NATO allies are purchasing aircraft as well. Japan is the largest buyer, with 105 F-35s ordered, and the UK, the Netherlands, Norway and Italy have all ordered jets. The U.S. plans to purchase 2,663 F-35 fighter jets for the Air Force, Navy and Marines in coming decades. Lockheed Martin expects to sell 4,600 fighters over the life of the F-35 program, valued by analysts at over $1.3 trillion.
Each of its four businesses recorded sales and profit growth in the first quarter, causing Lockheed Martin to raise its 2019 EPS guidance by 90 cents per share, to a range of $20.05 to $20.35.
General Motors
- Market value: $51.1 billion
- Dividend yield: 4.2%
Creditors of General Motors (GM, $36.01) continue to seek higher awards as part of a revised settlement of the company’s legacy ignition switch lawsuit. GM allegedly sold vehicles with faulty ignition switches, which could have prevented airbags from deploying during a crash.
If approved, the new settlement could cost General Motors an additional $1 billion in stock and force the company to accept additional claims totaling more than $35 billion. General Motors said in its 2018 annual report that it opposes the revised settlement but was unable to estimate the losses or a range of losses that could result if courts rule in favor of its creditors.
Despite these lawsuit challenges, analysts remain impressed with GM’s competitive positioning in trucks and autonomous vehicles, assisted by its popular OnStar service. Bank of America/Merrill Lynch analyst John Murphy has a “Buy” rating and $63 price target on GM stock. Morgan Stanley analyst Adam Jonas believes GM will benefit from strong demand for its trucks and SUVs for several more quarters and rates the shares “Overweight” (equivalent of “Buy”).
And General Motors is compensating investors generously with a 4%-plus dividend yield at current prices.
PG&E
- Market value: $10.5 billion
- Dividend yield: N/A
- PG&E (PCG, $19.77), the holding company for California utility Pacific Gas & Electric, certainly had a place among blue-chip stocks until relatively recently. However, it filed for bankruptcy in 2019 due to crushing wildfire liability costs. California officials concluded that sparks from PG&E equipment caused multiple massive wildfires in 2017 and 2018 and plaintiffs are seeking damages estimated to exceed $30 billion.
Although a bankruptcy filing doesn’t make litigation disappear, it does consolidate claims into a single proceeding before a bankruptcy judge, potentially avoiding excessive jury awards.
Costs relating to wildfire-related inspections, cleanup and legal fees trimmed 70 cents per share from the company’s first-quarter 2019 earnings. PG&E won’t provide full-year 2019 guidance due to uncertainty around the lawsuits, but estimates at least $1 billion-$1.4 billion of additional wildfire-related expenses this year.
PG&E is America’s largest electric utility, providing natural gas and electricity to more than two-thirds of California. The utility is no stranger to bankruptcy, having suffered through one 18 years ago when it was forced to sell electricity below costs. The company reemerged from bankruptcy in 2004 after paying $10.2 billion to creditors.
PCG shares have lost nearly two-thirds of their value from their 2017 highs, yet have rebounded considerably from earlier in 2019, when they plunged below $7. The 13 analysts who cover the stock aren’t howling to sell, either. Eleven are staying on the sidelines with cautious “Holds,” but two analysts – who are banking on lighter-than-expected penalties and see opportunities in this beaten-down stock – consider it a “Buy.”
Citi analyst Praful Mehta is one of them, actually upgrading the stock to “Buy” in February and reiterating its call just a few days ago. “We believe legislation (to socialize wildfire costs across several other groups) will be passed by the end of session and not July 12th. As noted earlier, we think this legislation will follow the path of least resistance,” he writes.
Lisa currently serves as an equity research analyst for Singular Research covering small-cap healthcare, medical device and broadcast media stocks.
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https://finance.yahoo.com/news/horseman-capital-management-return-aum-053917808.html | Horseman Capital Management’s Return, AUM, and Holdings | (NYSE:ABBV). The fund's stake was lowered by 48% to 11,000 Abbvie's shares
worth $886,000. On the other side, the fund raised its interest in Barclays
Bk Plc (... | Jun 10, 2019 | Yahoo Finance | Horseman Capital Management’s Return, AUM, and Holdings
Horseman Capital Management is a hedge fund launched in 2000 by John Horseman, with its headquarters located in London (Belgravia) and Jersey, UK. Its founder, John Horseman, has been the fund’s CEO and Director since its launching. He was also the fund’s portfolio manager until 2006 when the position was taken over by Russell Clark, who is the fund's current investment and portfolio manager. Prior to founding his own investment firm, John Horseman was a manager at GAM (Global Asset Management), where he spent 10 years. Russel Clark was also employed at GAM before joining Horseman Capital, and prior to GAM, he cut his teeth at UBS Wealth Management. He holds a Bachelor degree in Economy and Asian studies, from the Australian National University, from which he graduated in 1999, taking a 1-year exchange at Kansai University, Japan.
The fund, owned entirely by its founders and run by the small team of experts, utilizes global long/short equity strategy. It mainly focuses on mid-cap (typically between $2 and $10 billion of market cap) and large-cap companies (over $10 billion), with the preference to those with market caps of more than $5 billion, and it is oriented toward investing in pooled funds. As the most recent data from their website shows, total assets under management were over $700 million on April 30th, 2019.
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photofriday/Shutterstock.com[/caption]
When it comes to the fund's performance, its Horseman Global Fund, L.P., for example, had both positive and negative returns in the last couple of years. In 2013, it brought back 19.80%, followed by a decrease in 2014 and a return of 12.49%. During the next year, 2015, the fund made slight progress returning 20.52%, which was the highest annual return in the last few years. In 2016, however, the company returned the lowest figure of -24.14%, recovering in the following year, with a positive return of 2.91%. Last year, through October, Horseman Global Fund, L.P. lost 7.95%. Its total return amounted to 237.45%, with a compound annual return of 7.81%, and the worst drawdown was 36.89.
Insider Monkey’s mission is to identify promising (and also terrible) hedge fund stock pitches and share them with our subscribers. We launched a long activist investing strategy in our monthly newsletter 2 years ago. This strategy’s stock picks returned 61% in 2 short years, vs. a gain of 21% for the S&P 500 Index ETF (SPY). Last October we shared one of our stock picks, Ascendis Pharmaceuticals (ASND), in a free sample issue of our monthly newsletter (you can still download it free of charge). The stock doubled in less than 5 months.
We have also been very successful at identifying stocks that will decline even in a bull market. We launched our short strategy a little more than 2 years ago and share our short stock picks in our quarterly newsletter. This strategy’s picks lost 30.9% since then, vs. a gain of 24% for the S&P 500 Index. This means our short strategy actually outperformed the market by nearly 55 percentage points (let us know if you don’t understand how the outperformance for a short strategy is calculated).
Recently our monthly newsletter identified another undervalued stock that is expected to increase its earnings by more than 10% annually and trades at only 10 times its 2019 earnings. We expect this stock to return 60% in the next 12-24 months. We take a closer look at hedge funds like Horseman Capital Management in order to identify their best and worst ideas.
At the end of the first quarter of 2019, Horseman Capital Management’s equity portfolio was valued $290.64 million, which was by 4.92% higher compared to the previous quarter when it was $277.01 million. During the first quarter in 2019, the fund added 11 new positions, while removing 2 positions, having left with 45 positions at the end of the quarter. Of the 30 Most Popular Stocks Among Hedge Funds in Q1 of 2019, Horseman Capital Management held several of them, including Facebook, Inc. (NASDAQ:FB) as the biggest one.
During the first quarter of 2019, the fund lost its interest in two positions. The bigger one was Booking Holdings Inc. (NASDAQ:BKNG) which was worth $241,000 at the end of the last quarter of 2018, with 140 shares. Another sold position was iPath Series B S&P 500 VIX Short-Term Futures ETN (NYSE:VXX) which was worth $2.35 million, comprising of 50,000 shares.
Horseman Capital decided to trim 16 of its stakes during the Q1 2019. Cognizant Technology Solutions Corp (NASDAQ:CTSH) was lowered the most, more precisely, by 50% to 10,000 shares worth $724,000. The second company where the fund reduced its holdings the most was Abbvie Inc. (NYSE:ABBV). The fund’s stake was lowered by 48% to 11,000 Abbvie's shares worth $886,000. On the other side, the fund raised its interest in Barclays Bk Plc (NYSE:BCS), increasing its stake by 1536% to 817,600 shares, worth $23.92 million.
Click here to read the rest of the article, where we discuss Horseman Capital's biggest positions at the end of Q1 2019.
Disclosure: None. This article was originally published at Insider Monkey. | ABBV | 137.3 |
https://www.newswire.ca/news-releases/abbvie-s-maviret-tm-now-listed-on-the-nova-scotia-and-manitoba-formularies-828225080.html | AbbVie's MAVIRET™ now listed on the Nova Scotia and ... | MONTREAL, June 10, 2019 /CNW/ - AbbVie (NYSE: ABBV), a global, research and
development-based biopharmaceutical company announced today that MAVIRETTM
... | Jun 10, 2019 | Newswire.ca | 10 Jun, 2019, 08:00 ET
- MAVIRET is the first and only 8-week, pan-genotypic treatment for patients with chronic hepatitis C virus (HCV) infection without cirrhosis and who are new to treatment.*1
- MAVIRET is the only pan-genotypic treatment approved for use in patients across all stages of chronic kidney disease (CKD).
MONTREAL, June 10, 2019 /CNW/ - AbbVie (NYSE: ABBV), a global, research and development-based biopharmaceutical company announced today that MAVIRETTM (glecaprevir/pibrentasvir tablets) is now listed on the Nova Scotia Formulary and on the Manitoba Drug Benefits and Interchangeability Formulary, both effective since May 31, 2019. MAVIRET is a once-daily ribavirin-free treatment for adults with chronic hepatitis C virus (HCV) infection across all major HCV genotypes (GT1-6).2 It is the only 8-week, pan-genotypic treatment for patients without cirrhosis and who are new to treatment.*
"In Nova Scotia, it is possible to reach the World Health Organization's target of eliminating viral hepatitis as a major public threat by 2030. But in order to be successful, we need to implement strategies that include prevention, screening, timely and rapid testing, effective treatment and patient centred care for everyone living with hepatitis C," says Dr. Lisa Barrett, MD, PhD, FRCPC, Assistant professor, Division of Infectious Diseases, Department of Medicine, Department of Microbiology & Immunology, Dalhousie University. "Today, with treatments including MAVIRET, we should be able to treat almost all people living with hepatitis C infection regardless of their background. This is very important for each individual person but also for elimination because treatment helps prevent the spread of HCV."
MAVIRET is listed on the Nova Scotia Formulary for treatment-naive or treatment-experienced adult patients with chronic hepatitis C genotype 1,2,3,4,5 or 6 infection.3
"At the Hepatitis Outreach Society of Nova Scotia (HepNS), we've worked over the last decade to promote healthy living through information and support for people living with hepatitis C. But more importantly, we've been committed to reducing the transmission rates. We are hopeful that with newer medications like MAVIRET being available in Nova Scotia and New Brunswick, our members will be able to seek the appropriate treatment and finally shed the stigma associated with this disease," explains Alex MacDonnell, Acting Executive Director of HepNS.
MAVIRET is listed on the Manitoba Drug Benefits and Interchangeability Formulary for treatment-naive or treatment-experienced adult patients with chronic hepatitis C genotype 1,2,3,4,5 or 6 infection.4
"Hepatitis C is a serious health concern. When left untreated it leads to complications including liver cancer," explains Dr. Kelly Kaita, Hepatologist, Director, Viral Hepatitis Investigative Unit at the University of Manitoba. "Today, we have the knowledge and the expertise to test, diagnose and treat Canadians living with this deadly disease. Moreover, we have the right treatments, such as MAVIRET, that can cure the disease in as little as eight weeks. Now is the time to act, especially as we are working towards eradicating this virus by 2030."
MAVIRET's efficacy and safety were evaluated in nine phase II-III clinical trials, in over 2300 patients with genotype 1, 2, 3, 4, 5 or 6 HCV infection and with compensated liver disease (with or without cirrhosis).
About Hepatitis C
An estimated 250,000 people in Canada are living with chronic hepatitis C but as many as 44% are not aware that they have it.5 Left undiagnosed and untreated, chronic hepatitis C can lead to cirrhosis, liver cancer or liver failure. Currently, hepatitis C is the leading indication for liver transplant in Canada.6 AbbVie supports a range of efforts to help elevate and prioritize HCV elimination because we know achieving the shared goal of elimination by 2030 will take more than medicine. It will take transparent and collaborative partnerships with all stakeholders – industry, healthcare providers, healthcare systems, patient groups and their support networks. Joint efforts and maximizing the time we have left will enable us to reach this goal.
About MAVIRET
MAVIRET is approved in Canada for the treatment of chronic hepatitis C virus (HCV) in adults across all major genotypes (GT1-6).7 MAVIRET is a pan-genotypic, once-daily, ribavirin-free treatment that combines glecaprevir (100 mg), an NS3/4A protease inhibitor, and pibrentasvir (40 mg), an NS5A protein inhibitor. MAVIRET is taken once daily as three oral tablets.7
MAVIRET is an 8-week, pan-genotypic treatment that makes a virologic cure** possible in patients without cirrhosis who are new to treatment.*,1 These patients represent the majority of people infected with HCV. MAVIRET is also approved in patients with specific treatment challenges, including those with compensated cirrhosis, who are carriers of one of the major genotypes, and those who previously had limited treatment options, such as patients with severe CKD, post-liver and post-renal transplant recipients*** and those patients with genotype 3 HCV infection.7 MAVIRET is the only pan-genotypic treatment approved for use in patients across all stages of CKD.7
Glecaprevir was discovered during the ongoing collaboration between AbbVie and Enanta Pharmaceuticals (NASDAQ: ENTA) to develop HCV protease inhibitors and therapeutic regimens that include protease inhibitors.
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* Patients without cirrhosis and new to treatment with direct-acting antivirals (DDAs), (i.e., either treatment-naive or did not respond to previous interferon-based treatments (pegylated interferon [peg IFN] +/- ribavirin or sofosbuvir-ribavirin +/-peg IFN).
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** Patients who achieve a sustained virologic response at 12 weeks post treatment (SVR12) are considered cured of hepatitis C.
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***MAVIRET is recommended for 12 weeks in liver or kidney transplant recipients who are HCV GT1-6 treatment-naive or HCV GT-1, -2, -4, -5 or -6 PRS (IFN or peg IFN, ribavirin and/or sofosbuvir)-treatment experienced. A 16-week treatment duration should be considered in transplant patients who are HCV GT-1 NS5A inhibitor experienced (but NS3/4A inhibitor-naive) or HCV GT-3 PRS- treatment experienced.
About AbbVie Care
Canadians prescribed MAVIRET will have the opportunity to be enrolled in AbbVie Care, AbbVie's signature care program. The program is designed to provide a wide range of customized services including reimbursement and financial support, pharmacy services, personalized education and ongoing disease management support throughout the treatment.
About AbbVie
AbbVie is a global, research and development-based biopharmaceutical company committed to developing innovative advanced therapies for some of the world's most complex and critical conditions. The company's mission is to use its expertise, dedicated people and unique approach to innovation to markedly improve treatments across four primary therapeutic areas: immunology, oncology, virology and neuroscience. In more than 75 countries, AbbVie employees are working every day to advance health solutions for people around the world. For more information about AbbVie, please visit us at www.abbvie.ca and www.abbvie.com. Follow @abbvieCanada and @abbvie on Twitter or view careers on our Facebook or LinkedIn page.
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1 Decisions Resources Group. Hepatitis C virus: disease landscape & forecast 2016. January 2017.
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2 CADTH Canadian Drug Expert Committee Recommendation – Final. www.cadth.ca/sites/default/files/cdr/complete/SR0523_Maviret_complete-Jan-25-18.pdf. Accessed June 2019.
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3 Nova Scotia Pharmacare. Nova Scotia Formulary. https://novascotia.ca/dhw/pharmacare/pharmacists_bulletins/Pharmacists_Bulletin_May_19-04.pdf. Accessed June 2019.
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4 Manitoba Pharmacare Program. Manitoba Drug Benefits and Interchangeability Formulary. www.gov.mb.ca/health/mdbif/bulletin104.pdf. Accessed June 2019.
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5 Canadian Network on Hepatitis C (CanHepC). Blueprint to inform hepatitis C elimination efforts in Canada.
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www.canhepc.ca/sites/default/files/media/documents/blueprint_hcv_2019_05.pdf. Accessed June 2019.
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6 The Canadian Liver Foundation. www.liver.ca/how-you-help/advocate/. Accessed June 2019.
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7 AbbVie Corporation MAVIRET (glecaprevir/pibrentasvir tablets) Product Monograph. Date of Preparation: August 16, 2017. Date of Revision: November 28, 2018. http://www.abbvie.ca/content/dam/abbviecorp/ca/en/docs/MAVIRET_PM_EN.pdf. Accessed June 2019.
SOURCE AbbVie
For further information: Media: Muriel Haraoui, AbbVie Canada, 514-717-3764, [email protected]
Share this article | ABBV | 137.3 |
https://seekingalpha.com/article/4269369-how-to-retire-62-1_25-million | How To Retire At 62 With $1.25 Million | Abbvie (ABBV - 5.5%) Marathon Petroleum (MPC - 4.5%) Rio Tinto (RIO - 5.3%)
Huntington Bancorp (HBAN - 4.2%). All these are decent quality companies. | Jun 10, 2019 | Seeking Alpha | How To Retire At 62 With $1.25 Million
Summary
- Seeking Alpha helps investors and retirees facing current issues. One major issue is producing enough income without excess risk.
- The stock market today is painfully expensive, but the lower-risk positions are less expensive compared to the high-risk stocks.
- Dividend investing is a great source of income for a retiree.
- Taking social security early might be the right choice or you. If you want to delay, you can utilize short-term Treasury ETFs to protect capital.
- One of the most effective ways to increase income without raising volatility is to include preferred shares as part of the portfolio.
- Looking for more? I update all of my investing ideas and strategies to members of The REIT Forum. Start your free trial today »
This research report was produced with assistance from Big Dog Investments.
Well, lads, it’s time for this couple to retire.
When you’re ready for retirement, you need to be able to balance yield with safety. Too many investors focus on only one aspect. One way to improve yield, as we will demonstrate, is to include preferred shares. Several of the preferred shares we are discussing in this article were covered more extensively in Preferred Shares Week 154.
Investing for Retirement
Retirees need to know how to build a steady portfolio, plan their cash flows, and have reasonable expectations. Having a volatile portfolio is something younger investors can do when they have decades to not worry about market panics which can drastically eat into a portfolio in the short term. During retirement, retirees usually can’t afford to take a significant loss in their portfolio. We will use the story of Ted and Mary to demonstrate these concepts. Ted and Mary have a good understanding of this and know they are going to need to come up with a good plan. This time around, Ted and Mary need a lot more income from their portfolio. They will need to find some way to do it without carrying a significant amount of risk.
Retirement Savings
Ted and Mary were able to save up $1,250,000 for retirement. They are 60 years old and have decided to retire so they can spend time with family and eventually travel the world.
Social Security
Ted and Mary decided together that they would wait on filing for Social Security until they could get the max benefit. They are both fairly healthy and plan on having a great insurance plan in case either of them has health issues. Once Social Security kicks in, Ted and Mary plan on using it to travel to places throughout the world they’ve always wanted to see.
The plan
Ted and Mary saved up $1.25 million for retirement but want to live off a portfolio’s income. Ted and Mary have spent a couple of years reading investment strategy on Seeking Alpha. Mary believes that they should have part of their portfolio in dividend champions and short-term Treasuries. With an equal-weighted strategy, they will be able to have some of their portfolio in investments which have good potential to go up in value. They also have the benefit of being invested in companies which have a long-standing record of raising their dividends. Mary believes that the history of raising dividends, even during market panics, will give them a solid foundation of companies. Mary also believes that they should put some of their portfolio into short-term Treasuries in case of an emergency. Ted and Mary decide to put 20% of their portfolio into dividend champions and 30% into short-term Treasuries.
Ted knows they need to be getting a lot of income from their portfolio, and he wants to do it with a low amount of volatility. On Seeking Alpha, Ted found an author who covered preferred shares. After reading many articles on preferred shares, Ted told Mary that they should have a large portion of their portfolio invested in them. It will give them the income they are looking for and also be an investment which is in line with their risk levels. Ted and Mary agree that the remaining 50% of their portfolio will go into preferred shares or baby bonds.
What do preferred shares offer investors?
Preferred shares offer investors a higher yield than the common stock will normally carry. Further, preferred shares generally carry less volatility and less risk. Preferred share owners usually do not have voting rights. However, preferred stock does have a higher priority on assets and earnings relative to common stock. Keep in mind that the preferred share dividend cannot be cut unless the common stock dividend is cut to zero. If that were to happen, for the common stock to start paying a dividend again the preferred shareholders are paid all unpaid dividends if the preferred shares are “cumulative”.
We only cover cumulative preferred shares.
What about risk-averse investors?
Many investors may be searching for investments that carry less risk than common stocks. Preferred shares not only carry relatively less risk than the common stock, but the income tends to be significantly more consistent. Preferred shares carry a consistent yield that is normally higher than the yield on corporate bonds. Investors worried about risk can also hunt for preferred shares with more call protection on the calendar, a discount to call value or an FTF (fixed-to-floating) rate as a hedge against rising interest rates.
Buy-and-hold investors should stick to high quality. We suggest that buy-and-hold investors avoid anything with a risk rating of 4 or higher since it implies we are not comfortable enough in the long-term health of the company/security. It's far from suggesting "this stock might go under next year". We're simply eliminating anything from consideration for buy-and-hold where we would be concerned that the fundamentals might deteriorate. With those higher risk positions, it's better to just avoid going in rather than trying to figure out when to salvage a loss.
What about aggressive traders?
Aggressive investors or traders may be opposed to preferred shares because of their defensive nature. However, we believe there are opportunities for aggressive investors in the preferred share space. Higher yield preferred shares may be a great fit for an investor who is willing to take on more risk. Further, for investors who are willing to trade, we’ve had excellent success when trading in and out of preferred shares. That includes dividend captures.
How much should investors allocate to preferred shares?
We believe the amount that investors should invest in preferred shares is not a specific %. While writing this guide, our allocation to preferred shares was 29%. Our allocation in preferred shares can swing in either direction for a few reasons. When investors are confident in their common stock investments, they are less likely to invest a significant amount into preferred shares. When investors are worried about common stocks, they may allocate more to preferred shares. We believe that it’s important to look at:
- The current economic environment
- Personal investment style
- Risk tolerance
- Current valuations
What do we offer investors?
There is no perfectly safe investment. Even cash can be stolen (often not covered by insurance) or the value can be inflated away. We mainly focus on low-risk investments and have done quite well at it.
We've had rough periods. Since the start of 2016, our maximum drawdown was about 10% and it was in early 2018 (slightly larger drawdown than in early 2016 with the recession fears). In a nutshell, even though we can't guarantee safety, our downside risk is usually much lower than other methods targeting the 7% to 8% return.
Our system has also consistently outperformed the major indexes for stocks we cover. Those are the Vanguard Real Estate ETF (VNQ) and the iShares U.S. Preferred Stock ETF (PFF):
Why should investors choose individual stocks
Many investors turned to preferred share ETFs like the iShares U.S. Preferred Stock ETF. That technique has delivered some yield for the investors, but it delivered much weaker returns than picking individual shares. We explained this concept at great length in Preferred Shares Week 147.
Within that article, we charted total returns for PFF and included MFA-B (MFA.PB), DX-B (DX.PB), and CMO-E (CMO.PE). We use a unique charting technique for this purpose. Instead of calculating returns from one singular date, we chart based on current values. We want to answer the question:
"To have $100,000 in these shares today, how much would I have needed to invest (with dividend reinvestment) on any prior day?"
By phrasing our question that way, we can view thousands of potential starting dates and prices at once. Here is the chart:
The chart is designed so that all the final points must line up at precisely $100,000. Most charts show returns only from one starting date, but our chart shows returns based off any starting date. That means we don’t need to draw a new chart every time we want to look at a different date.
You can tell at a glance that an investor who bought DX-B, CMO-E, or MFA-B on any day between 7/1/2016 and 1/1/2018 was significantly outperforming PFF. You know that because throughout that period the highest line (worst performance going forward) came from PFF’s green line.
You also can see that these preferred shares usually correlate very well together. Small breaks in the valuation can appear for a few months, but the longer-term correlation is extremely strong. This is why we monitor prices so closely. We’re watching for those opportunities as they occur.
The next thing you may notice is the volatility. The preferred share lines (blue, gold, and red) are not showing materially more volatility than the ETF. They are climbing much faster, but the change from one period to another is not more volatile. This is important because it reflects the difference in risk. Since the ETF is diversified, it “should” be far less volatile than the preferred shares.
Why isn’t the diversification working?
Diversifying between several mediocre investments doesn’t create a great investment. PFF’s holdings include too many shares with excessive credit risk (terrible balance sheets) or excessive interest rate risk (yields are too low).
The concept of diversification is excellent
We encourage investors to diversify among several good investments. However, diversification by itself does not protect investors from including poor investments in their portfolio. PFF’s long-term performance is hampered by the inclusion of several poor investments. Diversification reduces the impact of a single bad investment but it doesn’t replace doing due diligence.
Mary’s strategy
Mary has chosen her 30 dividend champions:
| |
Ticker
| |
Name
| |
Income
| |
Yield
| |
(NWN)
| |
Northwest Natural Gas Company
| |
$232.87
| |
2.79%
| |
(PG)
| |
Procter & Gamble Company (THE)
| |
$231.16
| |
2.77%
| |
(EMR)
| |
Emerson Electric Company
| |
$260.32
| |
3.12%
| |
(MMM)
| |
3M Company
| |
$291.40
| |
3.50%
| |
(ESS)
| |
Essex Property Trust
| |
$219.42
| |
2.63%
| |
(CINF)
| |
Cincinnati Financial Corporation
| |
$182.94
| |
2.20%
| |
(KO)
| |
Coca-Cola Company (THE)
| |
$259.02
| |
3.11%
| |
(JNJ)
| |
Johnson & Johnson
| |
$230.67
| |
2.77%
| |
(CWT)
| |
California Water Service Group
| |
$130.20
| |
1.56%
| |
(TGT)
| |
Target Corporation
| |
$248.60
| |
2.98%
| |
(SWK)
| |
Stanley Black & Decker, Inc.
| |
$161.62
| |
1.94%
| |
(MO)
| |
Altria Group, Inc.
| |
$524.76
| |
6.30%
| |
(SYY)
| |
Sysco Corporation
| |
$182.90
| |
2.19%
| |
(BKH)
| |
Black Hills Corporation
| |
$216.15
| |
2.59%
| |
(UVV)
| |
Universal Corporation
| |
$424.40
| |
5.09%
| |
(WMT)
| |
Wal-Mart Stores, Inc.
| |
$168.04
| |
2.02%
| |
(PEP)
| |
Pepsico, Inc.
| |
$240.99
| |
2.89%
| |
(XOM)
| |
Exxon Mobil Corporation
| |
$389.35
| |
4.67%
| |
(MCD)
| |
McDonald's Corporation
| |
$190.32
| |
2.28%
| |
(NNN)
| |
National Retail Properties
| |
$306.61
| |
3.68%
| |
(O)
| |
Realty Income Corporation
| |
$310.94
| |
3.73%
| |
(LOW)
| |
Lowe's Companies, Inc.
| |
$189.88
| |
2.28%
| |
(KMB)
| |
Kimberly-Clark Corporation
| |
$256.13
| |
3.07%
| |
(ED)
| |
Consolidated Edison, Inc.
| |
$274.89
| |
3.30%
| |
(TGT)
| |
Target Corporation
| |
$248.60
| |
2.98%
| |
(TROW)
| |
T. Rowe Price Group, Inc.
| |
$244.03
| |
2.93%
| |
(CVX)
| |
Chevron Corporation
| |
$328.03
| |
3.94%
| |
(PM)
| |
Philip Morris International Inc.
| |
$490.56
| |
5.89%
| |
(VZ)
| |
Verizon Communications Inc.
| |
$347.87
| |
4.17%
| |
(HP)
| |
Helmerich & Payne, Inc.
| |
$461.59
| |
5.54%
Here are the reasons Mary wanted to go with dividend champions:
Dividend champions will have a high probability to continue to raise their dividends. The income should continue to go up for this portion of Ted and Mary’s portfolio. The companies have growth potential. Though the yields may not be as high as they need, the equity they own in the companies should go up. In the event of a market panic, these companies should do better than the overall market for a few reasons. One, the dividends will still be coming in when the stock falls. Two, these companies overall have a history of raising dividends, even through multiple recessions. Three, large companies that have been around for a while have a better shot at withstanding a significant drawdown.
This portion of the portfolio only has a yield of 3.3%. If Ted and Mary had this as their entire portfolio, they’d be making around $41,250 from the yield. That wouldn’t be enough for their current lifestyle and health insurance.
Treasuries
Here are Mary’s two choices for short-term Treasury ETFs:
| |
Ticker
| |
Name
| |
Income
| |
Yield
| |
(VGSH)
| |
Vanguard Short-Term Government Bond ETF
| |
$4,044.90
| |
2.16%
| |
(SCHO)
| |
Schwab Short-Term U.S. Treasury ETF
| |
$3,989.47
| |
2.13%
Here are a few reasons Ted and Mary decided to go with short-term Treasuries:
- They want treasury ETFs because they are a highly liquid substitute for cash.
- They provide superior income compared to checking or savings accounts.
- They want liquid funds in the event of a healthcare emergency.
- The S&P 500 is richly valued. They didn’t want to go all in at these prices.
This 20% portion of the portfolio only gave them an annual income of $8,034.75. However, this gave them an option for cash if anything came up.
Ted’s strategy
Here are the preferred shares Ted chose:
| |
Ticker
| |
Name
| |
Income
| |
Yield
| |
AGNCN from AGNC
| |
$4,222.97
| |
6.76%
| |
ANH-C from Anworth
| |
$4,706.44
| |
7.53%
| |
CHMI-A from Cherry Hill Mortgage
| |
$4,998.63
| |
8.00%
| |
CIM-B from Chimera Investment Corp.
| |
$4,863.81
| |
7.78%
| |
CMO-E from Capstead Mortgage
| |
$4,608.24
| |
7.37%
| |
DX-B from Dynex Capital
| |
$4,840.39
| |
7.74%
| |
MFA-B from MFA Financial
| |
$4,659.17
| |
7.45%
| |
NLY-F from Annaly Capital Management
| |
$4,244.10
| |
6.79%
| |
TWO-E from Two Harbors
| |
$4,719.59
| |
7.55%
| |
(GBLIL)
| |
Baby bond from Global Indemnity Limited
| |
$4,755.80
| |
7.61%
Here are some reasons for why they chose these high yielders:
- Preferred shares in the mortgage REIT sector can frequently be purchased near their call value or slightly lower.
- The stability in the share prices is a huge advantage for investors who want a portfolio with lower volatility.
- Getting shares with yields of 6.7% to 8% from common shares would involve dramatically more risk.
- Preferred shares will continue to pay out their dividends unless the common stock dividend goes to zero. This is very unlikely to happen unless a liquidation happens.
- In the event of a liquidation, preferred shares holders get paid before any money goes to common shareholders. This is where the ratio of common equity to preferred equity comes into play.
- The high yields from the preferred shares make up for what they couldn’t get out of dividend champions.
Big dividends
Ted was able to invest 50% of their portfolio into high dividend yields. This part of the portfolio will be able to give them an annual income of $46,619.15.
Combining that with their dividend champions and their short-term Treasury ETFs, they are looking for $62,900.76 in income from their total portfolio.
Total portfolio income
Income from the dividend champions should increase every year, which will help the total portfolio income. The Treasury ETFs also help, but Ted and Mary may decide to sell off a portion of those positions to help cover their expenses. If they wanted to file for social security earlier, they would have additional income in the current periods. However, if they want to delay social security for a larger paycheck when it comes, then the Treasury ETFs are an excellent place to store the cash until they need it.
The main purpose of including these short-term investments was in case they needed extra money. Couples can live in some cities with an income in the $40,000 range, but that would be much more difficult without health insurance provided by an employer or access to Medicare. The higher income will help Ted and Mary cover their health insurance plan, living expense, and their activities throughout the year.
Where to live
Ted and Mary sold their home in Portland, OR for $350,000. They wanted to move somewhere with a much lower cost of living. They wanted at least four bedrooms for visitors and wanted to be in a nice neighborhood. $350,000 was enough to get them the house they wanted.
Here’s home price information from the Zillow website:
In addition, they wanted:
More days where the sun was out closer to the mountains, not dealing with the Portland DMV.
Ted and Mary decided to move to Colorado Springs.
Climate
Here’s a climate history from U.S Climate Data:
Ted and Mary were happy to move to this climate. It gives them enough of a range in temperatures to experience all the seasons. They also liked how during the winter months they were able to get snow, but the majority of the time, it melted the same day. This was nice for a couple of reasons. One, it meant the roads were usually clear the day of or after a storm. Two, it meant they would be getting a lot of sun. Ted and Mary love the sunshine.
Cost of living
Here is the cost of living from the Colorado Springs CHAMBER & EDC website:
Ted and Mary liked the area in Colorado Springs, but they also liked the idea of living by Denver. The couple enjoy eating out frequently. They also love to go watch shows, and there’s a lot more in Denver than there is in Colorado Springs.
Costs
Even though the cost of living was a benefit in moving to Colorado Springs, Ted and Mary enjoy going out several nights a week. They intend to go out to eat and catch a show in Denver or Colorado Springs at least a couple of times a week.
End of the story
Ted and Mary get through retirement despite the occasional market panic, unexpected medical bills, and periodically helping their relatives through hard times. They were able to get through it all because they were disciplined and created an intelligent portfolio in advance. They also had medical bills that their insurance didn’t cover and cost them $150,000. However, they were able to sell their positions in their short-term Treasuries and cover all the additional costs.
They credit their success to remaining disciplined. They avoid taking on excessive risks in search of the highest possible yields. They know that grasping for yields leaves permanent damage to the portfolio. It’s an important lesson for all investors to recognize. Yet it helps them avoid painful recommendations for cutting expenses:
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Comments (435)
Well my ship has not sailed, mainly because I enjoy what I do with my money earned the hard way. I am 74, I do not have an investment background, did no inherit any money except for a $45 monthly mutual fund payment. Regardless of a persons age the information as presented presents a foundation for success. The level of success depends upon participation and one can doe what they want to. I have no need to make my estate larger , but I choose to because I like the challenge and the feeling of success that one gets from a project well done. To that extent there is never a day when I do not learn something.Allday
20% Small Cap Value
20% Long Term Bonds
20% Short Term Bonds
20% Goldportfoliocharts.com/...From the stock market’s bottom in 2009, through May 2019, the “golden butterfly “...-Returned close to 6% per year. (for full results, use link) -Experienced a maximum draw down of only 10%. This helps with quicker recovery times. -Longer term, since 1970 (the last 48 years) , the “golden butterfly” portfolio mix has only lost money (i.e. negative annual return) 20% of the time. Using the 6% average annual return, an investor could safely spend 3-4% of their nest egg annually, with a low risk of dipping too much into your principal. Related…Ray Dalio's / Tony Robbins' "all seasons" portfolio has turned in similar, long-term results… portfoliocharts.com/...----------------------
* "Rule of 72": 72 / 6% = 12 years to double
Jesse
While I have 5 My 2 best are AEP and AEE. Many other investors may choose SO as well and in the past I have owned it but sold it for a big gain, but may consider it again. MY 3 other Utes. are D, DUK, and PPL. I also own MAIN, PCI, PDI, which are monthly payers and if one is running wit a budget some monthly payers will help you set it up. I especially like the Pimco funds as the pay a great monthly dividend and at times will pay a large special at end of year, however one should invest only for the monthly dividend and not the specials. ON the communication side I also own T,and CCI, currently do not own VZ, but am looking to add to my 2000 share of T. I do also own 5 preferred. While we all have or favorites, finding a balance that you can live with can make retirement a less stressful environment..II own 63 positions, 23 are Closed end funds.
Everyone's goals are different, doing what works for you and just sometimes a better idea is shared by others, but in the end it is your decision,
Have a good day
Allday
WW
Buy an annuity you can get 8% payouts with inflation kicker and you have play money left over(not much though). You could go for 10% returns but only put 1/2 your money in the game and put the rest in Safe investments, 2-3% today.
There are also some 20% 2x yielders and you would only have to put 1/4 of your principal at risk and the rest in safe money market. Thats what I.
Telus (TU - 4.5%)
WP Carey (WPC - 4.9%)
Prudential (PRU - 4.0%)
Weyerhaeuser (WY - 5.7%)
Royal Dutch Shell 'B' (RDS/B - 5.8%)
Abbvie (ABBV - 5.5%)
Marathon Petroleum (MPC - 4.5%)
Rio Tinto (RIO - 5.3%)
Huntington Bancorp (HBAN - 4.2%)All these are decent quality companies. All are raising the dividend at least as fast as inflation, except Shell which I expect to start raising the dividend soon. Some are raising the dividends much faster than inflation (TU, PRU, ABBV, HBAN). Rio Tinto does have the European style variable dividend.An equal weighted portfolio in these 10 would yield 5.1%.The portfolio would give exposure to 6 of the 11 GICS Sectors.I would not recommend putting all your retirement income generation in these 10, though, but they would be an ok equity segment in a retirement income portfolio alongside some other things. In my case, I have a corporate pension, so I feel more comfortable having the "fill the gap" income needs met by equities.Note: I'm not a Financial Adviser and I don't have any fancy letters after my name. Do your own due diligence and see if they are suitable for you.Disclosure: I own all 10 of these.Dave
This same author of the article wrote other articles including how to retire with $500,000 in retirement.My own parents had extremely little saved when they retired - as in $10,000 if they even had that much, and they retired and enjoyed their life until the day they passed away. They never invested anything in the stock market but luckily they had small pensions and SS to carry them through. The simple thing is that they kept within their income limits. They didn't replace their cars unless they absolutely had to. They always kept up with repairs to their house so that the expenses wouldn't be more if they had waited.
Saving & investing money isn't a panacea for life, nor will it solve climate change. It certainly can make things easier though if you don't risk too much.
They do give you a blueprint here to make $125k. $1.25 million making 10% dividends, dont worry about the principal. If it does not fit your risk tolerance, thats about as good as your lifestyle can be. You better cutback.
Now how do you get that $1.25 million at 62. Two professions working hard no kids 25 years is one way. If you are already 62 buy a lottery ticket.
Simple, buy CBAY first thing in the morning as it was mistakenly beating down 45% yesterday.
Recipe for a wipe out.
As a hedge you can buy a lotto ticket, LOL.
I think the thought process is to experience some of those things now rather than wait til your body & mind tire more easily.
The risk is too high. It is better to have ETFs.
My IRA is all ETF's. | ABBV | 137.3 |
https://finance.yahoo.com/news/abbvie-abbv-stock-falls-63-190107253.html | AbbVie (ABBV) Stock Falls After $63 Billion Allergan Acquisition
Announcement | AbbVie (ABBV) Stock Falls After $63 Billion Allergan Acquisition
Announcement ... AbbVie ABBV stock fell over 15% through Tuesday morning
trading. The significant... | Jun 25, 2019 | Yahoo Finance | AbbVie (ABBV) Stock Falls After $63 Billion Allergan Acquisition Announcement
AbbVie ABBV stock fell over 15% through Tuesday morning trading. The significant drop came after the company announced that it will acquire Allergan PLC AGN in a deal worth approximately $63 billion. The drop brought AbbVie stock to a new 52-week low of $66.56 per share. Meanwhile, Allergan stock jumped about 27% after the news.
AbbVie and Allergan agreed on compensation of $120.30 in cash and 0.8660 ABBV shares per AGN share. This valued AGN stock at $188.24, a 45% premium from its closing price on Monday. AbbVie is the producer of the world’s best-selling drug Humira and Allergen is the producer of Botox.
Allergan shareholders still need to vote to approve the deal, but it looks to be a great one for Allergan as many analysts believed the company was headed toward a split to increase shareholder value. AbbVie, in its press release, stated that it expects “the Acquisition will provide annual pre-tax synergies and other cost reductions of at least $2 billion in year three.” Combined R&D resources as well as a reduction in supply chain and manufacturing redundancies are said to be the main sources of these synergies.
Along with synergies, AbbVie expects the acquisition to provide significant cash flow generation. AbbVie and Allergan generated a combined operating cash flow of $19 billion in 2018. AbbVie is looking to use the new cash flow to reduce its debt and continue its dividend growth, which are reasons for investors to be happy.
AbbVie is heavily reliant on revenue from Humira, which brought in $20 billion in revenue last year. But AbbVie has been looking to diversify its portfolio as cheaper alternatives are already becoming available in Europe. Plus, AbbVie’s patent on the drug will expire in 2023 in the U.S. Adding Botox, the most popular cosmetic procedure in the U.S., to its portfolio is a good way for AbbVie to diversify.
Allergan also has products in other major sectors. These sectors include neuroscience, eye care, women’s health, cystic fibrosis, and cardiovascular and infectious diseases. Allergan’s stock has struggled since an attempted merger with Pfizer PFE failed in 2016 in which Pfizer valued AGN at $363.63 per share, nearly double the amount AbbVie is set to pay.
Before Tuesday’s announcement, AGN stock had fallen around 32% over the past 12 months, while ABBV was down over 15%. The acquisition could provide a boost for AbbVie’s stock down the road as it is projected to increase the company’s cash flow as well as diversify its product portfolio.
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Zacks Investment Research | ABBV | 137.3 |
https://www.investopedia.com/abbvie-stock-breaks-down-after-acquisition-4691289 | AbbVie Stock Breaks Down After Acquisition | AbbVie Inc. (ABBV) shares fell more than 15% during Tuesday's session after
The Wall Street Journal reported and the company confirmed that it's in
the... | Jun 25, 2019 | Investopedia | AbbVie Inc. (ABBV) shares fell more than 15% during Tuesday's session after The Wall Street Journal reported and the company confirmed that it's in the final stages of acquiring Allergan PLC (AGN) for $188.24 per share in a transaction worth about $63 billion. Management called it a "transformative" transaction that will have a "profound" impact on the company's growth story.
The company anticipates pre-tax synergies and other cost reductions of at least $2 billion by the third year along with significant operating cash flow that will support a debt reduction target of $15 billion to $18 billion by 2022. However, AbbVie investors remain a bit more skeptical, as evidenced by the significant pullback in the stock following the announcement.
Piper Jaffray analyst Christopher Raymond is skeptical of the deal at first glance but remains open to the added growth potential. At the same time, SVB Leerink analyst Marc Goodman suggested that Allergan could receive multiple bids given the historically low price. Wells Fargo analyst David Maris doesn't think another bid will arise but hasn't ruled out the possibility of an activist investor getting involved.
From a technical standpoint, the stock broke down from a long-term descending triangle to trendline support dating back to 2017. The relative strength index (RSI) fell to oversold levels of 18.89, but the moving average convergence divergence (MACD) experienced a bearish downturn. These indicators suggest that the stock could see some near-term consolidation, but the long-term trend remains bearish.
Traders should watch for some consolidation above trendline support at $64.50 over the coming sessions with upside limited by trendline resistance at around $74.75. If the stock breaks down from support, traders could see a move down to $60.80 – reaction highs from late 2016 and early 2017. If the stock breaks out higher, traders could see a breakout from the descending triangle, although that move appears unlikely given the bearish sentiment.
The author holds no position in the stock(s) mentioned except through passively managed index funds. | ABBV | 137.3 |
https://seekingalpha.com/article/4272049-allergan-stay-for-abbvie-shares | Allergan: Stay For The AbbVie Shares (NYSE:AGN) | Allergan: Stay For The AbbVie Shares. Jun. 25, 2019 2:35 PM ETAllergan plc
(AGN)ABBV70 Comments 31 Likes. Stone Fox Capital profile picture. | Jun 25, 2019 | Seeking Alpha | Allergan: Stay For The AbbVie Shares
Summary
- Allergan agrees to a deal that values the stock at $188 per share for a 45% premium.
- Shareholders get shares in AbbVie that trade at only 6.4x 2020 EPS estimates.
- The high debt component of the deal could weigh on AbbVie.
- The stock has substantial upside from initial trading levels around $165.
The biopharma sector has turned into some of the deepest value stocks in the market. The Allergan (NYSE:AGN) acquisition by AbbVie (ABBV) is a prime example of a deal where the involved stocks trade at insanely cheap valuations causing the merger synergies to provide a big boost to the EPS estimates despite a large cash portion of the deal. For these reasons, Allergan shareholders should hold the stock through the merger process.
Source: AbbVie/Allergan merger presentation
Merger Details
The AbbVie acquisition of Allergan is a merger that has been in works for weeks according to CNBC, but a merger that is based on an extended period of weakness for the stocks involved. Even after the merger surge, Allergan is still down 50% from the highs above $330 and still down 27% over a 3-year period.
For this reason, AbbVie was able to offer $188.24 per share to acquire Allergan that had dipped to $115. The deal includes $120.30 in cash and 0.8660 per share in AbbVie stock.
The deal value of about 64% in cash helps cushion the weakness in AbbVie, but the nearly 15% weakness in AbbVie initially strips about $10 in deal value. With AbbVie at $67, the deal still offers a value of $178 for Allergan shareholders.
AbbVie will have to pay about $40 billion in cash to close the deal. The company forecasts operating cash flows hit ~$19 billion last year and the goal is repay up to $18 billion in debt by the end of 2021.
Source: AbbVie/Allergan merger presentation
Allergan ended Q1 with a massive debt load of $21.7 billion so the deal doesn't come without some massive debt concerns. Despite AbbVie having a solid balance sheet, the combined balance sheets had net debt of ~$18.5 billion with another $40 billion added to close the deal.
The 2021 debt reduction target only gets the new AbbVe down to net debt levels of $40 billion. The company will have substantial operating cash flows and plenty of assets to where further reducing debt wouldn't be a problem.
Significant Accretion
In addition to the immediate 45% premium to the Allergan stock that was recently trading around $115, the deal is substantially accretive to AbbVie. If anything, Allergan shareholders should want more stock in the deal due to the upside potential of the combined companies.
AbbVie predicts the deal is immediately 10% accretive and eventually tops 20% accretion. The company forecasts greater than $2 billion in merger synergies. The majority of the synergies are via simple cost reductions in SG&A and R&D.
Source: AbbVie/Allergan merger presentation
The incredible story here is that AbbVie is a remarkable bargain now at about 7x 2020 EPS estimates of about $9.50 per share. The accretive deal would in theory boost the EPS target to ~$10.45.
At $67 in initial trading following the blockbuster deal for Allergan, the stock only trades at about 6.4x updated EPS targets. The risk to the story remains the LOE on Humira in 2023. The company has a robust pipeline and will now have the potential to improve the business units from Allergan to offset those potential losses.
Source: AbbVie/Allergan merger presentation
Takeaway
The key investor takeaway is that AbbVie got an incredible bargain in buying Allergan despite the 45% premium. Allergan shareholders stand to benefit further as AbbVie's stock is likely to rally as the deal value is absorbed by the market.
With a nearly $10.50 EPS target in 2020 based on the accretive nature of the deal, AbbVie could easily rally back towards the 52-week highs of $100. In such a move, Allergan shareholders would obtain a deal value in the $200 range based on $87 in AbbVie stock and $120 in cash. Allergan remains a bargain despite the initial rally with the stock trading at only 10x EPS estimates, if the deal wasn't to close.
This article was written by
Stone Fox Capital launched the Out Fox The Street MarketPlace service in August 2020.
Invest with Stone Fox Capital's model Net Payout Yields portfolio on Interactive Advisors as he makes real time trades. The site allows followers to duplicate the model portfolio in their own brokerage accounts. You can find the portfolio and more details here:
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Analyst’s Disclosure: I am/we are long AGN. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.
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Comments (70)
I agree with your statement. The problem is what if that stock's earning have dropped but we don't know, Imagine new earnings make a PE of 30. Would you sell it?.
Obviously Mr. Market believes ABBV earnings have dropped with the adquisition and he is punishing the price to rebalance P/E. Mr. Market may be right or wrong, but he can do whatever he wants.
Honestly, I didn't make the numbers, but may be the market did.
Will it go to $60? Like the move
Nice move!
You put that much faith in what corporate management says? They distort facts on a daily basis. Brent Saunders has said one thing and done the complete opposite during his tenure at AGN. Common sense will tell you $80 Billion of debt will need to be paid off somehow and cutting dividend is a good starting point. Happens all the time!
AGN price is not reflecting (and probably will not fully reflect until the FTC approval) the full value of the offer of $120 + 0.86*Abbvie, with my back of the envelope computation pointing to a probability of deal failure of about 7% expected by merger arbitrageurs.
I think I am going to hold onto this for a while (still sitting on a huge gain) given that I believe Abbvie's price reaction today was an overreaction. | ABBV | 137.3 |
https://www.prnewswire.com/news-releases/abbvie-to-acquire-allergan-in-transformative-move-for-both-companies-300874219.html | AbbVie to Acquire Allergan in Transformative Move for Both ... | (NYSE: ABBV) and Allergan plc (NYSE: AGN) announced that the companies have
entered into a definitive transaction agreement under which AbbVie will
acquire... | Jun 25, 2019 | PR Newswire | AbbVie to Acquire Allergan in Transformative Move for Both Companies
NOT FOR RELEASE, PUBLICATION OR DISTRIBUTION, IN WHOLE OR IN PART, IN, INTO OR FROM ANY JURISDICTION WHERE TO DO SO WOULD CONSTITUTE A VIOLATION OF THE RELEVANT LAWS OR REGULATIONS OF SUCH JURISDICTION
THIS ANNOUNCEMENT IS BEING MADE PURSUANT TO RULE 2.5 OF THE IRISH TAKEOVER RULES
- Provides immediate scale and profitability to AbbVie's growth platform, excluding Humira, significantly expanding and diversifying its revenue base with new therapeutic areas, including Allergan's leading medical aesthetics business
- Enhances long-term R&D funding capacity, allowing for continued investment and sustained focus on innovative science and advancement of an industry-leading pipeline
- Increases global commercial scale to further maximize the value of Allergan's attractive portfolio of fast-growing products
- Combined company will produce robust cash flow to support continued dividend growth, further investment in the pipeline and reduction of debt levels
- Transaction delivers significant and immediate accretion and provides an attractive return on invested capital
- Creates substantial value for shareholders of both companies and is expected to close in early 2020
- Allergan Shareholders will receive 0.8660 AbbVie Shares and $120.30 in cash for each Allergan Share, for a total consideration of $188.24 per Allergan Share
- Transaction equity value of approximately $63 billion
25 Jun, 2019, 06:42 ET
NORTH CHICAGO, Ill. and DUBLIN, June 25, 2019 /PRNewswire/ -- AbbVie Inc. (NYSE: ABBV) and Allergan plc (NYSE: AGN) announced that the companies have entered into a definitive transaction agreement under which AbbVie will acquire Allergan in a cash and stock transaction for a transaction equity value of approximately $63 billion, based on the closing price of AbbVie's common stock of $78.45 on June 24, 2019.
"This is a transformational transaction for both companies and achieves unique and complementary strategic objectives," said Richard A. Gonzalez, chairman and chief executive officer, AbbVie. "The combination of AbbVie and Allergan increases our ability to continue to deliver on our mission to patients and shareholders. With our enhanced growth platform to fuel industry-leading growth, this strategy allows us to diversify AbbVie's business while sustaining our focus on innovative science and the advancement of our industry-leading pipeline well into the future."
"This acquisition creates compelling value for Allergan's stakeholders, including our customers, patients and shareholders. With 2019 annual combined revenue of approximately $48 billion, scale in more than 175 countries, an industry-leading R&D pipeline and robust cash flows, our combined company will have the opportunity to make even bigger contributions to global health than either can alone," said Brent Saunders, chairman and chief executive officer, Allergan. "Our fast-growing therapeutic areas, including our world class medical aesthetics, eye care, CNS and gastrointestinal businesses, will enhance AbbVie's strong growth platform and create substantial value for shareholders of both companies."
Strategic Rationale
- New growth platforms and leadership positions to diversify and expand revenue base: The combined company will consist of several attractive franchises with leadership positions across immunology, hematologic oncology, medical aesthetics, neuroscience, women's health, eye care and virology. Allergan's product portfolio will be enhanced by AbbVie's commercial strength, expertise and international infrastructure.
- Immediate scale and enhanced profitability for AbbVie's growth platform: AbbVie's enhanced growth platform, comprised of growing and durable franchises across highly-attractive therapeutic areas, is expected to grow at a high-single digit annual growth rate well into the next decade, from more than $30 billion in 2020.
- Financially attractive with immediate EPS accretion: This transaction is expected to be 10% accretive to adjusted earnings per share over the first full year following the close of the transaction, with peak accretion of greater than 20%.1 ROIC is expected to exceed AbbVie's cost of capital within the first full year.
- Significant cash flow generation: The success and scale of the combined commercial business ensures funding capacity and flexibility for simultaneous robust pipeline investment, debt reduction and capital return to shareholders. The combined companies generated $19 billion in operating cash flow in 2018.
Structure and Governance
Upon completion of the transaction, AbbVie will continue to be incorporated in Delaware as AbbVie Inc. and have its principal executive offices in North Chicago, Ill. AbbVie will continue to be led by Richard A. Gonzalez as chairman and chief executive officer. Two members of Allergan's Board, including chairman and chief executive officer, Brent Saunders, will join AbbVie's Board upon completion of the transaction.
Transaction Details
Under the terms of the Transaction Agreement, Allergan Shareholders will receive 0.8660 AbbVie Shares and $120.30 in cash for each Allergan Share that they hold, for a total consideration of $188.24 per Allergan Share.2 The transaction represents a 45% premium to the closing price of Allergan's Shares on June 24, 2019.
AbbVie anticipates that the Acquisition will provide annual pre-tax synergies and other cost reductions of at least $2 billion in year three while leaving investments in key growth franchises untouched. The synergies and other cost reductions will be a result of optimizing the research and early stage portfolio, and reducing overlapping R&D resources (~50%), driving efficiencies in SG&A, including sales and marketing and central support function costs (~40%), and eliminating redundancies in manufacturing and supply chain, and leveraging procurement spend (~10%). The synergies estimate excludes any potential revenue synergies.3
AbbVie is expected to generate significant annual operating cash flow, which will support a debt reduction target of $15 to $18 billion before the end of 2021, while also enabling a continued commitment to Baa2/BBB or better credit rating and continued dividend growth.
It is expected that, immediately after the closing of the Acquisition, AbbVie Shareholders will own approximately 83% of AbbVie on a fully diluted basis and the Allergan Shareholders will own approximately 17% of AbbVie on a fully diluted basis.
The transaction is subject to the Conditions set out in Appendix III of the Rule 2.5 Announcement, including certain regulatory approvals and approval by Allergan's Shareholders.
1 The statement that this transaction is earnings accretive should not be interpreted to mean that the earnings per share in the current or any future financial period will necessarily match or be greater than those for the relevant preceding financial period.
2 Subject to adjustment in accordance with the Exchange Ratio Modification Number.
3 There are various material assumptions underlying the synergies and other cost reductions which may result in the synergies and other cost reductions being materially greater or less than estimated. The estimates should therefore be read in conjunction with the bases and assumptions for these synergy numbers which are set out in Appendix I of this announcement. The synergies and other cost reductions have been reported on in accordance with Rule 19.3(b) of the Irish Takeover Rules by (i) PricewaterhouseCoopers LLP and (ii) Morgan Stanley & Co. International plc. Copies of their respective reports are included in Appendix IV and Appendix V to this announcement. Each of PricewaterhouseCoopers LLP and Morgan Stanley & Co. International plc has given and not withdrawn its consent to the issue of this announcement with the inclusion of its report and context in which it is included. The synergy and earnings enhancement statements in this section should not be construed as a profit forecast or interpreted to mean that the earnings of AbbVie and/or Allergan in 2019, or in any subsequent period, would necessarily match or be greater than or be less than those of AbbVie and/or Allergan for the relevant financial period or any other period. The synergies estimate excludes any potential revenue synergies.
Conference Call and Other Materials
AbbVie will host an investor conference call today at 7:30 a.m. Central to discuss this transaction. The call will be webcast through AbbVie's Investor Relations website at investors.abbvie.com. An archived edition of the call will be available after 11 a.m. Central. Presentation materials for the investor conference call are available here.
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Conference call details:
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Date:
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Tuesday, June 25, 2019
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Call start time:
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7:30 a.m. Central time
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Dial-in numbers:
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877-934-8565 (toll free) or 210-795-9161 (international)
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Passcode:
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ABBVIE
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Please place your call by 7:15 a.m. Central time in order to be cleared for the start of the call at 7:30 a.m. Central time.
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Call replay:
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800-846-1910 (toll free) or 402-280-9953 (international)
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Replay code:
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62519
In addition, an infographic highlighting the key attributes of this transaction is available here.
AbbVie's lead financial advisor is Morgan Stanley & Co. LLC who has delivered a fairness opinion and has provided the committed financing for the transaction, and its legal advisors are Kirkland & Ellis LLP and McCann FitzGerald. PJT Partners LP is also serving as a financial advisor to AbbVie. Allergan's exclusive financial advisor is J.P. Morgan Securities LLC and its legal advisors are Wachtell, Lipton, Rosen & Katz and Arthur Cox.
Key Questions and Answers
1. What are the strategic and financial benefits of this transaction?
This transaction achieves unique and complementary strategic objectives for both organizations. Combining Allergan's diversified on-market product portfolio with AbbVie's growth platform and deep expertise in R&D, commercial strength and international footprint will create a leading biopharmaceutical company with approximately $48 billion in combined 2019 revenue. This combination also enhances AbbVie's ability for robust investment in its industry-leading pipeline of innovative therapies throughout the next decade and enables AbbVie to deliver on its mission to better serve patients.
The financial benefits include immediate 10% earnings-per-share accretion over the first full year of the combination, with peak accretion of greater than 20%. The transaction will generate annual pre-tax synergies and other cost reductions of at least $2 billion in year three, with a return on invested capital to exceed AbbVie's cost of capital within the first full year.
2. When do you anticipate this transaction to close and what is the leadership structure for the new combined company?
We anticipate closing of the transaction by early 2020, subject to regulatory and Allergan's shareholder approvals. The combined company will continue to be incorporated in Delaware and have its principal executive offices in North Chicago, Ill. Richard A. Gonzalez will serve as the chairman and chief executive officer through the Humira loss of exclusivity in 2023. AbbVie's Board will include two Allergan board members, including Allergan's chairman and chief executive officer, Brent Saunders.
3. Does this transaction represent a change in your fundamental strategy for AbbVie?
This transaction enhances our ability to continue to advance our mission to develop a consistent stream of innovative medicines to create a remarkable impact on people's lives. AbbVie will now have a more diversified product portfolio with several leadership positions in high value therapeutic areas and an industry-leading pipeline of next-generation therapies with ensured capacity for continued investment across our innovative pipeline.
4. What is the benefit of doing a transaction of this size versus smaller bolt-on acquisitions?
This transaction is designed to meet a different strategic imperative than smaller bolt-on acquisitions. Its ability to deliver immediate scale to the AbbVie growth platform with Allergan's on-market diversified product portfolio meets our strategic goal to reduce reliance on Humira and allows us to continue expanding our focus on high-innovation science throughout the next decade.
Smaller bolt-on acquisitions provide opportunities for future growth, but also require significant R&D investment amid scientific and clinical uncertainty. This transaction offers immediate compelling financial and strategic value to our shareholders with a much lower risk profile.
5. What is your level of confidence in your ability to operate the combined company given that it represents somewhat of a change in the mix of businesses from what AbbVie has been?
We are highly confident in our ability to enhance the value of Allergan's existing commercial franchises and capitalize on next-generation pipeline programs. AbbVie has a proven track record of industry leading financial performance and commercial expertise in building market-leading franchises in immunology, hematologic oncology, and other areas, and our geographic scale will enable us to unlock additional value in Allergan's franchises. Our senior leadership team is experienced in leading diverse businesses and we are confident in our future success.
6. What are your plans for capital allocation for the combined company? How do you intend to address the debt levels of the combined company?
The combined company will produce robust cash flow which will support continued growth of our dividend, further investment in our pipeline, and reduction of debt. We intend to reduce debt levels by $15-$18 billion by the end of 2021, with further deleveraging through 2023.
7. What do you view as the largest risks associated with the transaction?
Any transaction of this magnitude involves a series of regulatory approvals and integration complexities. Both companies have organizations that are highly experienced at integrating businesses and we expect that process to be efficient and thorough.
About AbbVie and Acquirer Sub
AbbVie is a global, research-driven biopharmaceutical company committed to developing innovative advanced therapies for some of the world's most complex and critical conditions. The company's mission is to use its expertise, dedicated people and unique approach to innovation to markedly improve treatments across four primary therapeutic areas: immunology, oncology, virology and neuroscience. In more than 75 countries, AbbVie employees are working every day to advance health solutions for people around the world. For more information about AbbVie, please visit us at www.abbvie.com. Follow @abbvie on Twitter, Facebook or LinkedIn.
Acquirer Sub, a wholly-owned subsidiary of AbbVie, is a limited liability company organized in Delaware solely for the purpose of effecting the Acquisition. To date, Acquirer Sub has not conducted any activities other than those incidental to its formation and the execution of the Transaction Agreement.
About Allergan
Allergan, headquartered in Dublin, Ireland, is a global pharmaceutical leader focused on developing, manufacturing and commercializing branded pharmaceutical, device, biologic, surgical and regenerative medicine products for patients around the world. Allergan markets a portfolio of brands and products primarily focused on four key therapeutic areas including medical aesthetics, eye care, central nervous system and gastroenterology. As part of its approach to delivering innovation for better patient care, Allergan has built a broad pharmaceutical and device research and development pipelines.
With employees and commercial operations in approximately 100 countries, Allergan is committed to working with physicians, healthcare providers and patients to deliver innovative and meaningful treatments that help people around the world live longer, healthier lives every day. For more information about Allergan, please visit www.allergan.com.
ENQUIRIES
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AbbVie
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Media: Adelle Infante
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+ 1 847 938 8745
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Investors: Liz Shea
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+ 1 847 935 2211
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Morgan Stanley
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Clint Gartin
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+1 212 761 4000
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Michael Boublik
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+1 212 761 4000
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Joe Modisett
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+1 212 761 4000
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David Kitterick
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+44 207 425 8000
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Allergan
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Media: Amy Rose
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+ 1 862 289 3072
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Investors: Manisha Narasimhan, PhD
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+ 1 862 261 7162
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J.P. Morgan Securities LLC
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Jeremy Meilman
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+ 1 212 270 6000
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Thomas Monaghan
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+ 1 212 270 6000
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Dwayne Lysaght
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+44 207 742 4000
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David Connern
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+44 207 742 4000
NO OFFER OR SOLICITATION
This announcement is not intended to and does not constitute an offer to sell or the solicitation of an offer to subscribe for or buy or an invitation to purchase or subscribe for any securities or the solicitation of any vote or approval in any jurisdiction pursuant to the Acquisition or otherwise, nor shall there be any sale, issuance or transfer of securities in any jurisdiction in contravention of applicable law. In particular, this announcement is not an offer of securities for sale into the United States. No offer of securities shall be made in the United States absent registration under the U.S. Securities Act of 1933, as amended, or pursuant to an exemption from, or in a transaction not subject to, such registration requirements. Any securities issued in the Acquisition are anticipated to be issued in reliance upon available exemptions from such registration requirements pursuant to Section 3(a)(10) of the U.S. Securities Act of 1933, as amended. The Acquisition will be made solely by means of the Scheme Document (or, if applicable, the Takeover Offer document), which will contain the full terms and conditions of the Acquisition, including details with respect to the Allergan shareholder vote in respect of the Acquisition. Any decision in respect of, or other response to, the Acquisition, should be made only on the basis of the information contained in the Scheme Document.
IMPORTANT ADDITIONAL INFORMATION WILL BE FILED WITH THE SEC
In connection with the proposed Acquisition, Allergan will file with the U.S. Securities and Exchange Commission (the "SEC") a Proxy Statement, which will include the Scheme Document. BEFORE MAKING ANY VOTING DECISION, ALLERGAN'S SHAREHOLDERS ARE URGED TO READ THE PROXY STATEMENT, INCLUDING THE SCHEME DOCUMENT, AND OTHER RELEVANT DOCUMENTS FILED OR TO BE FILED WITH THE SEC IN CONNECTION WITH THE PROPOSED ACQUISITION OR INCORPORATED BY REFERENCE IN THE PROXY STATEMENT (IF ANY) CAREFULLY AND IN THEIR ENTIRETY WHEN THEY BECOME AVAILABLE BECAUSE THEY WILL CONTAIN IMPORTANT INFORMATION ABOUT THE PROPOSED ACQUISITION AND THE PARTIES TO THE PROPOSED ACQUISITION. Allergan's shareholders and investors will be able to obtain, without charge, a copy of the Proxy Statement, including the Scheme Document, and other relevant documents filed with the SEC (when available) from the SEC's website at http://www.sec.gov. Allergan shareholders and investors will also be able to obtain, without charge, a copy of the Proxy Statement, including the Scheme Document, and other relevant documents (when available) by directing a written request to Allergan plc, Clonshaugh Business and Technology Park, Coolock, Dublin, D17 E400, Ireland, Attention: Investor Relations, or from Allergan's website, www.allergan.com.
PARTICIPANTS IN THE SOLICITATION
Allergan and certain of its directors and executive officers and employees may be considered participants in the solicitation of proxies from the shareholders of Allergan in respect of the transactions contemplated by the Scheme Document. Information regarding the persons who may, under the rules of the SEC, be deemed participants in the solicitation of the shareholders of Allergan in connection with the proposed transactions, including a description of their direct or indirect interests, by security holdings or otherwise, will be set forth in the Scheme Document when it is filed with the SEC. Information regarding Allergan's directors and executive officers is contained in Allergan's Annual Report on Form 10-K for the fiscal year ended December 31, 2018 and its Proxy Statement on Schedule 14A, dated March 22, 2019, which are filed with the SEC, and certain of Allergan's Current Reports on Form 8-K filed with the SEC on February 19, 2019, March 22, 2019 and May 1, 2019.
FORWARD-LOOKING STATEMENTS
This announcement contains certain forward-looking statements with respect to a possible acquisition involving AbbVie and Allergan and AbbVie's, Allergan's and/or the combined group's estimated or anticipated future business, performance and results of operations and financial condition, including estimates, forecasts, targets and plans for AbbVie and, following the acquisition, if completed, the combined group. The words "believe," "expect," "anticipate," "project" and similar expressions, among others, generally identify forward-looking statements. These forward-looking statements are subject to risks and uncertainties that may cause actual results to differ materially from those indicated in the forward-looking statements. Such risks and uncertainties include, but are not limited to, the possibility that a possible acquisition will not be pursued, failure to obtain necessary regulatory approvals or required financing or to satisfy any of the other conditions to the possible acquisition, adverse effects on the market price of AbbVie's shares of common stock or Allergan's ordinary shares and on AbbVie's or Allergan's operating results because of a failure to complete the possible acquisition, failure to realize the expected benefits of the possible acquisition, failure to promptly and effectively integrate Allergan's businesses, negative effects relating to the announcement of the possible acquisition or any further announcements relating to the possible acquisition or the consummation of the possible acquisition on the market price of AbbVie's shares of common stock or Allergan's ordinary shares, significant transaction costs and/or unknown or inestimable liabilities, potential litigation associated with the possible acquisition, general economic and business conditions that affect the combined companies following the consummation of the possible acquisition, changes in global, political, economic, business, competitive, market and regulatory forces, future exchange and interest rates, changes in tax laws, regulations, rates and policies, future business acquisitions or disposals and competitive developments. These forward-looking statements are based on numerous assumptions and assessments made in light of AbbVie's or, as the case may be, Allergan's experience and perception of historical trends, current conditions, business strategies, operating environment, future developments and other factors it believes appropriate. By their nature, forward-looking statements involve known and unknown risks and uncertainties because they relate to events and depend on circumstances that will occur in the future. The factors described in the context of such forward-looking statements in this announcement could cause Allergan's plans with respect to AbbVie, Allergan's or AbbVie's actual results, performance or achievements, industry results and developments to differ materially from those expressed in or implied by such forward-looking statements. Although it is believed that the expectations reflected in such forward-looking statements are reasonable, no assurance can be given that such expectations will prove to have been correct and persons reading this announcement are therefore cautioned not to place undue reliance on these forward-looking statements which speak only as at the date of this announcement. Additional information about economic, competitive, governmental, technological and other factors that may affect AbbVie is set forth in Item 1A, "Risk Factors," in AbbVie's 2018 Annual Report on Form 10-K, which has been filed with the SEC, the contents of which are not incorporated by reference into, nor do they form part of, this announcement. Additional information about economic, competitive, governmental, technological and other factors that may affect Allergan is set forth in Item 1A, "Risk Factors," in Allergan's 2018 Annual Report on Form 10-K, which has been filed with the SEC, the contents of which are not incorporated by reference into, nor do they form part of, this announcement.
Any forward-looking statements in this announcement are based upon information available to AbbVie, Allergan and/or their respective boards of directors, as the case may be, as of the date of this announcement and, while believed to be true when made, may ultimately prove to be incorrect. Subject to any obligations under applicable Law, none of AbbVie, Allergan or any member of their respective boards of directors undertakes any obligation to update any forward-looking statement whether as a result of new information, future developments or otherwise, or to conform any forward-looking statement to actual results, future events, or to changes in expectations. All subsequent written and oral forward-looking statements attributable to AbbVie, Allergan or their respective boards of directors or any person acting on behalf of any of them are expressly qualified in their entirety by this paragraph.
Statement Required by the Irish Takeover Rules
The AbbVie Directors accept responsibility for the information contained in this announcement relating to AbbVie and the AbbVie Directors and members of their immediate families, related trusts and persons connected with them, except for the statements made by Allergan in respect of AbbVie. To the best of the knowledge and belief of the AbbVie Directors (who have taken all reasonable care to ensure that such is the case), the information contained in this announcement for which they accept responsibility is in accordance with the facts and does not omit anything likely to affect the import of such information.
The Allergan Directors accept responsibility for the information contained in this announcement relating to Allergan and the Allergan Directors and members of their immediate families, related trusts and persons connected with them, except for the statements made by AbbVie in respect of Allergan and the recommendation and related opinions of the Independent Allergan Directors. The Independent Allergan Directors accept responsibility for the recommendation and the related opinions of the Independent Allergan Directors contained in this announcement. To the best of the knowledge and belief of the Allergan Directors and the Independent Allergan Directors (who have taken all reasonable care to ensure such is the case), the information contained in this announcement for which they respectively accept responsibility is in accordance with the facts and does not omit anything likely to affect the import of such information.
Morgan Stanley & Co. LLC, acting through its affiliate Morgan Stanley & Co. International plc, which is authorized by the Prudential Regulation Authority and regulated by the Financial Conduct Authority in the United Kingdom, is acting as financial adviser to AbbVie and for no one else in relation to the matters referred to in this announcement. In connection with such matters, Morgan Stanley and its directors, officers, employees and agents will not regard any other person as its client, nor will it be responsible to anyone other than AbbVie for providing the protections afforded to their clients or for providing advice in connection with the matters described in this announcement or any matter referred to herein.
PJT Partners LP, a U.S. registered broker-dealer regulated by FINRA and a member of SIPC, is acting for AbbVie and no one else in connection with the matters set out in this announcement and will not be responsible to anyone other than AbbVie for providing advice in relation to the matters in this announcement. Neither PJT Partners LP nor any of its subsidiaries, branches or affiliates owes or accepts any duty, liability or responsibility whatsoever (whether direct or indirect, whether in contract, in tort, under statute or otherwise) to any person who is not a client of PJT Partners LP in connection with this announcement, any statement contained herein or otherwise.
J.P. Morgan Securities LLC, which is a registered broker dealer with the SEC, is acting as financial adviser to Allergan in connection with the Acquisition. In connection with the Acquisition, J.P. Morgan Securities LLC and its directors, officers, employees and agents will not regard any other person as its client, nor will it be responsible to anyone other than Allergan for providing the protections afforded to clients of J.P. Morgan Securities LLC or for giving advice in connection with the Acquisition or any matter referred to herein.
Dealing Disclosure Requirements
Under the provisions of Rule 8.3 of the Irish Takeover Panel Act, 1997, Takeover Rules 2013 (the "Irish Takeover Rules"), if any person is, or becomes, 'interested' (directly or indirectly) in, 1% or more of any class of 'relevant securities' of Allergan or AbbVie, all 'dealings' in any 'relevant securities' of Allergan or AbbVie (including by means of an option in respect of, or a derivative referenced to, any such 'relevant securities') must be publicly disclosed by not later than 3:30 pm (New York time) on the 'business' day following the date of the relevant transaction. This requirement will continue until the date on which the Scheme becomes effective or on which the 'offer period' otherwise ends. If two or more persons co-operate on the basis of any agreement, either express or tacit, either oral or written, to acquire an 'interest' in 'relevant securities' of Allergan or AbbVie, they will be deemed to be a single person for the purpose of Rule 8.3 of the Irish Takeover Rules.
Under the provisions of Rule 8.1 of the Irish Takeover Rules, all 'dealings' in 'relevant securities' of Allergan by AbbVie or 'relevant securities' of AbbVie by Allergan, or by any party acting in concert with either of them, must also be disclosed by no later than 12 noon (New York time) on the 'business' day following the date of the relevant transaction.
A disclosure table, giving details of the companies in whose 'relevant securities' 'dealings' should be disclosed, can be found on the Irish Takeover Panel's website at www.irishtakeoverpanel.ie.
'Interests in securities' arise, in summary, when a person has long economic exposure, whether conditional or absolute, to changes in the price of securities. In particular, a person will be treated as having an 'interest' by virtue of the ownership or control of securities, or by virtue of any option in respect of, or derivative referenced to, securities.
Terms in quotation marks are defined in the Irish Takeover Rules, which can also be found on the Irish Takeover Panel's website. If you are in any doubt as to whether or not you are required to disclose a dealing under Rule 8, please consult the Irish Takeover Panel's website at www.irishtakeoverpanel.ie or contact the Irish Takeover Panel on telephone number +353 1 678 9020 or fax number +353 1 678 9289.
No Profit Forecast / Asset Valuations
No statement in this announcement is intended to constitute a profit forecast for any period, nor should any statements be interpreted to mean that earnings or earnings per share will necessarily be greater or lesser than those for the relevant preceding financial periods for AbbVie or Allergan as appropriate. No statement in this announcement constitutes an asset valuation.
Publication on Website
Pursuant to Rule 2.6(c) of the Irish Takeover Rules, this announcement will be available to AbbVie employees on AbbVie's website www.abbvie.com and Allergan employees on Allergan's website www.allergan.com. Neither the content of any such website nor the content of any other website accessible from hyperlinks on such website is incorporated into, or forms part of, this announcement.
Right to Switch to a Takeover Offer
AbbVie reserves the right, subject to the terms of the Transaction Agreement, to elect to implement the Acquisition by way of a Takeover Offer as an alternative to the Scheme, subject to the provisions of the Transaction Agreement and with the Panel's consent. In such event, the Acquisition will be implemented on terms at least as favorable, so far as applicable, as those which would apply to the Scheme, subject to appropriate amendments (including an acceptance condition set at 80% of the shares to which such offer relates).
Rounding
Certain figures included in this announcement have been subjected to rounding adjustments. Accordingly, any figures shown for the same category presented in different tables may vary slightly and figures shown as totals in certain tables may not be an arithmetic aggregation of the figures that precede them.
General
Appendix I to this announcement contains further details of the sources of information and bases of calculations set out in this announcement; Appendix II to this announcement contains definitions of certain expressions used in this announcement; Appendix III to this announcement contains the Conditions of the Acquisition and the Scheme; Appendix IV to this announcement sets out the report from PricewaterhouseCoopers LLP in respect of certain merger benefit statements made in this announcement; Appendix V to this announcement contains the report from Morgan Stanley in respect of certain merger benefit statements made in this announcement and Appendix VI to this announcement sets out the Transaction Agreement.
The release, publication or distribution of this announcement in or into certain jurisdictions may be restricted by the laws of those jurisdictions, including any Restricted Jurisdictions. Accordingly, copies of this announcement and all other documents relating to the Acquisition are not being, and must not be, released, published, mailed or otherwise forwarded, distributed or sent in, into or from any Restricted Jurisdictions. Persons receiving such documents (including, without limitation, nominees, trustees and custodians) should observe these restrictions. Failure to do so may constitute a violation of the securities laws of any such jurisdiction. To the fullest extent permitted by applicable Law, the companies involved in the Acquisition disclaim any responsibility or liability for the violations of any such restrictions by any person.
Any response in relation to the Acquisition should be made only on the basis of the information contained in the Scheme Documents or any document by which the Acquisition and the Scheme are made. Allergan Shareholders are advised to read carefully the formal documentation in relation to the proposed Acquisition once the Scheme Documents have been despatched.
This announcement has been prepared for the purpose of complying with the laws of Ireland and the Takeover Rules and the information disclosed may not be the same as that which would have been disclosed if this announcement had been prepared in accordance with the laws of jurisdictions outside of Ireland.
RECOMMENDED OFFER
ABBVIE TO ACQUIRE ALLERGAN
FOR $63 BILLION IN CASH AND STOCK
BY MEANS OF A SCHEME OF ARRANGEMENT UNDER CHAPTER 1 OF PART 9 OF THE
COMPANIES ACT 2014
1. Introduction
The AbbVie Board and the Independent Allergan Directors announced today that they have reached agreement on the terms of a recommended acquisition of Allergan in a transaction valued at approximately $63 billion of equity value. The Acquisition will be effected by means of a Scheme under Chapter 1 of Part 9 of the Act.
The Acquisition will be on the terms and subject to the conditions set out below, and the implementation of the Acquisition and the Scheme will be subject to the Conditions referred to in Appendix III of this announcement, which will also be set out in the Scheme Document.
2. Consideration
Under the terms of the Transaction Agreement, which has been unanimously approved by the AbbVie Board and the Independent Allergan Directors, at completion Allergan Shareholders will receive 0.8660 AbbVie Shares and $120.30 in cash (and Cash Consideration in lieu of Fractional Entitlements) for each Allergan Share that they hold.4
Based on the closing price for AbbVie common stock on June 24, 2019, the last trading day prior to the date of this announcement, Allergan Shareholders will receive cash and shares valued at $188.24 per Allergan Share, representing a premium of 45% to the closing price of Allergan's ordinary shares on June 24, 2019, the last trading day prior to the date of this announcement and a transaction equity value of approximately $63 billion.
The Acquisition is expected to be taxable, to the Allergan Shareholders, for U.S. federal income tax purposes.
It is expected that, immediately after the closing of the Acquisition, AbbVie Shareholders will own approximately 83% of AbbVie on a fully diluted basis and the Allergan Shareholders will own approximately 17% of AbbVie on a fully diluted basis.
AbbVie has secured fully underwritten financing commitments from Morgan Stanley Senior Funding, Inc. and MUFG Bank, Ltd., for an aggregate amount of US$38.0 billion, to finance together with AbbVie's own cash resources, the cash portion of the Acquisition.
4 Subject to adjustment in accordance with the Exchange Ratio Modification Number.
3. AbbVie Background to and Reasons for the Acquisition
As a part of its on-going review of AbbVie's long-term strategy, the AbbVie Board regularly considers strategic opportunities that might be available to enhance shareholder value, including additional investments in new growth opportunities and potential acquisitions.
Beginning in late April of 2019, senior management of AbbVie and Allergan had a series of discussions regarding the possibility of an acquisition by AbbVie of Allergan and the possible terms of such a transaction. In connection with a possible transaction, AbbVie retained Morgan Stanley & Co. LLC in late May of 2019 as its financial advisor and Kirkland & Ellis LLP and McCann FitzGerald as its legal advisors.
During the period preceding the execution of definitive documentation for the Acquisition on June 25, 2019, the parties discussed and negotiated the transaction terms, conducted due diligence with respect to each other's businesses and consulted with the Panel, and AbbVie arranged financing for the transaction. On June 24, 2019, the AbbVie Board met, together with AbbVie's senior management and financial and legal advisors, to consider proposed terms and drafts of definitive documentation for a proposed acquisition by AbbVie of Allergan. At this meeting, AbbVie's Board unanimously determined that the Transaction Agreement and the transactions contemplated thereby, including the Acquisition, were in the best interests of AbbVie and its stockholders, and thereby authorized and approved the Acquisition.
AbbVie's Board believes that the Acquisition will create a more diversified pharmaceutical company, positioned for success in current and future health care markets. Following the Acquisition, AbbVie will have market leading positions in multiple therapeutic categories, a more diversified product portfolio, and strong cash flow.
In reaching its decision to authorize and approve the Acquisition, the AbbVie Board consulted with and received advice and reports from AbbVie's senior management and its financial and legal advisors, and drew on its knowledge of AbbVie's business, assets, financial position, operating results, historical and current trading prices of its securities, and the opportunities and challenges in its businesses and the industries in which it operates, as well as information relating to Allergan and the potential opportunities available to and future business prospects of the combined company.
Further detail in respect of the background and reasons for the Acquisition will be included in the Proxy Statement.
4. Allergan Background to and Reasons for Recommending the Acquisition
The Allergan Directors have on an ongoing basis considered the long-term strategy of Allergan and strategic opportunities that might be available to enhance shareholder value, including additional investments in new growth opportunities, potential acquisitions and the possible sale of Allergan as well as a potential spin off of certain of Allergan's businesses.
Beginning in late April of 2019, senior management of AbbVie and Allergan had a series of discussions regarding the possibility of an acquisition by AbbVie of Allergan and the possible terms of such a transaction. In connection with a possible transaction, Allergan retained J.P. Morgan Securities LLC as its financial advisor and Wachtell, Lipton, Rosen & Katz and Arthur Cox as its legal advisors.
During the period preceding the execution of definitive documentation for the Acquisition on June 25, 2019, the parties discussed and negotiated the transaction terms, conducted due diligence with respect to each other's businesses and consulted with the Panel. Also during this period, the Independent Allergan Directors met, together with Allergan's senior management and its financial and legal advisors, on various occasions to consider the merits of a potential transaction with AbbVie and the status of the discussions and negotiations between the parties.
On June 23, 2019, the Independent Allergan Directors met, together with Allergan's senior management and financial and legal advisors, to consider proposed terms and drafts of definitive documentation for a proposed acquisition by AbbVie of Allergan. At this meeting, the Independent Allergan Directors unanimously determined that the Transaction Agreement and the transactions contemplated thereby, including the Scheme, were advisable for, fair to and in the best interests of Allergan and the Allergan Shareholders, and thereby approved the Acquisition and determined that the terms of the Scheme were fair and reasonable.
In reaching its decision to approve the Acquisition, the Independent Allergan Directors consulted with and received advice and reports from Allergan's senior management and its financial and legal advisors, and drew on its knowledge of Allergan's business, assets, financial position, operating results, historical and current trading prices of its securities, and the opportunities and challenges in its businesses and the industries in which it operates, as well as information relating to AbbVie and the potential opportunities available to and future business prospects of the combined company. After giving consideration to these and a variety of other factors and risks, the Independent Allergan Directors unanimously determined to recommend that Allergan Shareholders vote in favor of the Acquisition.
Further detail in respect of the background and reasons for the Acquisition will be included in the Proxy Statement.
5. Allergan Recommendation
The Independent Allergan Directors, who have been so advised by J.P. Morgan Securities LLC as to the financial terms of the Acquisition, consider the terms of the Acquisition to be fair and reasonable. In providing its advice, J.P. Morgan Securities LLC has taken into account the commercial assessments of the Independent Allergan Directors. J.P. Morgan Securities LLC is acting as independent financial adviser to the Independent Allergan Directors in relation to the Acquisition for the purposes of Rule 3 of the Takeover Rules.
Accordingly, the Independent Allergan Directors unanimously recommend to Allergan Shareholders to vote in favor of the Acquisition and the Scheme, as the Independent Allergan Directors who are Allergan Shareholders intend to do in respect of their own beneficial holdings of, in the aggregate, 63,690 Allergan Shares.
Thomas C. Freyman is not participating in the Independent Allergan Directors' recommendation of the Acquisition and related matters as Mr. Freyman is regarded under Rule 3 of the Irish Takeover Rules as having a conflict of interest due to Mr. Freyman's shareholding in AbbVie.
6. The Acquisition and the Scheme
The Acquisition will be effected by means of a "scheme of arrangement" in accordance with Chapter 1 of Part 9 of the Act pursuant to which Acquirer Sub, a wholly owned subsidiary of AbbVie, will acquire all of the outstanding Allergan Shares in exchange for 0.8660 AbbVie Shares and $120.30 in cash (and Cash Consideration in lieu of Fractional Entitlements) per Allergan Share, subject to adjustment in accordance with the Exchange Ratio Modification Number. The Acquisition will be subject to the Conditions set out in Appendix III to this announcement and to be set forth in the Scheme described in the Scheme Document which will be delivered to Allergan Shareholders.
To become effective, the Scheme will require, among other things, the approval of the Scheme by a majority in number of members of each class of Allergan Shareholders (including as may be directed by the High Court pursuant to Section 450(5) of the Act) present and voting either in person or by proxy at the Court Meeting (or at any adjournment or postponement of such meeting) representing, at the relevant voting record time, at least 75% in value of the Allergan Shares of that class held by such Allergan Shareholders and (ii) the Required EGM Resolutions being duly passed by the requisite majorities of Allergan Shareholders at the EGM (or any adjournment or postponement thereof). Following the Allergan Shareholder Approval being obtained and the satisfaction or (where applicable) waiver of the other conditions to the consummation of the Scheme, the sanction of the Irish High Court is also required. The Acquisition, which is unanimously recommended by the AbbVie Board and the Independent Allergan Directors, is also subject to receipt of certain regulatory approvals and certain other conditions, as more particularly set out in Appendix III of this announcement.
Assuming the necessary approvals from the Allergan Shareholders have been obtained and all other conditions have been satisfied or waived (where applicable), the Scheme will become effective upon delivery to the Irish Registrar of Companies of a copy of the Court Order of the Irish High Court sanctioning the Scheme together with the minute required by section 86 of the Act confirming a capital reduction to take place in connection with the Acquisition and registration of the Court Order and minute by the Irish Registrar of Companies. Upon the Scheme becoming effective, the Scheme will be binding on all Allergan Shareholders, irrespective of whether or not they attended or voted at the Court Meeting or the EGM.
The Acquisition will be conditional upon the Scheme becoming effective. The Conditions to the Acquisition and the Scheme are set out in full in Appendix III to this announcement. The implementation of the Scheme is conditional, amongst other things, upon:
(a) the approval by the Allergan Shareholders and the sanction by the Irish High Court of the Scheme;
(b) the approval for listing on NYSE (subject only to certain standard conditions) of all of the AbbVie Shares to be issued in the Acquisition;
(c) all applicable waiting periods under the HSR Act in connection with the Acquisition having expired or having been terminated, and, to the extent applicable, any agreement between Allergan and AbbVie, on the one hand, and the Federal Trade Commission or the Antitrust Division of the United States Department of Justice, on the other hand, not to consummate the Scheme or the Acquisition having expired or been earlier terminated;
(d) to the extent (i) the Acquisition constitutes a concentration within the scope of the EC Merger Regulation or otherwise is a concentration that is subject to the EC Merger Regulation, the European Commission having decided to allow the closing of the Acquisition, and (ii) that all or part of the Acquisition is referred by the European Commission to the relevant authority of one or more member countries of the European Economic Area, such relevant authority(ies) (in the case of a partial referral in conjunction with a final decision of the European Commission) having issued a final decision or decisions which satisfies (or together satisfy) the prior clause (i) (that clause being interpreted mutatis mutandis);
(e) all required Clearances of any Governmental Entity having been obtained and remaining in full force and effect and all applicable waiting periods having expired, lapsed or been terminated (as appropriate), in each case in connection with the Acquisition, under the Antitrust Laws of each Required Antitrust Jurisdiction, and (a) no order, writ, decree, judgment, or injunction (whether temporary or permanent) shall have been issued, promulgated, made, rendered or entered into by any court or other tribunal of competent jurisdiction, and (b) no Law other than an order, writ, decree, judgement or injunction described in clause (a) (whether or not final or appealable) (excluding, for the purpose of this clause (b), any Antitrust Law of any jurisdiction that is not a Required Antitrust Jurisdiction) shall have been enacted, issued, promulgated, enforced or entered and continue in effect and, in each case of clauses (a) and (b), restrain, enjoin, make illegal or otherwise prohibit the consummation of the Acquisition;
(f) the Transaction Agreement not having been terminated in accordance with its terms;
(g) the absence of a material adverse effect with respect to each party;
(h) the accuracy of each of the parties' representations and warranties, except generally as would not have a material adverse effect on such party; and
(i) the performance by each party, in all material respects, with all of its covenants and agreements under the Transaction Agreement.
The Scheme Document, containing further information relating to the implementation of the Acquisition, the full terms and Conditions of the Scheme, and the notices of the Court Meeting, to be convened by resolution of the Allergan Board or direction of the Irish High Court, and the separate EGM required to approve the Scheme and related resolutions will be mailed as promptly as reasonably practicable after securing approval of the High Court to despatch such documents to Allergan Shareholders and, for information only, to holders of Allergan Options and Allergan Share Awards.
The Proxy Statement will contain important information about the Acquisition (including the Scheme), the Transaction Agreement, the Court Meeting and the EGM.
7. Merger Benefit Statement
AbbVie anticipates that the Acquisition will provide annual pre-tax synergies and other cost reductions of at least $2 billion in year three while leaving investments in key growth franchises untouched. The synergies and other cost reductions will be a result of optimizing the research and early stage portfolio, and reducing overlapping R&D resources (~50%), driving efficiencies in SG&A, including sales and marketing and central support function costs (~40%), and eliminating redundancies in manufacturing and supply chain, and leveraging procurement spend (~10%). The synergies estimate excludes any potential revenue synergies.
Subject to the Scheme becoming effective, Allergan Shareholders will be able to share in the synergies and other cost reductions resulting from the Acquisition by means of the AbbVie Shares they will receive as part of the Scheme Consideration.
There are various material assumptions underlying the synergies and other cost reductions estimates which may result in the synergies and other cost reductions being materially greater or less than estimated. The estimate of synergies and other cost reductions should therefore be read in conjunction with the key assumptions underlying the estimates set out in Appendix I of this announcement.
The synergies and other cost reductions statements should not be construed as a profit forecast or interpreted to mean that AbbVie's profits or earnings in the first full year following the Acquisition, or in any subsequent period, would necessarily match or be greater than or be less than those of AbbVie and/or Allergan for the relevant preceding financial period or any other period.
The estimate of synergies set out in this announcement has been reported on for the purposes of Rule 19.3(b)(ii) of the Irish Takeover Rules by (i) PricewaterhouseCoopers LLP and (ii) Morgan Stanley & Co. International plc. Copies of their respective reports are included in Appendix IV and Appendix V to this announcement. Each of PricewaterhouseCoopers LLP and Morgan Stanley & Co. International plc has given and not withdrawn its consent to the issue of this announcement with the inclusion of its report.
8. About AbbVie and Acquirer Sub
AbbVie is a global, research-driven biopharmaceutical company committed to developing innovative advanced therapies for some of the world's most complex and critical conditions. The company's mission is to use its expertise, dedicated people and unique approach to innovation to markedly improve treatments across four primary therapeutic areas: immunology, oncology, virology and neuroscience. In more than 75 countries, AbbVie employees are working every day to advance health solutions for people around the world. For more information about AbbVie, please visit us at www.abbvie.com. Follow @abbvie on Twitter, Facebook or LinkedIn.
Acquirer Sub, a wholly-owned subsidiary of AbbVie, is a limited liability company organized in Delaware solely for the purpose of effecting the Acquisition. To date, Acquirer Sub has not conducted any activities other than those incidental to its formation and the execution of the Transaction Agreement.
9. About Allergan
Allergan, headquartered in Dublin, Ireland, is a global pharmaceutical leader focused on developing, manufacturing and commercializing branded pharmaceutical, device, biologic, surgical and regenerative medicine products for patients around the world. Allergan markets a portfolio of brands and products primarily focused on four key therapeutic areas including medical aesthetics, eye care, central nervous system and gastroenterology. As part of its approach to delivering innovation for better patient care, Allergan has built a broad pharmaceutical and device research and development pipelines.
With employees and commercial operations in approximately 100 countries, Allergan is committed to working with physicians, healthcare providers and patients to deliver innovative and meaningful treatments that help people around the world live longer, healthier lives every day.
For press release and other company information, please visit Allergan's web site at www.allergan.com.
10. Effect of the Scheme on Allergan Options and Allergan Share Awards
Pursuant to the terms of the Transaction Agreement, Allergan's outstanding equity awards will be treated as follows: (i) each unexercised Allergan Option will be substituted with an Allergan Replacement Option, with the exercise price per AbbVie Share and the number of AbbVie Shares underlying the Allergan Replacement Option adjusted to reflect the conversion from Allergan Shares into AbbVie Shares, and (ii) each other Allergan Share Award, including Allergan RSU Awards, Allergan PSUs and Allergan Restricted Stock Awards, will be substituted with an Allergan Replacement Share Award, with the number of AbbVie Shares underlying each such Allergan Replacement Share Award adjusted to reflect the conversion from Allergan Shares into AbbVie Shares. AbbVie restricted stock unit awards will be granted in substitution for Allergan PSUs, and the number of AbbVie Shares underlying each Allergan PSU with a performance period that remains subject to performance vesting conditions as of the date of the Transaction Agreement (i.e., any Allergan PSU for which the level of performance has not been determined) will equal 130% of the target number of Allergan Shares subject to such Allergan PSU. Each Allergan Replacement Option and Allergan Replacement Share Award will continue to have, and be subject to, the same terms and conditions (including, for each Allergan PSU, the time vesting conditions provided in the applicable award agreement, but excluding any performance-based vesting conditions) that applied to the corresponding Allergan Option or Allergan Share Award, as applicable (except for terms rendered inoperative by reason of the Acquisition or for immaterial administrative or ministerial changes that are not adverse to any holder other than in any de minimis respect).
11. Management and Employees
Pursuant to the terms of the Transaction Agreement, AbbVie has given certain assurances in relation to the continuation of certain existing compensation and employment benefit arrangements of Allergan's employees following the Acquisition. Further details in this regard will be included in the Scheme Document.
12. Delisting of Allergan Shares
It is intended that, subject to and following the Scheme becoming effective, and subject to applicable requirements of the NYSE, the Allergan Shares will be delisted from the NYSE and deregistered, along with other securities of Allergan under the Exchange Act, as promptly as practicable after the Effective Time.
13. Financing
AbbVie has secured fully underwritten financing commitments from Morgan Stanley Senior Funding, Inc. and MUFG Bank, Ltd., for an aggregate amount of US$38.0 billion, to finance together with AbbVie's own cash resources, the cash portion of the Acquisition. Further information on the financing of the Acquisition will be set out in the Scheme Document.
Morgan Stanley & Co. LLC, acting through its affiliate Morgan Stanley & Co. International plc, financial advisor to AbbVie, is satisfied that sufficient resources are available to satisfy in full the Cash Consideration payable to Allergan Shareholders under the terms of the Acquisition.
14. Expenses Reimbursement Agreement
Allergan has entered into the Expenses Reimbursement Agreement, dated June 25, 2019 with AbbVie, the terms of which have been approved by the Panel. Under the Expenses Reimbursement Agreement, Allergan has agreed to pay to AbbVie in certain circumstances an amount equal to all documented, specific, quantifiable third party costs and expenses incurred, directly or indirectly, by AbbVie and/or its subsidiaries, or on their behalf, for the purposes of, in preparation for, or in connection with the Acquisition, including, but not limited to, third party costs and expenses incurred in connection with exploratory work carried out in contemplation of and in connection with the Acquisition, legal, financial and commercial due diligence, the arrangement of financing and the engagement of third party representatives to assist in the process. The liability of Allergan to pay these amounts shall arise only after the date of this announcement and is limited to a maximum amount equal to 1% of the aggregate value of the total Scheme Consideration (excluding, for the avoidance of doubt, any interest in such share capital of Allergan held by AbbVie or any Concert Parties of AbbVie). The circumstances in which such payment will be made are if:
(a) the Transaction Agreement is terminated:
(i) by AbbVie at any time prior to the receipt of the Allergan Shareholder Approval, due to an Allergan Change of Recommendation having occurred; or
(ii) by Allergan, at any time prior to obtaining the Allergan Shareholder Approval, in response to an Allergan Superior Proposal and, substantially concurrently with such termination, a written definitive agreement providing for the consummation of transactions contemplated by such Allergan Superior Proposal is duly executed and delivered by Allergan and all other parties thereto; or
(b) all of the following occur:
(i) the Transaction Agreement is terminated (x) by AbbVie if Allergan breached or failed to perform in any material respect any of its covenants or other agreements contained in the Transaction Agreement, which breach or failure to perform (1) would have resulted in a failure of the Condition set forth in paragraph 4(iii) of Appendix III and (2) was not reasonably capable of being cured by the End Date or, if curable, is not cured by the earlier of (a) the End Date and (b) 30 days following written notice by AbbVie thereof or (y) by AbbVie or Allergan, if the Court Meeting or the EGM was completed and the Court Meeting Resolution or the Required EGM Resolutions, as applicable, were not approved by the requisite majorities; and
(ii) prior to the Court Meeting, an Allergan Alternative Proposal was publicly disclosed or announced (or, in the case of a termination described in paragraph (b)(i)(x) above, was made publicly or privately to the Allergan Board), or any person shall have publicly announced an intention (whether or not conditional) to make an Allergan Alternative Proposal (it being understood that, for purposes of this paragraph (b)(ii) and paragraph (b)(iii) below, references to "twenty percent (20%)" in the definition of Allergan Alternative Proposal shall be deemed to refer to "fifty percent (50)%"); and
(iii) (x) an Allergan Alternative Proposal is consummated within twelve months after such termination, or (y) a definitive agreement providing for an Allergan Alternative Proposal is entered into within twelve months after such termination and which is subsequently consummated, in the case of each of clauses (x) and (y), regardless of whether such Allergan Alternative Proposal is the same Allergan Alternative Proposal referred to in paragraph (b)(ii) above.
Each of J.P. Morgan Securities LLC and the Independent Allergan Directors have confirmed in writing to the Panel that, in the opinion of J.P. Morgan Securities LLC and the Independent Allergan Directors (respectively), in the context of the note to Rule 21.2 of the Takeover Rules and the Acquisition, the Expenses Reimbursement Agreement is in the best interests of the Allergan Shareholders. The Panel has consented to Allergan entering into the Expenses Reimbursement Agreement.
15. Transaction Agreement
AbbVie, Allergan and Acquirer Sub have entered into the Transaction Agreement dated June 25, 2019 which contains certain assurances, obligations and commitments in relation to the implementation of the Scheme, including provisions in relation to the conduct of Allergan's business between the date of this announcement and the Effective Date and other matters relating to the Acquisition. A copy of the Transaction Agreement is appended to this announcement at Appendix VI and a summary of the principal terms of the Transaction Agreement will be set out in the Proxy Statement (which will also contain the Scheme Document).
The Proxy Statement, which will be filed with the SEC, will contain important information about the Acquisition (including the Scheme), the Transaction Agreement, the Court Meeting and the EGM.
The Transaction Agreement provides that, upon termination of the Transaction Agreement under certain circumstances relating to the failure to obtain antitrust approvals, AbbVie will pay Allergan a reverse termination fee of $1.25 billion.
16. Disclosure of Interests in Relevant Securities of Allergan
As at the close of business on June 21, 2019 (being the last practicable date prior to the release of this announcement), Morgan Stanley & Co. LLC, financial adviser to AbbVie and any person (other than an exempt principal trader or an exempt fund manager) controlling, controlled by, or under the same control as, Morgan Stanley & Co. LLC was interested in, or held short positions in, the Allergan securities set out in Appendix I to this announcement.
Save as described above, as at the close of business on June 21, 2019, none of AbbVie, Acquirer Sub or, so far as AbbVie is aware, any person Acting in Concert with AbbVie:
(a) had an interest in relevant securities of Allergan;
(b) had any short position in relevant securities of Allergan;
(c) had received an irrevocable commitment or letter of intent to accept the terms of the Acquisition in respect of relevant securities of Allergan; or
(d) had borrowed or lent any Allergan Shares.
Furthermore, no arrangement to which Rule 8.7 of the Takeover Rules applies exists between AbbVie, Acquirer Sub or Allergan or a person Acting in Concert with AbbVie, Acquirer Sub or Allergan in relation to Allergan Shares. For these purposes, an "arrangement to which Rule 8.7 of the Takeover Rules applies" includes any indemnity or option arrangement, and any agreement or understanding, formal or informal, of whatever nature, between two or more persons relating to relevant securities which is or may be an inducement to one or more of such persons to deal or refrain from dealing in such securities.
In the interests of confidentiality, AbbVie, Acquirer Sub and Morgan Stanley have made only limited enquiries in respect of certain parties who may be deemed by the Panel to be Acting in Concert with them for the purposes of the Acquisition. Further enquiries will be made to the extent necessary as soon as practicable following the date of this announcement and any disclosure in respect of such parties will be included in the Scheme Document.
17. Rule 2.10 Disclosure
In accordance with Rule 2.10 of the Takeover Rules, Allergan (NYSE: AGN) confirms that, as of the close of business on June 24, 2019, Allergan's issued share capital, excluding treasury shares, consisted of 327,823,903 ordinary shares, par value US$0.0001 per share. The International Securities Identification Number (ISIN) of the Allergan ordinary shares is IE00BY9D5467.
Allergan confirms that, as of the close of business on June 24, 2019, there were outstanding 2,861,241 restricted share units (the "Allergan Restricted Share Units") and 6,342,739 options to purchase Allergan ordinary shares (the "Allergan Share Options") granted by Allergan. Upon vesting, each Allergan Restricted Share Unit entitles the holder to receive one Allergan ordinary share and each Allergan Share Option entitles the holder to purchase one Allergan ordinary share at the applicable exercise price.
Allergan also confirms that, as of the close of business on June 24, 2019, there were outstanding performance share units (the "Allergan Performance Share Units") entitling holders to receive up to a maximum of 482,892 Allergan ordinary shares upon vesting, assuming satisfaction of the applicable performance criteria at maximum performance.
The number of Allergan Shares capable of being issued in respect of the Allergan Restricted Share Units and Allergan Performance Share Units described in this announcement includes the Allergan ordinary shares capable of being issued upon the vesting of the applicable dividend equivalent units attaching to the respective Allergan Restricted Share Units and Allergan Performance Share Units.
18. Rule 30.2 Derogation
Rule 30.2 of the Irish Takeover Rules requires that, except with the consent of the Panel, and subject to Rule 2.7 of the Irish Takeover Rules, Allergan must despatch the Scheme Document to Allergan Shareholders within 28 days of the announcement of a firm intention to make an offer, being this announcement.
On June 24, 2019 the Panel agreed to grant the parties a derogation from Rule 30.2.
There is a requirement to file the Proxy Statement (which will also contain the Scheme Document) with the SEC in connection with the Scheme. The preparation of the Proxy Statement may take more than 28 days. Also, the SEC may elect to review the Proxy Statement. This review process may take 60 days or more to complete. Under SEC rules, the Proxy Statement may not be despatched to Allergan's Shareholders until such review is complete. The Panel granted the derogation on the basis that the Scheme Document cannot be despatched until the SEC's review of the Proxy Statement is completed. The Scheme Document will be despatched to Allergan's Shareholders as soon as practicable after a definitive Proxy Statement is filed.
19. General
The Acquisition and the Scheme will be made subject to the Conditions and the further terms and conditions to be set out in the Scheme Document. The Scheme Document will include full details of the Acquisition and will be accompanied by the appropriate forms of proxy.
AbbVie reserves the right, subject to the terms of the Transaction Agreement, to elect to implement the Acquisition by way of a Takeover Offer as an alternative to the Scheme, subject to the provisions of the Transaction Agreement and with the Panel's consent. In such event, the Acquisition will be implemented on terms at least as favourable, so far as applicable, as those which would apply to the Scheme, subject to appropriate amendments (including an acceptance condition set at 80% of the shares to which such offer relates).
The Transaction Agreement is governed by the laws of the State of Delaware. However, the Acquisition and the Scheme and matters related thereto (including matters related to the Takeover Rules) shall, to the extent required by the laws of Ireland, be governed by, and construed in accordance with, the laws of Ireland. The interpretation of the duties of directors of Allergan shall also be governed by, and construed in accordance with, the laws of Ireland.
Appendix I to this announcement contains further details of the sources of information and bases of calculations set out in this announcement; Appendix II to this announcement contains definitions of certain expressions used in this announcement; Appendix III to this announcement contains the Conditions of the Acquisition and the Scheme; Appendix IV to this announcement sets out the report from PricewaterhouseCoopers LLP in respect of certain merger benefit statements made in this announcement; Appendix V to this announcement contains the report from Morgan Stanley & Co. International plc, in respect of certain merger benefit statements made in this announcement and Appendix VI to this announcement sets out the Transaction Agreement.
ENQUIRIES
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AbbVie
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+44 207 742 4000
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David Connern
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+44 207 742 4000
NO OFFER OR SOLICITATION
This announcement is not intended to and does not constitute an offer to sell or the solicitation of an offer to subscribe for or buy or an invitation to purchase or subscribe for any securities or the solicitation of any vote or approval in any jurisdiction pursuant to the acquisition or otherwise, nor shall there be any sale, issuance or transfer of securities in any jurisdiction in contravention of applicable law. In particular, this announcement is not an offer of securities for sale into the United States. No offer of securities shall be made in the United States absent registration under the U.S. Securities Act of 1933, as amended, or pursuant to an exemption from, or in a transaction not subject to, such registration requirements. Any securities issued in the acquisition are anticipated to be issued in reliance upon available exemptions from such registration requirements pursuant to Section 3(a)(10) of the U.S. Securities Act of 1933, as amended. The acquisition will be made solely by means of the Scheme Document (or, if applicable, the Takeover Offer Document), which will contain the full terms and conditions of the acquisition, including details with respect to the Allergan shareholder vote in respect of the acquisition. Any decision in respect of, or other response to, the acquisition, should be made only on the basis of the information contained in the Scheme Document.
IMPORTANT ADDITIONAL INFORMATION WILL BE FILED WITH THE SEC
In connection with the proposed Acquisition, Allergan will file with the U.S. Securities and Exchange Commission (the "SEC") a Proxy Statement, which will include the Scheme Document. BEFORE MAKING ANY VOTING DECISION, Allergan'S SHAREHOLDERS ARE URGED TO READ THE PROXY STATEMENT, INCLUDING THE SCHEME DOCUMENT, AND OTHER RELEVANT DOCUMENTS FILED OR TO BE FILED WITH THE SEC IN CONNECTION WITH THE PROPOSED ACQUISITION OR INCORPORATED BY REFERENCE IN THE PROXY STATEMENT (IF ANY) CAREFULLY AND IN THEIR ENTIRETY WHEN THEY BECOME AVAILABLE BECAUSE THEY WILL CONTAIN IMPORTANT INFORMATION ABOUT THE PROPOSED ACQUISITION AND THE PARTIES TO THE PROPOSED ACQUISITION. Allergan's shareholders and investors will be able to obtain, without charge, a copy of the Proxy Statement, including the Scheme Document, and other relevant documents filed with the SEC (when available) from the SEC's website at http://www.sec.gov. Allergan shareholders and investors will also be able to obtain, without charge, a copy of the Proxy Statement, including the Scheme Document, and other relevant documents (when available) by directing a written request to Allergan plc, Clonshaugh Business and Technology Park, Coolock, Dublin, D17 E400, Ireland, Attention: Investor Relations, or from Allergan's website, www.allergan.com.
PARTICIPANTS IN THE SOLICITATION
Allergan and certain of its directors and executive officers and employees may be considered participants in the solicitation of proxies from the shareholders of Allergan in respect of the transactions contemplated by the Scheme Document. Information regarding the persons who may, under the rules of the SEC, be deemed participants in the solicitation of the shareholders of Allergan in connection with the proposed transactions, including a description of their direct or indirect interests, by security holdings or otherwise, will be set forth in the Scheme Document when it is filed with the SEC. Information regarding Allergan's directors and executive officers is contained in Allergan's Annual Report on Form 10-K for the fiscal year ended December 31, 2018 and its Proxy Statement on Schedule 14A, dated March 22, 2019, which are filed with the SEC, and certain of Allergan's Current Reports on Form 8-K filed with the SEC on February 19, 2019, March 22, 2019 and May 1, 2019.
FORWARD-LOOKING STATEMENTS
This announcement contains certain forward-looking statements with respect to a possible acquisition involving AbbVie and Allergan and AbbVie's, Allergan's and/or the combined group's estimated or anticipated future business, performance and results of operations and financial condition, including estimates, forecasts, targets and plans for AbbVie and, following the Acquisition, if completed, the combined company. The words "believe," "expect," "anticipate," "project" and similar expressions, among others, generally identify forward-looking statements. These forward-looking statements are subject to risks and uncertainties that may cause actual results to differ materially from those indicated in the forward-looking statements. Such risks and uncertainties include, but are not limited to, the possibility that a possible acquisition will not be pursued, failure to obtain necessary regulatory approvals or required financing or to satisfy any of the other conditions to the possible acquisition, adverse effects on the market price of AbbVie's shares of common stock or Allergan's ordinary shares and on AbbVie's or Allergan's operating results because of a failure to complete the possible acquisition, failure to realize the expected benefits of the possible acquisition, failure to promptly and effectively integrate Allergan's businesses, negative effects relating to the announcement of the possible acquisition or any further announcements relating to the possible acquisition or the consummation of the possible acquisition on the market price of AbbVie's shares of common stock or Allergan's ordinary shares, significant transaction costs and/or unknown or inestimable liabilities, potential litigation associated with the possible acquisition, general economic and business conditions that affect the combined companies following the consummation of the possible acquisition, changes in global, political, economic, business, competitive, market and regulatory forces, future exchange and interest rates, changes in tax laws, regulations, rates and policies, future business acquisitions or disposals and competitive developments. These forward-looking statements are based on numerous assumptions and assessments made in light of AbbVie's or, as the case may be, Allergan's experience and perception of historical trends, current conditions, business strategies, operating environment, future developments and other factors it believes appropriate. By their nature, forward-looking statements involve known and unknown risks and uncertainties because they relate to events and depend on circumstances that will occur in the future. The factors described in the context of such forward-looking statements in this announcement could cause Allergan's plans with respect to AbbVie, Allergan's or AbbVie's actual results, performance or achievements, industry results and developments to differ materially from those expressed in or implied by such forward-looking statements. Although it is believed that the expectations reflected in such forward-looking statements are reasonable, no assurance can be given that such expectations will prove to have been correct and persons reading this announcement are therefore cautioned not to place undue reliance on these forward-looking statements which speak only as at the date of this announcement. Additional information about economic, competitive, governmental, technological and other factors that may affect AbbVie is set forth in Item 1A, "Risk Factors," in AbbVie's 2018 Annual Report on Form 10-K, which has been filed with the SEC, the contents of which are not incorporated by reference into, nor do they form part of, this announcement. Additional information about economic, competitive, governmental, technological and other factors that may affect Allergan is set forth in Item 1A, "Risk Factors," in Allergan's 2018 Annual Report on Form 10-K, which has been filed with the SEC, the contents of which are not incorporated by reference into, nor do they form part of, this announcement.
Any forward-looking statements in this announcement are based upon information available to AbbVie, Allergan and/or their respective boards of directors, as the case may be, as of the date of this announcement and, while believed to be true when made, may ultimately prove to be incorrect. Subject to any obligations under applicable Law, none of AbbVie, Allergan or any member of their respective boards of directors undertakes any obligation to update any forward-looking statement whether as a result of new information, future developments or otherwise, or to conform any forward-looking statement to actual results, future events, or to changes in expectations. All subsequent written and oral forward-looking statements attributable to AbbVie, Allergan or their respective boards of directors or any person acting on behalf of any of them are expressly qualified in their entirety by this paragraph.
Statement Required by the Irish Takeover Rules
The AbbVie Directors accept responsibility for the information contained in this announcement relating to AbbVie and the AbbVie Directors and members of their immediate families, related trusts and persons connected with them, except for the statements made by Allergan in respect of AbbVie. To the best of the knowledge and belief of the AbbVie Directors (who have taken all reasonable care to ensure that such is the case), the information contained in this announcement for which they accept responsibility is in accordance with the facts and does not omit anything likely to affect the import of such information.
The Allergan Directors accept responsibility for the information contained in this announcement relating to Allergan and the Allergan Directors and members of their immediate families, related trusts and persons connected with them, except for the statements made by AbbVie in respect of Allergan and the recommendation and related opinions of the Independent Allergan Directors. The Independent Allergan Directors accept responsibility for the recommendation and the related opinions of the Independent Allergan Directors contained in this announcement. To the best of the knowledge and belief of the Allergan Directors and the Independent Allergan Directors (who have taken all reasonable care to ensure such is the case), the information contained in this announcement for which they respectively accept responsibility is in accordance with the facts and does not omit anything likely to affect the import of such information.
Morgan Stanley & Co. LLC, acting through its affiliate Morgan Stanley & Co. International plc, which is authorized by the Prudential Regulation Authority and regulated by the Financial Conduct Authority in the United Kingdom, is acting as financial adviser to AbbVie and for no one else in relation to the matters referred to in this announcement. In connection with such matters, Morgan Stanley, its affiliates and its respective directors, officers, employees and agents will not regard any other person as their client, nor will it be responsible to anyone other than AbbVie for providing the protections afforded to their clients or for providing advice in connection with the matters described in this announcement or any matter referred to herein.
PJT Partners LP, a U.S. registered broker-dealer regulated by FINRA and a member of SIPC, is acting for AbbVie and no one else in connection with the matters set out in this announcement and will not be responsible to anyone other than AbbVie for providing advice in relation to the matters in this announcement. Neither PJT Partners LP nor any of its subsidiaries, branches or affiliates owes or accepts any duty, liability or responsibility whatsoever (whether direct or indirect, whether in contract, in tort, under statute or otherwise) to any person who is not a client of PJT Partners LP in connection with this announcement, any statement contained herein or otherwise.
J.P. Morgan Securities LLC, which is a registered broker dealer with the SEC, is acting as financial adviser to Allergan in connection with the Acquisition. In connection with the Acquisition, J.P. Morgan Securities LLC and its directors, officers, employees and agents will not regard any other person as its client, nor will it be responsible to anyone other than Allergan for providing the protections afforded to clients of J.P. Morgan Securities LLC or for giving advice in connection with the Acquisition or any matter referred to herein.
Dealing Disclosure Requirements
Under the provisions of Rule 8.3 of the Irish Takeover Panel Act, 1997, Takeover Rules 2013 (the "Irish Takeover Rules"), if any person is, or becomes, 'interested' (directly or indirectly) in, 1% or more of any class of 'relevant securities' of Allergan or AbbVie, all 'dealings' in any 'relevant securities' of Allergan or AbbVie (including by means of an option in respect of, or a derivative referenced to, any such 'relevant securities') must be publicly disclosed by not later than 3:30 pm (New York time) on the 'business' day following the date of the relevant transaction. This requirement will continue until the date on which the Scheme becomes effective or on which the 'offer period' otherwise ends. If two or more persons co-operate on the basis of any agreement, either express or tacit, either oral or written, to acquire an 'interest' in 'relevant securities' of Allergan or AbbVie, they will be deemed to be a single person for the purpose of Rule 8.3 of the Irish Takeover Rules.
Under the provisions of Rule 8.1 of the Irish Takeover Rules, all 'dealings' in 'relevant securities' of Allergan by AbbVie or 'relevant securities' of AbbVie by Allergan, or by any party acting in concert with either of them, must also be disclosed by no later than 12 noon (New York time) on the 'business' day following the date of the relevant transaction.
A disclosure table, giving details of the companies in whose 'relevant securities' 'dealings' should be disclosed, can be found on the Irish Takeover Panel's website at www.irishtakeoverpanel.ie.
'Interests in securities' arise, in summary, when a person has long economic exposure, whether conditional or absolute, to changes in the price of securities. In particular, a person will be treated as having an 'interest' by virtue of the ownership or control of securities, or by virtue of any option in respect of, or derivative referenced to, securities.
Terms in quotation marks are defined in the Irish Takeover Rules, which can also be found on the Irish Takeover Panel's website. If you are in any doubt as to whether or not you are required to disclose a dealing under Rule 8, please consult the Irish Takeover Panel's website at www.irishtakeoverpanel.ie or contact the Irish Takeover Panel on telephone number +353 1 678 9020 or fax number +353 1 678 9289.
No Profit Forecast / Asset Valuations
No statement in this announcement is intended to constitute a profit forecast for any period, nor should any statements be interpreted to mean that earnings or earnings per share will necessarily be greater or lesser than those for the relevant preceding financial periods for AbbVie or Allergan as appropriate. No statement in this announcement constitutes an asset valuation.
Publication on Website
Pursuant to Rule 2.6(c) of the Irish Takeover Rules, this announcement will be available to AbbVie employees on AbbVie's website www.abbvie.com and Allergan employees on Allergan's website www.Allergan.com. Neither the content of any such website nor the content of any other website accessible from hyperlinks on such website is incorporated into, or forms part of, this announcement.
Right to Switch to a Takeover Offer
AbbVie reserves the right, subject to the terms of the Transaction Agreement, to elect to implement the Acquisition by way of a Takeover Offer as an alternative to the Scheme, subject to the provisions of the Transaction Agreement and with the Panel's consent. In such event, the Acquisition will be implemented on terms at least as favorable, so far as applicable, as those which would apply to the Scheme, subject to appropriate amendments (including an acceptance condition set at 80% of the shares to which such offer relates).
Rounding
Certain figures included in this announcement have been subjected to rounding adjustments. Accordingly, any figures shown for the same category presented in different tables may vary slightly and figures shown as totals in certain tables may not be an arithmetic aggregation of the figures that precede them.
General
Appendix I to this announcement contains further details of the sources of information and bases of calculations set out in this announcement; Appendix II to this announcement contains definitions of certain expressions used in this announcement; Appendix III to this announcement contains the Conditions of the Acquisition and the Scheme; Appendix IV to this announcement sets out the report from PricewaterhouseCoopers LLP in respect of certain merger benefit statements made in this announcement; Appendix V to this announcement contains the report from Morgan Stanley & Co. International plc, in respect of certain merger benefit statements made in this announcement and Appendix VI to this announcement sets out the Transaction Agreement.
The release, publication or distribution of this announcement in or into certain jurisdictions may be restricted by the laws of those jurisdictions, including any Restricted Jurisdictions. Accordingly, copies of this announcement and all other documents relating to the Acquisition are not being, and must not be, released, published, mailed or otherwise forwarded, distributed or sent in, into or from any Restricted Jurisdictions. Persons receiving such documents (including, without limitation, nominees, trustees and custodians) should observe these restrictions. Failure to do so may constitute a violation of the securities laws of any such jurisdiction. To the fullest extent permitted by applicable Law, the companies involved in the Acquisition disclaim any responsibility or liability for the violations of any such restrictions by any person.
Any response in relation to the Acquisition should be made only on the basis of the information contained in the Scheme Documents or any document by which the Acquisition and the Scheme are made. Allergan Shareholders are advised to read carefully the formal documentation in relation to the proposed Acquisition once the Scheme Documents have been despatched.
This announcement has been prepared for the purpose of complying with the laws of Ireland and the Takeover Rules and the information disclosed may not be the same as that which would have been disclosed if this announcement had been prepared in accordance with the laws of jurisdictions outside of Ireland.
APPENDIX I
SOURCES AND BASES OF INFORMATION
1. In this announcement, unless otherwise stated or the context otherwise requires, the following bases and sources have been used:
(a) The historical share prices are sourced from the New York Stock Exchange for both AbbVie and Allergan;
(b) The value of the whole of the existing issued share capital of AbbVie is based upon the entire issued ordinary share capital excluding treasury shares at June, 21 2019, namely 1,478,365,231 AbbVie Shares;
(c) The value of the whole of the existing issued share capital of Allergan is based upon the entire issued ordinary share capital excluding treasury shares at June, 21 2019, namely 327,823,649 Allergan Shares;
(d) References to the arrangements in place between AbbVie and Allergan regarding an expenses reimbursement agreement are sourced from the terms of the Expenses Reimbursement Agreement approved by the Panel;
(e) The entire issued and to be issued share capital (fully diluted share capital) of AbbVie is calculated on the basis of:
(i) the number of issued AbbVie Shares, as set out in paragraph (b) above; and
(ii) 10,591,251 in aggregate of issued AbbVie Restricted Stock Units ("RSUs") and Performance Stock Units ("PSUs"); and
(iii) 6,848,750 AbbVie Options; and
(iv) all AbbVie Shares, RSUs and Options maintain vesting status and remain outstanding;
(f) The entire issued and to be issued share capital (fully diluted share capital) of Allergan is calculated on the basis of:
(i) the number of issued Allergan Shares, as set out in paragraph (c) above; and
(ii) 482,892 issued Allergan PSUs (calculated by reference to the number of Allergan Shares the Allergan PSUs are convertible into if target performance criteria are met); and
(iii) 2,861,395 issued Allergan RSU Awards; and
(iv) 6,342,839 Allergan Options; and
(v) full exercise of the outstanding options and vesting of outstanding Allergan RSU Awards and Allergan PSU Awards at target performance levels.
(g) Save where otherwise stated, financial and other information concerning AbbVie and Allergan has been extracted from published sources or from audited financial results of AbbVie and Allergan; and
(h) References to the arrangements in place between AbbVie and Allergan regarding a transaction agreement are sourced from the Transaction Agreement.
2. All references in this announcement:
(a) to 2019 revenue of the combined company are based on revenue guidance for 2019 provided on recent earnings calls; and
(b) any reference to 2020 revenues are derived from an average of the following broker estimates:
(i) in relation to AbbVie and Humira revenues: Societe Generale, Atlantic Equities, SVB Leerink, Piper Jaffray, Wolfe Research, Morgan Stanley, BMO, Cowen and Credit Suisse; and
(ii) in relation to Allergan: JP Morgan, Credit Suisse, Guggenheim, RBC, Suntrust, Piper Jaffray, Wells Fargo, Citi, Leerink, Cantor, Cowen, Morgan Stanley.
3. The statement that the Acquisition is earnings accretive should not be interpreted to mean that the earnings per share in the current or any future period financial period will necessarily match or be greater than those for the relevant preceding financial period.
4. As at the close of business on June 21, 2019 (being the last practicable date prior to the release of this announcement), Morgan Stanley & Co. LLC, financial adviser to AbbVie and any person (other than an exempt principal trader or an exempt fund manager) controlling, controlled by, or under the same control as, Morgan Stanley & Co. LLC, was interested in, or held short positions in, the following Allergan securities:
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Entity Name
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Product
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Quantity
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Morgan Stanley Strategic Investments, Inc.
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Common Stock
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(2)*
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Morgan Stanley AIP GP LP
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Common Stock
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1881
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Morgan Stanley Finance LLC
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OPTION
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14,700
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Morgan Stanley B.V.
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OPTION
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2,545
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Morgan Stanley AIP GP LP
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Common Stock
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|
454
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Morgan Stanley AIP GP LP
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Common Stock
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7,095
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Morgan Stanley Strategic Investments, Inc.
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|
Common Stock
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(4)*
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|
*Represents a short position.
5. The bases of belief (including sources of information and assumptions made) that support the expected synergies and other cost reductions are set out in the following paragraphs. The estimate of synergies has been reported on in accordance with Rule 19.3(b)(ii) of the Irish Takeover Rules.
6. The expected sources of the estimated pre-tax synergies are:
(a) optimizing the research and early stage portfolio, and reducing overlapping R&D resources;
(b) driving efficiencies in SG&A including sales and marketing, and central support function costs; and
(c) eliminating redundancies in manufacturing and supply chain, and leveraging procurement spend.
7. When evaluating potential annual pre-tax cost synergies and other cost reductions the AbbVie Board has assumed the following:
(a) The cost bases for the quantification exercise are:
(i) in respect of AbbVie, the four months actual cost base to 30 April 2019 plus eight months of the latest forecast cost base to 31 December 2019; and
(ii) in respect of Allergan, the three months actual cost base to 31 March 2019 plus nine months of the latest forecast cost base to 31 December 2019;
(b) that the Scheme will become effective and AbbVie, through Acquirer Sub, will acquire 100% of the issued and to be issued share capital of Allergan on completion of the Acquisition;
(c) that there will be no material unanticipated impact on the combined company arising from any decisions made by competition authorities;
(d) that there will be no material change to the market dynamics affecting AbbVie and/or Allergan following completion of the Acquisition; and
(e) that there will be no material change to exchange rates following completion of the Acquisition.
8. In establishing the estimate of pre-tax synergies and other cost reductions the AbbVie Board has assumed that Allergan's operations, processes and procedures are comparable to those of AbbVie's related operations, except where publicly available information clearly indicates otherwise or the due diligence materials provided by Allergan to AbbVie indicated otherwise.
9. AbbVie's management, aided by its previous integration experience and through an understanding of Allergan's operations and cost structure based on their own market intelligence and experience, and due diligence materials provided by Allergan, has determined the source and scale of potential pre-tax synergies and other cost reductions. The pre-tax synergies and other cost reductions are incremental to AbbVie's and, to the best of AbbVie's knowledge, Allergan's existing plans.
10. In addition to information from AbbVie's and Allergan's respective management teams, the sources of information that AbbVie has used to arrive at the estimate of potential pre-tax synergies and other cost reductions include:
(a) the Allergan annual report and accounts;
(b) Allergan presentations to analysts;
(c) Allergan's website;
(d) analysts' research;
(e) other public information;
(f) AbbVie's knowledge of the industry and of Allergan; and
(g) AbbVie's experience of synergies from previous transactions.
11. There remains an inherent risk in the synergy forward-looking statements. No synergy statement in this announcement, including any statement that the Acquisition will be accretive, should be construed as a profit forecast or interpreted to mean that AbbVie's earnings in the first full year following the Scheme, or in any subsequent period, would necessarily match or be greater than or be less than those of AbbVie and/or Allergan for the relevant preceding financial period or any other period.
APPENDIX II
DEFINITIONS
The following definitions apply throughout this announcement unless the context otherwise requires:
"AbbVie Board" means the board of directors of AbbVie.
"AbbVie Directors" means the members of the AbbVie Board.
"AbbVie Group" means AbbVie and all of its subsidiaries.
"AbbVie Material Adverse Effect" has the meaning given to it in Section 1.1 of the Transaction Agreement.
"AbbVie Options" means all options to purchase AbbVie Shares, whether granted pursuant to the AbbVie Share Plan or otherwise.
"AbbVie Parties" means, collectively, AbbVie and Acquirer Sub.
"AbbVie Restricted Stock Units" / "RSUs" means the restricted stock units of AbbVie.
"AbbVie Share Plan" means the AbbVie 2013 Stock Award and Incentive Plan.
"AbbVie Shares" means the common stock of AbbVie, par value $0.01 per share.
"AbbVie Shareholders" means the holders of Abbvie Shares.
"AbbVie" means AbbVie Inc. a Delaware corporation
"Acquirer Sub" means Venice Subsidiary LLC, a Delaware limited liability company.
"Acquisition" means the proposed acquisition by Acquirer Sub of Allergan by means of the Scheme or the Takeover Offer (and any such Scheme or Takeover Offer as it may be revised, amended or extended from time to time), including the issuance by AbbVie of the aggregate Share Consideration and payment by Acquirer Sub of the aggregate Cash Consideration pursuant to the Scheme or the Takeover Offer, in each case, as described in this Rule 2.5 Announcement and provided for in the Transaction Agreement.
"Act" means the Companies Act 2014, all enactments which are to be read as one with, or construed or read together as one with the Act and every statutory modification and reenactment thereof for the time being in force.
"Acting in Concert" shall have the meaning given to that term in the Takeover Panel Act.
"Allergan" means Allergan an Irish public limited company with registered number 527629 having its registered office at Clonshaugh Business and Technology Park, Coolock, Dublin, D17 E400, Ireland.
"Allergan Alternative Proposal" means any bona fide proposal or offer (including non-binding proposals or offers) from any Person or Group, other than AbbVie and its Subsidiaries or any of its Concert Parties, relating to any (i) direct or indirect acquisition (whether in a single transaction or a series of related transactions) of assets of Allergan or any of its Subsidiaries (including equity securities of Subsidiaries) equal to twenty percent (20%) or more of the consolidated assets of Allergan, or to which twenty percent (20%) or more of the revenues or earnings of Allergan on a consolidated basis are attributable for the most recent fiscal year for which audited financial statements are then available, (ii) direct or indirect acquisition (including by scheme of arrangement or takeover offer) or issuance (whether in a single transaction or a series of related transactions) of twenty percent (20%) or more of any class of equity or voting securities of Allergan, (iii) scheme of arrangement, tender offer, takeover offer or exchange offer that, if consummated, would result in a Person or Group beneficially owning twenty percent (20%) or more of any class of equity or voting securities of Allergan, or (iv) scheme of arrangement, merger, consolidation, share exchange, business combination, joint venture, reorganization, recapitalization or similar transaction involving Allergan or any of its Subsidiaries, under which a Person or Group or, in the case of clause (B) below, the shareholders or equityholders of any Person or Group would, directly or indirectly, (A) acquire assets equal to twenty percent (20%) or more of the consolidated assets of Allergan, or to which 20% or more of the revenues or earnings of Allergan on a consolidated basis are attributable for the most recent fiscal year for which audited financial statements are then available, or (B) immediately after giving effect to such transactions, beneficially own twenty percent (20%) or more of any class of equity or voting securities of Allergan or the surviving or resulting Person (including any parent Person) in such transaction.
"Allergan Board" means the board of directors of Allergan.
"Allergan Change of Recommendation" shall have the meaning given to that term in Section 5.3(a)(iii) of the Transaction Agreement.
"Allergan Directors" means the members of the board of directors of Allergan.
"Allergan Equity Award Holder Proposal" means the proposal of AbbVie to the Allergan Equity Award Holders to be made in accordance with Rule 15 of the Takeover Rules and the terms of the Allergan Share Plans.
"Allergan Equity Awards" means the Allergan Options, the Allergan Restricted Stock Awards, the Allergan RSU Awards, the Allergan PSU Awards and any other Allergan equity-based awards granted under a Allergan Share Plans or otherwise.
"Allergan Group" means Allergan and all of its subsidiaries.
"Allergan Material Adverse Effect" has the meaning given to it in Section 1.1 of the Transaction Agreement.
"Allergan Options" means all options to purchase Allergan Shares, whether granted pursuant to the Allergan Share Plans or otherwise.
"Allergan PSUs" means all Allergan RSU Awards with performance-based vesting or delivery requirements, whether granted pursuant to the Allergan Share Plans or otherwise.
"Allergan Replacement Option" an option granted under the AbbVie Share Plan that will be substituted for each Allergan Option.
"Allergan Replacement Share Award" an award granted under the AbbVie Share Plan that will be substituted for each Allergan Share Award.
"Allergan Restricted Stock Awards" means all awards of Allergan Shares subject to vesting restrictions and/or forfeiture back to Allergan, whether granted pursuant to the Allergan Share Plans or otherwise.
"Allergan RSU Awards" means all restricted stock units payable in Allergan Shares or whose value is determined with reference to the value of Allergan Shares, whether granted pursuant to the Allergan Share Plans or otherwise.
"Allergan Share" means the ordinary shares of Allergan, par value US$0.0001 per share.
"Allergan Shareholders" means the holders of Allergan Shares.
"Allergan Share Award" means an award denominated in Allergan Shares (including Allergan Restricted Stock Awards, Allergan PSU Awards and Allergan RSU Awards), other than an Allergan Option.
"Allergan Share Plans" means, collectively, the Allergan, Inc. 2008 Equity Plan, the Forest Laboratories, LLC 2007 Equity Incentive Plan, the Amended and Restated Allergan 2011 Incentive Award Plan, the Amended and Restated 2013 Incentive Award Plan of Allergan, the Kythera Biopharmaceuticals, Inc. 2012 Equity Incentive Plan, the Warner Chilcott Equity Incentive Plan, the ZELTIQ Aesthetics, Inc. 2012 Stock Plan, and any other equity-based incentive plan maintained by Allergan or assumed by Allergan in connection with prior acquisitions.
"Allergan Shareholder Approval" means (i) the approval of the Scheme by a majority in number of members of each class of Allergan Shareholders (including as may be directed by the High Court pursuant to Section 450(5) of the Act) representing, at the relevant voting record time, at least seventy five percent (75%) in value of the Allergan Shares of that class held by Allergan Shareholders who are members of that class and that are present and voting either in person or by proxy, at the Court Meeting (or at any adjournment or postponement of such meeting) and (ii) the Required EGM Resolutions being duly passed by the requisite majorities of Allergan Shareholders at the EGM (or at any adjournment or postponement of such meeting).
"Allergan Superior Proposal" means any bona fide, written Allergan Alternative Proposal (other than an Allergan Alternative Proposal which has resulted from a breach in any material respect of Section 5.3 of the Transaction Agreement) (with all references to "twenty percent (20%)" in the definition of Allergan Alternative Proposal being deemed to be references to "fifty percent (50%)") on terms that the Allergan Board determines in good faith, after consultation with its financial advisor and outside legal counsel, and taking into account all the terms and conditions of the Allergan Alternative Proposal that the Allergan Board considers to be appropriate (including the identity of the Person making the Allergan Alternative Proposal and the expected timing and likelihood of consummation, any governmental or other approval requirements (including divestitures and entry into other commitments and limitations), break-up fees, expense reimbursement provisions, conditions to consummation and availability of necessary financing), is more favorable to the Allergan Shareholders from a financial point of view than the Acquisition (taking into account any proposal by AbbVie to amend the terms of the Transaction Agreement).
"Antitrust Laws" means the Sherman Act of 1890, the Clayton Act of 1914, the Federal Trade Commission Act of 1914, the HSR Act and all other federal, state and foreign applicable Laws in effect from time to time that are designed or intended to prohibit, restrict or regulate actions having the purpose or effect of monopolization or restraint of trade.
"Cash Consideration" means US$120.30 in cash per Allergan Share (as it may be adjusted by the Exchange Ratio Modification Number) and any cash in lieu of fractions.
"Clearances" means all consents, clearances, approvals, permissions, license, variance, exemption, authorization, acknowledgement, permits, nonactions, Orders and waivers to be obtained from, and all registrations, applications, notices and filings to be made with or provided to, any Governmental Entity or other third party in connection with the implementation of the Scheme and/or the Acquisition.
"Completion" means the completion of the Acquisition.
"Completion Date" means the date of completion of the Acquisition.
"Concert Parties" means such Persons as are deemed to be Acting in Concert with AbbVie pursuant to Rule 3.3 of Part A of the Irish Takeover Rules.
"Conditions" means the conditions to the Scheme and the Acquisition set out in paragraphs 1, 2, 3, 4 and 5 of Appendix III of this Rule 2.5 Announcement, and "Condition" means any one of the Conditions.
"Court Meeting" means the meeting or meetings of the Allergan Shareholders or, if applicable, the meeting or meetings of any class or classes of Allergan Shareholders (and, in each case, any adjournment or postponement thereof) convened by (i) resolution of the Allergan Board or (ii) order of the High Court, in either case, pursuant to Section 450 of the Act to consider and, if thought fit, approve the Scheme (with or without amendment).
"Court Meeting Resolution" means the resolution to be proposed at the Court Meeting for the purposes of approving and implementing the Scheme.
"Court Order" means the Order or Orders of the High Court sanctioning the Scheme under Section 453 of the Act and confirming the reduction of capital that forms part of it under Sections 84 and 85 of the Act.
"EC Merger Regulation" means Council Regulation (EC) No. 139/2004 of 20 January 2004 on the control of concentrations between undertakings.
"Effective Date" means the date on which the Scheme becomes effective in accordance with its terms or, if the Acquisition is implemented by way of a Takeover Offer, the date on which the Takeover Offer has become (or has been declared) unconditional in all respects in accordance with the provisions of the Takeover Offer Documents and the Takeover Rules.
"Effective Time" means the time on the Effective Date at which the Court Order and a copy of the minute required by Section 86 of the Act are registered by the Registrar of Companies or, if the Acquisition is implemented by way of a Takeover Offer, the time on the Effective Date at which the Takeover Offer becomes (or is declared) unconditional in all respects in accordance with the provisions of the Takeover Offer Documents and the Takeover Rules.
"EGM" means the extraordinary general meeting of the Allergan Shareholders (and any adjournment or postponement thereof) to be convened in connection with the Scheme, expected to be held as soon as the preceding Court Meeting shall have been concluded (it being understood that if the Court Meeting is adjourned or postponed, the EGM shall be correspondingly adjourned or postponed).
"End Date" means June 25, 2020; provided, that if as of such date any of Conditions 3(ii), 3(iii), 3(iv) or 3(y) (with respect to Condition 3(v), only if the failure of such Condition to have been satisfied as of such date is an Order or Law under any Antitrust Law) have not been satisfied, and on such date all other Conditions (other than Conditions 2(iii) and 2(iv)) have been satisfied (or, in the sole discretion of the applicable Party, waived (where applicable)) or would be satisfied (or, in the sole discretion of the applicable Party, waived (where applicable)) if the Acquisition were completed on such date, the "End Date" shall be September 25, 2020.
"Equity Award Conversion Ratio" means the sum, rounded to the nearest one thousandth, of (a) the Exchange Ratio and (b) the quotient obtained by dividing (i) the Cash Consideration by (ii) the volume weighted average price of an AbbVie Share for a ten trading day period, starting with the opening of trading on the eleventh trading day prior to the Completion Date to the closing of trading on the second to last trading day prior to the Completion Date, as reported by Bloomberg.
"Exchange Act" means the United States Securities Exchange Act of 1934, as amended.
"Exchange Ratio" means 0.8660 AbbVie Shares per Allergan Share.
"Exchange Ratio Modification Number" means the provision that, under the terms of the Transaction Agreement, if the Acquisition would otherwise result in the issuance of AbbVie Shares in excess of 19.99% of the AbbVie Shares outstanding immediately prior to the Completion Date (the "Share Cap"), the Exchange Ratio shall be reduced by the smallest number (rounded to the nearest 0.0001) that causes the total number of AbbVie Shares issuable in the Acquisition to not exceed the Share Cap (the "Revised Exchange Ratio Number"), and the Cash Consideration shall be increased by an amount in cash equal to (x) the Revised Exchange Ratio Number multiplied by (y) the VWAP of the AbbVie Shares.
"Expenses Reimbursement Agreement" means the expenses reimbursement agreement dated June 25, 2019 between AbbVie and Allergan, the terms of which have been approved by the Panel.
"Fractional Entitlements" means fractions of AbbVie Shares.
"Governmental Entity" means any United States, Irish or other foreign or supranational, federal, state or local governmental commission, board, body, division, political subdivision, bureau or other regulatory authority or agency, including courts and other judicial bodies, or any competition, antitrust or supervisory body, central bank, public international organization or other governmental, trade or regulatory agency or body, securities exchange or any self-regulatory body or authority, including any instrumentality or entity designed to act for or on behalf of the foregoing, in each case, in any jurisdiction, including, the Panel, the High Court, the SEC, and each Allergan Regulatory Agency.
"HSR Act" means the United States Hart-Scott-Rodino Antitrust Improvements Act of 1976.
"Independent Allergan Directors" means the Allergan Directors, excluding Thomas C. Freyman.
"Irish High Court" or "High Court" means the High Court of Ireland.
"Irish Takeover Rules" or "Takeover Rules" means the Irish Takeover Panel Act, 1997, Takeover Rules 2013.
"Law" means any federal, state, local, foreign or supranational law, statute, ordinance, rule, regulation, judgment, order, injunction, decree, executive order or agency requirement of any Governmental Entity.
"Morgan Stanley" means Morgan Stanley & Co. LLC, Morgan Stanley & Co. International plc and each of their affiliates.
"NYSE" means the New York Stock Exchange.
"Order" means any order, writ, decree, judgment, award, injunction, ruling, settlement or stipulation issued, promulgated, made, rendered or entered into by or with any Governmental Entity or arbitrator (in each case, whether temporary, preliminary or permanent).
"Panel" or "Irish Takeover Panel" means the Irish Takeover Panel.
"Parties" means Allergan and the AbbVie Parties and "Party" shall mean either Allergan, on the one hand, or AbbVie or the AbbVie Parties (whether individually or collectively), on the other hand (as the context requires).
"Person" means any individual, corporation, partnership, limited liability company, association, trust or other entity or organization, including a government or political subdivision or an agency or instrumentality of such government or political subdivision.
"Proxy Statement" means a proxy statement to be sent to the Allergan Shareholders in connection with the matters to be submitted at the Court Meeting and the EGM.
"Registrar of Companies" or "Irish Registrar of Companies" means the Registrar of Companies in Dublin, Ireland.
"Required Antitrust Jurisdiction" means U.S., European Union, China, Brazil, Canada, Israel, Mexico, Japan, South Africa, South Korea, Turkey and the United Kingdom (only in the event of any exit by the United Kingdom from, or suspension or termination of its membership in, the European Union such that a United Kingdom Governmental Entity has jurisdiction under any Antitrust Law to review the transactions contemplated by the Transaction Agreement).
"Required EGM Resolutions" mean, collectively, the following resolutions to be proposed at the EGM: (i) an ordinary resolution to approve the Scheme and to authorize the Allergan Board to take all such action as it considers necessary or appropriate to implement the Scheme; (ii) a special resolution to cancel, subject to the approval of the High Court, the issued share capital of Allergan (other than any Allergan Shares held by any member of the AbbVie Group); (iii) an ordinary resolution authorizing the Allergan Board to allot new ordinary shares to Acquirer Sub pursuant to the Transaction Agreement and the Scheme by capitalization of the reserve arising from the cancellation of the issued share capital of Allergan pursuant to the resolution described in clause (ii) and (iv) a special resolution amending the Allergan memorandum and articles of association.
"Restricted Jurisdictions" means the jurisdictions in which the release, publication or distribution of this announcement may be restricted by the laws of those jurisdictions.
"Rule 2.5 Announcement" means this announcement issued pursuant to Rule 2.5 of the Irish Takeover Rules.
"Sanction Date" means the date on which the Condition in paragraph 2(iii) is satisfied.
"Scheme Consideration" means 0.8660 (as it may be adjusted by the Exchange Ratio Modification Number) of an AbbVie Share plus US$120.30 in cash per Allergan Share (as it may be adjusted by the Exchange Ratio Modification Number) and any cash in lieu of fractions.
"Scheme Document" means a document (or relevant sections of the Proxy Statement comprising the Scheme Document) (including any amendments or supplements thereto) to be distributed to Allergan Shareholders and, for information only, to Allergan Equity Award Holders containing (i) the Scheme, (ii) the notice or notices of the Court Meeting and EGM, (iii) an explanatory statement as required by Section 452 of the Act with respect to the Scheme, (iv) such other information as may be required or necessary pursuant to the Act, the Exchange Act or the Takeover Rules and (v) such other information as Allergan and AbbVie shall agree.
"Scheme" means the proposed scheme of arrangement under Chapter 1 of Part 9 of the Act and the capital reduction under Sections 84 and 85 of the Act to effect the Acquisition pursuant to the Transaction Agreement, on such terms and in such form as is consistent with the terms agreed to by the Parties as set out in this Rule 2.5 Announcement, including any revision thereof as may be agreed between the Parties in writing, and, if required, by the High Court.
"SEC" means the United States Securities and Exchange Commission.
"Share Consideration" means 0.8660 (as it may be adjusted pursuant to the Exchange Ratio Modification Number) of an AbbVie Share.
"Takeover Offer" means an offer in accordance with Section 3.6 of the Transaction Agreement for the entire issued share capital of Allergan (other than any Allergan Shares beneficially owned by AbbVie or any member of the AbbVie Group (if any) and any Allergan Shares held by any member of the Allergan Group) including any amendment or revision thereto pursuant to the Transaction Agreement, the full terms of which would be set out in the Takeover Offer Document or (as the case may be) any revised offer documents.
"Takeover Offer Document" means, if, following the date of the Transaction Agreement, AbbVie elects to implement the Acquisition by way of the Takeover Offer in accordance with Section 3.6 of the Transaction Agreement, the document to be despatched to Allergan Shareholders and others jointly by AbbVie and Acquirer Sub containing, among other things, the Takeover Offer, the Conditions (except as AbbVie determines pursuant to and in accordance with Section 3.6 of the Transaction Agreement not to be appropriate in the case of a Takeover Offer) and certain information about AbbVie, Acquirer Sub and Allergan and, where the context so requires, includes any form of acceptance, election, notice or other document reasonably required in connection with the Takeover Offer.
"Takeover Panel Act" means the Irish Takeover Panel Act 1997.
"Takeover Rules" means the Irish Takeover Panel Act 1997, Takeover Rules, 2013.
"Transaction Agreement" means the Transaction Agreement dated June 25, 2019 by and among AbbVie, Acquirer Sub and Allergan.
"VWAP of AbbVie Shares" means the volume weighted average price of an AbbVie Share for a ten trading day period, starting with the opening of trading on the eleventh trading day prior to the Completion Date to the closing of trading on the second to last trading day prior to the Completion Date, as reported by Bloomberg.
References to "dollars" and "$" means U.S. dollars.
References to any applicable Law shall be deemed to refer to such applicable Law as amended from time to time and to any rules or regulations promulgated thereunder.
Any singular term shall be deemed to include the plural, and any plural term the singular, and references to any gender shall include all genders.
APPENDIX III
CONDITIONS OF THE ACQUISITION AND THE SCHEME
The Acquisition and the Scheme will comply with the Takeover Rules and, where relevant, the rules and regulations of the Exchange Act, the Act and the NYSE, and are subject to the terms and conditions set out in this Announcement and to be set out in the Scheme Document. The Acquisition and the Scheme are, to the extent required by the Laws of Ireland, governed by the Laws of Ireland.
The Acquisition and the Scheme will be subject to the conditions set out in this Appendix III.
1. The Acquisition will be conditional upon the Scheme becoming effective and unconditional by not later than the End Date (or such earlier date as may be specified by the Panel, or such later date as AbbVie and Allergan may, subject to receiving the consent of the Panel and the High Court, in each case if required, agree).
2. The Scheme will be conditional upon:
(i) the Scheme having been approved by a majority in number of members of each class of Allergan Shareholders (including as may be directed by the High Court pursuant to Section 450(5) of the Act) present and voting either in person or by proxy at the Court Meeting (or at any adjournment or postponement of such meeting) representing, at the Voting Record Time, at least 75% in value of the Allergan Shares of that class held by such Allergan Shareholders present and voting;
(ii) each of the Required EGM Resolutions having been duly passed by the requisite majority of Allergan Shareholders at the EGM (or at any adjournment or postponement of such meeting);
(iii) the High Court having sanctioned (without material modification) the Scheme pursuant to Sections 449 to 455 of the Act and the High Court having confirmed the related reduction of capital involved therein (the date on which the condition in this paragraph 2(iii) is satisfied, the "Sanction Date"); and
(iv) copies of the Court Order and the minute required by Section 86 of the Act in respect of the reduction of capital (referred to in paragraph 2(iii)) having been delivered for registration to the Registrar of Companies and the Court Order and such minute having been registered by the Registrar of Companies.
3. The AbbVie Parties and Allergan have agreed that, subject to paragraph 6, the Scheme and the Acquisition will also be conditional upon the following matters having been satisfied or waived on or before the Sanction Date:
(i) the NYSE having approved, and not withdrawn such approval, the listing of all of the Share Consideration to be issued in the Acquisition, subject only to official notice of issuance;
(ii) the applicable waiting periods under the HSR Act in connection with the Acquisition having expired or been earlier terminated, and, to the extent applicable, any agreement between Allergan and the AbbVie Parties, on the one hand, and the Federal Trade Commission or the Antitrust Division of the United States Department of Justice, on the other hand, not to consummate the Scheme or the Acquisition having expired or been earlier terminated;
(iii)
(a) to the extent that the Acquisition constitutes a concentration within the scope of Council Regulation (EC) No. 139/2004 (the "EC Merger Regulation") or otherwise constitutes a concentration that is subject to the EC Merger Regulation, the European Commission having decided to allow closing of the Acquisition;
(b) the extent that all or part of the Acquisition is referred by the European Commission to the relevant Governmental Entity of one or more member countries of the European Economic Area, such relevant Governmental Entity(ies) (in the case of a partial referral in conjunction with a final decision of the European Commission) having issued a final decision or decisions which satisfies (or together satisfy) Condition 3(iii)(a) above (that clause being interpreted mutandis mutatis);
(iv) all required Clearances of any Governmental Entity having been obtained and remaining in full force and effect and all applicable waiting periods having expired, lapsed or been terminated (as appropriate), in each case in connection with the Acquisition, under the Antitrust Laws of each Required Antitrust Jurisdiction;
(v) (a) no order, writ, decree, judgment, or injunction (whether temporary or permanent) shall have been issued, promulgated, made, rendered or entered into by any court or other tribunal of competent jurisdiction, and (b) no Law other than an order, writ, decree, judgment, or injunction described in clause (a) (excluding, for purposes of this clause (b), any such Antitrust Law of any jurisdiction that is not a Required Antitrust Jurisdiction) in any jurisdiction of competent authority, shall have been enacted, issued, promulgated, enforced or entered and continue in effect and, in the case of each of clauses (a) and (b), restrain, enjoin, make illegal or otherwise prohibit the consummation of the Acquisition; and
(vi) the Transaction Agreement not having been terminated in accordance with its terms by the applicable Party or Parties as set forth below as a consequence of an event set forth below (such events being the events set out in the Transaction Agreement following the occurrence of which the Transaction Agreement may be terminated in accordance with its terms):
(a) termination by either Allergan or AbbVie if the Court Meeting or the EGM shall have been completed and the Court Meeting Resolution or the Required EGM Resolutions, as applicable, shall not have been approved by the requisite majorities;
(b) termination by either Allergan or AbbVie if the Effective Time shall not have occurred by 5:00 p.m., New York City time, on the End Date, provided, that such right to terminate the Transaction Agreement shall not be available to a Party whose breach of any provision of the Transaction Agreement shall have been the primary cause of the failure of the Effective Time to have occurred by such time;
(c) termination by either Allergan or AbbVie if the High Court shall decline or refuse to sanction the Scheme, unless both Parties agree in writing that the decision of the High Court shall be appealed (it being agreed that Allergan shall make such an appeal if requested to do so in writing by AbbVie and the counsel appointed by AbbVie and by Allergan agree that doing so is a reasonable course of action);
(d) termination by either Allergan or AbbVie if there shall be in effect any (x) Law other than an order, writ, decree, judgment, or injunction described in clause (y) (whether or not final or appealable) (excluding any such Antitrust Law of any jurisdiction that is not a Required Antitrust Jurisdiction) in any jurisdiction of competent authority or (y) final and non-appealable order, writ, decree, judgment, or injunction issued, promulgated, made, rendered or entered into by any court or other tribunal of competent jurisdiction, that, in the case of each of clauses (x) and (y), permanently restrains, enjoins, makes illegal or otherwise prohibits the consummation of the Acquisition; provided that such right to terminate the Transaction Agreement shall not be available to any Party whose breach of any provision of the Transaction Agreement shall have been the primary cause of such Law, order, writ, decree, judgment, or injunction;
(e) termination by Allergan if any AbbVie Party shall have breached or failed to perform in any material respect any of its covenants or other agreements contained in the Transaction Agreement or if any of its representations or warranties set forth in the Transaction Agreement are inaccurate, which breach, failure to perform or inaccuracy (1) would result in a failure of Condition 5(ii) or 5(iii) and (2) is not reasonably capable of being cured by the End Date or, if curable, is not cured by the earlier of (x) the End Date and (y) 30 days following written notice by Allergan thereof;
(f) termination by Allergan prior to obtaining the Allergan Shareholder Approval if (1) in accordance with Section 5.3 of the Transaction Agreement, the Allergan Board shall have authorized Allergan to terminate the Transaction Agreement in response to an Allergan Superior Proposal and (2) substantially concurrently with such termination, a definitive agreement providing for the consummation of such Allergan Superior Proposal is duly executed and delivered by all parties thereto and, prior to or substantially concurrently with such termination, Allergan pays AbbVie any amounts due under the Expenses Reimbursement Agreement (it being understood that, without limiting Allergan's obligations under the Expenses Reimbursement Agreement, only such costs and expenses for which AbbVie shall have submitted to Allergan in writing a request for such amounts and written invoices or written documentation supporting such request prior to such termination in accordance with the Expenses Reimbursement Agreement shall be due substantially concurrently with such termination);
(g) termination by AbbVie if Allergan shall have breached or failed to perform in any material respect any of its covenants or other agreements contained in the Transaction Agreement or if any of its representations or warranties set forth in the Transaction Agreement are inaccurate, which breach, failure to perform or inaccuracy (1) would result in a failure of Condition 4(ii) or 4(iii) and (2) is not reasonably capable of being cured by the End Date or, if curable, is not cured by the earlier of (x) the End Date and (y) 30 days following written notice by AbbVie thereof;
(h) termination by AbbVie if, prior to the receipt of the Allergan Shareholder Approval an Allergan Change of Recommendation shall have occurred; or
(i) termination by mutual written consent of Allergan and AbbVie.
4. The AbbVie Parties and Allergan have agreed that, subject to paragraph 6, the AbbVie Parties' obligation to effect the Scheme and the Acquisition will also be conditional upon the following matters having been satisfied (or, to the extent permitted by applicable Law, waived by AbbVie) on or before the Sanction Date:
(i) from June 25, 2019 (being the date of this Announcement) to the Sanction Date, there having not been any event, change, effect, development or occurrence that has had, or would reasonably be expected to have, individually or in the aggregate, an Allergan Material Adverse Effect;
(ii) (a) the representation and warranty of Allergan set forth in Section 6.1(A)(k)(ii) (Absence of Certain Changes or Events) of the Transaction Agreement having been true and correct in all respects at and as of the date of the Transaction Agreement and at and as of the Sanction Date as though made at and as of the Sanction Date, (b) each of the representations and warranties of Allergan set forth in Sections 6.1(A)(c)(i) (Capitalization), 6.1(A)(d)(i) (Corporate Authority Relative to the Agreement), 6.1(A)(s) (Required Vote of Allergan Shareholders), 6.1(A)(v) (Opinion of Financial Advisor), 6.1(A)(w) (Finders or Brokers) and 6.1(A)(y) (Takeover Statutes) of the Transaction Agreement having been true and correct (read for the purpose of this paragraph 4(ii)(b) without any qualification as to materiality or Allergan Material Adverse Effect therein) in all material respects at and as of the date of the Transaction Agreement and at and as of the Sanction Date as though made at and as of the Sanction Date (in each case except to the extent that any such representation and warranty speaks as of a particular date, in which case such representation and warranty shall have been true and correct in all material respects as of such particular date), and (c) each of the representations and warranties of Allergan set forth in Section 6.1(A) of the Transaction Agreement (other than those specifically listed in paragraphs 4(ii)(a) or 4(ii)(b)) having been true and correct (read for purposes of this paragraph 4(ii)(c) without any qualification as to materiality or Allergan Material Adverse Effect therein) in all respects at and as of the date of the Transaction Agreement and at and as of the Sanction Date as though made at and as of the Sanction Date (in each case except to the extent that any such representation and warranty speaks as of a particular date, in which case such representation and warranty shall have been true and correct as of such particular date), except for such failures to be true and correct as have not had and would not reasonably be expected to have, individually or in the aggregate, an Allergan Material Adverse Effect;
(iii) Allergan having performed and complied, in all material respects, with all of the covenants and agreements that the Transaction Agreement requires Allergan to perform or comply with prior to the Sanction Date; and
(iv) AbbVie having received a certificate from an executive officer of Allergan confirming the satisfaction of the conditions set forth in paragraphs 4(ii) and 4(iii).
5. The AbbVie Parties and Allergan have agreed that, subject to paragraph 6, Allergan's obligation to effect the Scheme and the Acquisition will also be conditional upon the following matters having been satisfied (or, to the extent permitted by applicable Law, waived by Allergan) on or before the Sanction Date:
(i) from June 25, 2019 (being the date of this Announcement) to the Sanction Date, there having not been any event, change, effect, development or occurrence that has had, or would reasonably be expected to have, individually or in the aggregate, an AbbVie Material Adverse Effect;
(ii) (a) the representation and warranty of AbbVie set forth in Section 6.2(A)(h) (Absence of Certain Changes or Events) of the Transaction Agreement having been true and correct in all respects at and as of the date of the Transaction Agreement and at and as of the Sanction Date as though made at and as of the Sanction Date, (b) each of the representations and warranties of AbbVie set forth in Sections 6.2(A)(b)(i) (Capital Stock) and 6.2(A)(c)(i) (Corporate Authority Relative to the Agreement) of the Transaction Agreement having been true and correct in all material respects (read for the purpose of this paragraph 5(ii)(b) without any qualification as to materiality or AbbVie Material Adverse Effect therein) at and as of the date of the Transaction Agreement and at and as of the Sanction Date as though made at and as of the Sanction Date (in each case except to the extent that any such representation and warranty speaks as of a particular date, in which case such representation and warranty shall have been true and correct in all material respects as of such particular date), and (c) each of the representations and warranties of AbbVie set forth in Section 6.2(A) of the Transaction Agreement (other than those specifically listed in paragraphs 5(ii)(a) or 5(ii)(b)) having been true and correct (read for purposes of this paragraph 5(ii)(c) without any qualification as to materiality or AbbVie Material Adverse Effect therein) in all respects at and as of the date of the Transaction Agreement and at and as of the Sanction Date as though made at and as of the Sanction Date (in each case except to the extent that any such representation and warranty speaks as of a particular date, in which case such representation and warranty shall have been true and correct in all respects as of such particular date), except for such failures to be true and correct as have not had and would not reasonably be expected to have, individually or in the aggregate, an AbbVie Material Adverse Effect;
(iii) the AbbVie Parties having performed and complied, in all material respects, with all of the covenants and agreements that the Transaction Agreement requires either of the AbbVie Parties to perform or comply with prior to the Sanction Date; and
(iv) Allergan having received a certificate from an executive officer of AbbVie confirming the satisfaction of the conditions set forth in paragraphs 5(ii) and 5(iii).
6. Subject to the requirements of the Panel:
(i) AbbVie and Allergan reserve the right (but neither Party shall be under any obligation) to waive (to the extent permitted by applicable Law), in whole or in part, all or any of the conditions in paragraph 3 (provided that no such waiver shall be effective unless agreed to by both Parties);
(ii) AbbVie reserves the right (but shall be under no obligation) to waive (to the extent permitted by applicable Law), in whole or in part, all or any of the conditions in paragraph 4; and
(iii) Allergan reserves the right (but shall be under no obligation) to waive (to the extent permitted by applicable Law), in whole or in part, all or any of the conditions in paragraph 5.
7. The Scheme will lapse unless it is effective on or prior to the End Date (or such later date as AbbVie and Allergan may, subject to receiving the consent of the Panel and the High Court, in each case if required, agree).
8. If AbbVie is required to make an offer for Allergan Shares under the provisions of Rule 9 of the Takeover Rules, AbbVie may make such alterations to any of the Conditions set out in paragraphs 1, 2, 3, 4 and 5 above as are necessary to comply with the provisions of that rule.
9. AbbVie reserves the right, subject to the prior written consent of the Panel, to effect the Acquisition by way of a Takeover Offer in the circumstances described in and subject to the terms of Section 3.6 of the Transaction Agreement. Without limiting Section 3.6 of the Transaction Agreement, in the event the Acquisition is structured as a Takeover Offer, such offer will be implemented on terms and conditions that are at least as favorable to the Allergan Shareholders and the holders of Allergan Options and Allergan Share Awards as those which would apply in relation to the Scheme (except for an acceptance condition set at 80% of the nominal value of the Allergan Shares to which such an offer relates (and which are not already in the beneficial ownership of AbbVie)).
APPENDIX IV
Report of PricewaterhouseCoopers LLP pursuant to Rule 19.3(b)(ii) of the Irish Takeover Rules
The Directors (the "Directors")
AbbVie Inc.
1 North Waukegan Road
North Chicago, IL 60064
United States
Morgan Stanley & Co International plc (the "Financial Adviser")
25 Cabot Square
Canary Wharf
London
E14 4QA
U.K.
25 June 2019
Dear Ladies and Gentlemen
Merger Benefit Statement by AbbVie Inc. (the "Company")
We report on the "Merger Benefit Statement" by the Directors included in Section 7 of the Rule 2.5 Announcement dated 25 June 2019 (the "Announcement") to the effect that:
"AbbVie anticipates that the Acquisition will provide annual pre-tax synergies and other cost reductions of at least $2 billion in year three while leaving investments in key growth franchises untouched. The synergies and other cost reductions will be a result of optimizing the research and early stage portfolio, and reducing overlapping R&D resources (~50%), driving efficiencies in SG&A, including sales and marketing and central support function costs (~40%), and eliminating redundancies in manufacturing and supply chain, and leveraging procurement spend (~10%). The synergies estimate excludes any potential revenue synergies."
The Merger Benefit Statement has been made in the context of disclosure in Section 7 of the Announcement setting out the bases of belief of the Directors supporting the Merger Benefit Statement and their analysis and explanation of the underlying constituent elements.
This report is required by Rule 19.3(b)(ii) of the Irish Takeover Panel Act 1997, Takeover Rules, 2013 (the "Rules") and is given for the purpose of complying with that rule and for no other purpose.
Responsibilities
It is the responsibility of the Directors to make the Merger Benefit Statement in accordance with the Code.
It is our responsibility and that of the Financial Adviser to form our respective opinions as required by Rule 19.3(b)(ii) of the Rules, as to whether the Merger Benefit Statement has been made with due and careful consideration.
Save for any responsibility which we may have to those persons to whom this report is expressly addressed and for any responsibility arising under Rule 19.3(b)(ii) of the Rules to any person as and to the extent therein provided, to the fullest extent permitted by law we do not assume any responsibility and will not accept any liability to any other person for any loss suffered by any such other person as a result of, arising out of, or in connection with this report or our statement, required by and given solely for the purposes of complying with Rule 19.3(b)(ii) of the Rules, consenting to its inclusion in the Announcement.
Basis of Opinion
We conducted our work in accordance with the Standards for Investment Reporting issued by the Auditing Practices Board in the United Kingdom and published by the Institute of Chartered Accountants in Ireland. We have discussed the Merger Benefit Statement together with the relevant bases of belief (including sources of information and assumptions) with the Directors and with the Financial Adviser. Our work did not involve any independent examination of any of the financial or other information underlying the Merger Benefit Statement.
Since the Merger Benefit Statement and the assumptions on which it is based relate to the future and may therefore be affected by unforeseen events, we can express no opinion as to whether the actual Benefit achieved will correspond to those anticipated in the Merger Benefit Statement and the differences may be material.
Our work has not been carried out in accordance with auditing or other standards and practices generally accepted in the United States of America or other jurisdictions and accordingly should not be relied upon as if it had been carried out in accordance with those standards and practices.
Opinion
In our opinion, on the basis of the foregoing, the Directors have made the Merger Benefit Statement, in the form and context in which it is made, with due care and consideration.
Yours sincerely
/s/ PricewaterhouseCoopers LLP
PricewaterhouseCoopers LLP
PricewaterhouseCoopers LLP, 1 Embankment Place, London WC2N 6RH
T: +44 (0) 20 7583 5000, F: +44 (0) 20 7212 4652, www.pwc.co.uk
PricewaterhouseCoopers LLP is a limited liability partnership registered in England with registered number OC303525. The registered office of
PricewaterhouseCoopers LLP is 1 Embankment Place, London WC2N 6RH. PricewaterhouseCoopers LLP is authorised and regulated by the Financial Conduct Authority for designated investment business.
APPENDIX V
Report of Morgan Stanley & Co. International plc pursuant to Rule 19.3(b)(ii) of the Irish Takeover Rules
The Directors
AbbVie Inc
1 N. Waukegan Road North Chicago,
Illinois 60064
25 June 2019
Dear Sirs
Proposed acquisition of Allergan plc ("Allergan") by AbbVie Inc. ("AbbVie")
We refer to the statements of estimated cost synergies, the bases of preparation thereof and the notes thereto (together the "Statements") made by AbbVie set out in this announcement dated 25 June 2019, for which the directors of AbbVie are solely responsible.
We have discussed the Statements (including the assumptions and sources of information referred to therein) with the directors of AbbVie and those officers and employees of AbbVie who have developed the underlying plans.
The Statements are subject to uncertainty as described in this document and our work did not involve any independent examination of any of the financial or other information underlying the Statements.
We have relied upon the accuracy and completeness of all the financial and other information discussed or reviewed by us and we have assumed such accuracy and completeness for the purposes of rendering this letter. In giving the confirmation set out in this letter, we have reviewed the work carried out by PricewaterhouseCoopers LLP, and have discussed with them the conclusions stated in their report dated 25 June 2019 addressed to yourselves and ourselves in this matter.
We do not express any opinion as to the achievability of the merger benefits identified by the directors of AbbVie in the Statements.
This letter is provided solely to the directors of AbbVie in connection with Rule 19.3(b)(ii) of the Irish Takeover Panel Act, 1997, Takeover Rules 2013 and for no other purpose. We accept no responsibility to Allergan or its or AbbVie's shareholders or any other person, other than the directors of AbbVie in respect of the contents of, or any matter arising out of or in connection with, this letter or the work undertaken in connection with this letter.
On the basis of the foregoing, we consider that the Statements, for which the directors of AbbVie are solely responsible, have been made with due care and consideration in the form and context in which they are made.
Yours faithfully
/s/ David Kitterick
Authorised Signatory
For and on behalf of
Morgan Stanley & Co. International plc
APPENDIX VI
The Transaction Agreement
This TRANSACTION AGREEMENT (this "Agreement"), dated as of June 25, 2019 is by and among AbbVie, a Delaware corporation ("AbbVie"), Venice Subsidiary, LLC, a Delaware limited liability company and a direct wholly owned Subsidiary of AbbVie ("Acquirer Sub"), and Allergan plc, an Irish public limited company with registered number 527629 having its registered office at Clonshaugh Business and Technology Park, Coolock, Dublin, D17 E400, Ireland ("Allergan").
WHEREAS, AbbVie has agreed to make a proposal to cause Acquirer Sub to acquire Allergan on the terms set out in the Rule 2.5 Announcement;
WHEREAS, this Agreement sets out certain matters relating to the conduct of the Acquisition (as defined below) that have been agreed by the Parties; and
WHEREAS, the Parties intend that the Acquisition will be implemented by way of the Scheme, although this may, subject to the consent (where required) of the Panel, be switched to a Takeover Offer in accordance with the terms set out in this Agreement.
NOW, THEREFORE, in consideration of the foregoing and the representations, warranties, covenants and agreements contained in this Agreement, the Parties agree as follows:
ARTICLE 1
INTERPRETATION
Section 1.1 Definitions.
As used in this Agreement the following words and expressions have the following meanings:
"AbbVie Board" means the board of directors of AbbVie.
"AbbVie Group" means AbbVie and all of its Subsidiaries.
"AbbVie Material Adverse Effect" means any event, change, effect, development or occurrence that, individually or together with any other event, change, effect, development or occurrence, (a) would prevent, materially delay or materially impair the ability of AbbVie and Acquirer Sub to consummate the transactions contemplated hereby (including the Acquisition) prior to the End Date or (b) has had or would reasonably be expected to have a material adverse effect on the condition (financial or otherwise), properties, assets, liabilities, business, operations or results of operations of AbbVie and its Subsidiaries, taken as a whole; provided, that, solely for the purpose of clause (b), no event, change, effect, development or occurrence to the extent resulting from or arising out of any of the following shall be deemed to constitute an AbbVie Material Adverse Effect or shall be taken into account in determining whether there has been, or would reasonably be expected to be, an AbbVie Material Adverse Effect: (i) any changes in general United States or global economic conditions, (ii) any changes in conditions generally affecting the industries in which AbbVie or any of its Subsidiaries operate, (iii) any decline, in and of itself, in the market price or trading volume of AbbVie Shares (it being understood and agreed that the facts, events, developments or occurrences giving rise to or contributing to such decline that are not otherwise excluded from the definition of AbbVie Material Adverse Effect may, to the extent not otherwise excluded, be taken into account in determining whether there has been, or would reasonably be expected to be, an AbbVie Material Adverse Effect), (iv) any changes in political conditions or in securities, credit, financial, debt or other capital markets, in each case in the United States or any foreign jurisdiction, (v) any failure, in and of itself, by AbbVie or any of its Subsidiaries to meet any internal or published projections, forecasts, estimates or predictions, revenues, earnings or other financial or operating metrics for any period (it being understood and agreed that the facts, events, developments or occurrences giving rise to or contributing to such failure that are not otherwise excluded from the definition of AbbVie Material Adverse Effect may, to the extent not otherwise excluded, be taken into account in determining whether there has been, or would reasonably be expected to be, an AbbVie Material Adverse Effect), (vi) the execution and delivery of this Agreement, the public announcement of this Agreement or the consummation of the transactions contemplated hereby (including the Acquisition) (it being understood and agreed that the foregoing shall not apply with respect to any representation or warranty that is intended to expressly address the consequences of the execution, delivery or performance of this Agreement or the consummation of the transactions contemplated hereby (including the Acquisition) or Condition 5(ii) to the extent it relates to such representations and warranties), (vii) any adoption, implementation, promulgation, repeal, modification, amendment or change of any applicable Law of or by any Governmental Entity, (viii) any changes or prospective changes in GAAP, (ix) any changes in geopolitical conditions, the outbreak or escalation of hostilities, any acts of war, sabotage, cyberattack or terrorism, or any escalation or worsening of any such acts of war, sabotage, cyberattack or terrorism threatened or underway as of the date of this Agreement, (x) any epidemic, plague, pandemic or other outbreak of illness or public health event, hurricane, earthquake, flood or other natural disasters, acts of God or any change resulting from weather conditions (xi) any matter set forth in Section 6.2(h) of the AbbVie Disclosure Schedule or (xii) any action taken by AbbVie or any of its Subsidiaries that is expressly required to be taken by AbbVie or any of its Subsidiaries pursuant to this Agreement or any action expressly requiring Allergan's consent pursuant to this Agreement which is not taken as a result of the failure of Allergan to consent to such action following request for such consent by AbbVie, except in the case of each of clauses (i), (ii), (iv), (vii), (viii), (ix) or (x), to the extent that any such event, change, effect, development or occurrence has a disproportionate adverse effect on AbbVie and its Subsidiaries, taken as a whole, relative to the adverse effect such event, change, effect, development or occurrence has on other companies operating in the industries in which AbbVie and its Subsidiaries operate.
"AbbVie Parties" means, collectively, AbbVie and Acquirer Sub.
"AbbVie Preferred Shares" means the preferred stock of AbbVie, par value $0.01 per share.
"AbbVie Reimbursement Payment" shall have the meaning given to that term in the Expenses Reimbursement Agreement.
"AbbVie Share Plan" means the AbbVie 2013 Stock Award and Incentive Plan.
"AbbVie Shares" means the common stock of AbbVie, par value $0.01 per share.
"Acquisition" means the proposed acquisition by Acquirer Sub of Allergan by means of the Scheme or the Takeover Offer (and any such Scheme or Takeover Offer as it may be revised, amended or extended from time to time), including the issuance by AbbVie of the aggregate Share Consideration and payment by Acquirer Sub of the aggregate Cash Consideration pursuant to the Scheme or the Takeover Offer, in each case, as described in the Rule 2.5 Announcement and provided for in this Agreement.
"Act" means the Companies Act 2014, all enactments which are to be read as one with, or construed or read together as one with the Act and every statutory modification and reenactment thereof for the time being in force.
"Acting in Concert" shall have the meaning given to that term in the Takeover Panel Act.
"Actions" means any civil, criminal or administrative actions, litigations, arbitrations, suits, demands, claims, hearings, notices of violation, investigations, proceedings, demand letters, settlement or enforcement actions by, from or before any Governmental Entity.
"Affiliate" means, in relation to any Person, any other Person that, directly or indirectly, controls, is controlled by, or is under common control with, such first person (as used in this definition, "control" means the possession, directly or indirectly, of the power to direct or cause the direction of management or policies of a Person, whether through the ownership of securities or partnership or other ownership interests, by Contract or otherwise and the terms "controlled" and "controlling" shall have correlative meanings).
"Allergan Alternative Proposal" means any bona fide proposal or offer (including non-binding proposals or offers) from any Person or Group, other than AbbVie and its Subsidiaries or any of its Concert Parties, relating to any (i) direct or indirect acquisition (whether in a single transaction or a series of related transactions) of assets of Allergan or any of its Subsidiaries (including equity securities of Subsidiaries) equal to twenty percent (20%) or more of the consolidated assets of Allergan, or to which twenty percent (20%) or more of the revenues or earnings of Allergan on a consolidated basis are attributable for the most recent fiscal year for which audited financial statements are then available, (ii) direct or indirect acquisition (including by scheme of arrangement or takeover offer) or issuance (whether in a single transaction or a series of related transactions) of twenty percent (20%) or more of any class of equity or voting securities of Allergan, (iii) scheme of arrangement, tender offer, takeover offer or exchange offer that, if consummated, would result in a Person or Group beneficially owning twenty percent (20%) or more of any class of equity or voting securities of Allergan, or (iv) scheme of arrangement, merger, consolidation, share exchange, business combination, joint venture, reorganization, recapitalization or similar transaction involving Allergan or any of its Subsidiaries, under which a Person or Group or, in the case of clause (B) below, the shareholders or equityholders of any Person or Group would, directly or indirectly, (A) acquire assets equal to twenty percent (20%) or more of the consolidated assets of Allergan, or to which 20% or more of the revenues or earnings of Allergan on a consolidated basis are attributable for the most recent fiscal year for which audited financial statements are then available, or (B) immediately after giving effect to such transactions, beneficially own twenty percent (20%) or more of any class of equity or voting securities of Allergan or the surviving or resulting Person (including any parent Person) in such transaction.
"Allergan Benefit Plan" means each employee welfare benefit plan within the meaning of Section 3(1) of ERISA (whether or not such plan is subject to ERISA), each employee pension benefit plan within the meaning of Section 3(2) of ERISA (whether or not such plan is subject to ERISA), and each employment, consulting, compensation, salary contribution, change-in-control, bonus, incentive, equity or equity-based, phantom equity, deferred compensation, vacation, paid time off, stock purchase, stock or stock-based, severance, termination pay or indemnity, retention, employment, change of control or fringe benefit or other material benefit or compensation plan, program, policy, scheme, arrangement, or agreement, whether or not written, that in each case, is sponsored, maintained or contributed to by any member of the Allergan Group or to which any member of the Allergan Group has or would reasonably be expected to have any material liability (whether current or contingent), excluding any arrangements maintained by any Governmental Entity or otherwise required by applicable Law.
"Allergan Board" means the board of directors of Allergan.
"Allergan Directors" means the members of the board of directors of Allergan.
"Allergan Employees" means the employees of Allergan or any Subsidiary of Allergan as of immediately prior to the Effective Time.
"Allergan Equity Award Holder Proposal" means the proposal of AbbVie to the Allergan Equity Award Holders to be made in accordance with Rule 15 of the Takeover Rules and the terms of the Allergan Share Plans.
"Allergan Equity Award Holders" means the holders of Allergan Equity Awards.
"Allergan Equity Awards" means the Allergan Options, the Allergan Restricted Stock Awards, the Allergan RSU Awards, the Allergan PSU Awards and any other Allergan equity-based awards granted under a Allergan Share Plan or otherwise.
"Allergan Group" means Allergan and all of its Subsidiaries.
"Allergan Intellectual Property" means the Owned Intellectual Property and the Licensed Intellectual Property.
"Allergan Intervening Event" means any material event, fact, change, effect, development or occurrence arising or occurring after the date of this Agreement that (i) was not known, or the material consequences of which were not known, in each case to the Allergan Board as of or prior to the date of this Agreement, (ii) does not relate to or involve any Allergan Alternative Proposal and (iii) does not relate to AbbVie or any of its Subsidiaries.
"Allergan Material Adverse Effect" means any event, change, effect, development or occurrence that, individually or together with any other event, change, effect, development or occurrence, (a) would prevent, materially delay or materially impair the ability of Allergan to consummate the transactions contemplated hereby (including the Acquisition) prior to the End Date or (b) has had or would reasonably be expected to have a material adverse effect on the condition (financial or otherwise), properties, assets, liabilities, business, operations or results of operations of Allergan and its Subsidiaries, taken as a whole; provided that, solely for the purposes of clause (b), no event, change, effect, development or occurrence to the extent resulting from or arising out of any of the following shall be deemed to constitute an Allergan Material Adverse Effect or shall be taken into account in determining whether there has been, or would reasonably be expected to be, an Allergan Material Adverse Effect: (i) any changes in general United States or global economic conditions, (ii) any changes in conditions generally affecting the industries in which Allergan or any of its Subsidiaries operate, (iii) any decline, in and of itself, in the market price or trading volume of Allergan Shares (it being understood and agreed that the facts, events, developments or occurrences giving rise to or contributing to such decline that are not otherwise excluded from the definition of Allergan Material Adverse Effect may, to the extent not otherwise excluded, be taken into account in determining whether there has been, or would reasonably be expected to be, an Allergan Material Adverse Effect), (iv) any changes in political conditions or in securities, credit, financial, debt or other capital markets, in each case in the United States or any foreign jurisdiction, (v) any failure, in and of itself, by Allergan or any of its Subsidiaries to meet any internal or published projections, forecasts, estimates or predictions, revenues, earnings or other financial or operating metrics for any period (it being understood and agreed that the facts, events, developments or occurrences giving rise to or contributing to such failure that are not otherwise excluded from the definition of Allergan Material Adverse Effect may, to the extent not otherwise excluded, be taken into account in determining whether there has been, or would reasonably be expected to be, an Allergan Material Adverse Effect), (vi) the execution and delivery of this Agreement, the public announcement of this Agreement or the consummation of the transactions contemplated hereby (including the Acquisition) (it being understood and agreed that the foregoing shall not apply with respect to any representation or warranty that is intended to expressly address the consequences of the execution, delivery or performance of this Agreement or the consummation of the transactions contemplated hereby (including the Acquisition) or Condition 4(ii) to the extent it relates to such representations and warranties), (vii) any adoption, implementation, promulgation, repeal, modification, amendment or change of any applicable Law of or by any Governmental Entity, (viii) any changes or prospective changes in GAAP, (ix) any changes in geopolitical conditions, the outbreak or escalation of hostilities, any acts of war, sabotage, cyberattack or terrorism, or any escalation or worsening of any such acts of war, sabotage, cyberattack or terrorism threatened or underway as of the date of this Agreement, (x) any epidemic, plague, pandemic or other outbreak of illness or public health event, hurricane, earthquake, flood or other natural disasters, acts of God or any change resulting from weather conditions, (xi) any matter set forth in Section 6.1(a)(k)(ii) of the Allergan Disclosure Schedule or (xii) any action taken by Allergan or any of its Subsidiaries that is expressly required to be taken by Allergan or any of its Subsidiaries pursuant to this Agreement or any action expressly requiring AbbVie's consent pursuant to this Agreement which is not taken as a result of the failure of AbbVie to consent to such action following request for such consent by Allergan, except in the case of each of clauses (i), (ii), (iv), (vii), (viii), (ix) or (x), to the extent that any such event, change, effect, development or occurrence has a disproportionate adverse effect on Allergan and its Subsidiaries, taken as a whole, relative to the adverse effect such event, change, effect, development or occurrence has on other companies operating in the industries in which Allergan and its Subsidiaries operate.
"Allergan Options" means all options to purchase Allergan Shares, whether granted pursuant to the Allergan Share Plans or otherwise.
"Allergan Preferred Shares" means the preferred stock of Allergan, par value US $0.0001 per share.
"Allergan Product" means all products or product candidates that are being researched, tested, developed, commercialized, manufactured, sold or distributed by any member of the Allergan Group and all products or product candidates, if any, with respect to which any member of the Allergan Group has royalty rights.
"Allergan PSU Awards" means all Allergan RSU Awards with performance-based vesting or delivery requirements, whether granted pursuant to the Allergan Share Plans or otherwise.
"Allergan Regulatory Agency" means any Governmental Entity that is concerned with the quality, identity, strength, purity, safety, efficacy, testing, manufacturing, labeling, storage, distribution, marketing, sale, pricing, import or export of any of the Allergan Products.
"Allergan Regulatory Permits" means authorizations (i) under the FDCA or the Public Health Service Act and (ii) of any applicable Allergan Regulatory Agency necessary for the lawful operation of the businesses of Allergan or any of its Subsidiaries.
"Allergan Restricted Stock Awards" means all awards of Allergan Shares subject to vesting restrictions and/or forfeiture back to Allergan, whether granted pursuant to the Allergan Share Plans or otherwise.
"Allergan RSU Awards" means all restricted stock units payable in Allergan Shares or whose value is determined with reference to the value of Allergan Shares, whether granted pursuant to the Allergan Share Plans or otherwise.
"Allergan Share Award" means an award denominated in Allergan Shares (including Allergan Restricted Stock Awards, Allergan PSU Awards and Allergan RSU Awards), other than an Allergan Option.
"Allergan Share Plans" means, collectively, the Allergan, Inc. 2008 Equity Plan, the Forest Laboratories LLC 2007 Equity Incentive Plan, the Amended and Restated 2011 Incentive Award Plan of Allergan, the Amended and Restated 2013 Incentive Award Plan of Allergan (the "Allergan 2013 Plan"), the Kythera Biopharmaceuticals, Inc. 2012 Equity Incentive Plan, the Warner Chilcott Equity Incentive Plan, the ZELTIQ Aesthetics, Inc. 2012 Stock Plan, and any other equity-based incentive plan maintained by Allergan or assumed by Allergan in connection with prior acquisitions.
"Allergan Shareholder Approval" means (i) the approval of the Scheme by a majority in number of members of each class of Allergan Shareholders (including as may be directed by the High Court pursuant to Section 450(5) of the Act) representing, at the relevant voting record time, at least seventy five percent (75%) in value of the Allergan Shares of that class held by Allergan Shareholders who are members of that class and that are present and voting either in person or by proxy, at the Court Meeting (or at any adjournment or postponement of such meeting) and (ii) the Required EGM Resolutions being duly passed by the requisite majorities of Allergan Shareholders at the EGM (or at any adjournment or postponement of such meeting).
"Allergan Shareholders" means the holders of Allergan Shares.
"Allergan Shares" means the ordinary shares of Allergan, par value US$0.0001 per share.
"Allergan Superior Proposal" means any bona fide, written Allergan Alternative Proposal (other than an Allergan Alternative Proposal which has resulted from a breach in any material respect of Section 5.3) (with all references to "twenty percent (20%)" in the definition of Allergan Alternative Proposal being deemed to be references to "fifty percent (50%)") on terms that the Allergan Board determines in good faith, after consultation with its financial advisor and outside legal counsel, and taking into account all the terms and conditions of the Allergan Alternative Proposal that the Allergan Board considers to be appropriate (including the identity of the Person making the Allergan Alternative Proposal and the expected timing and likelihood of consummation, any governmental or other approval requirements (including divestitures and entry into other commitments and limitations), break-up fees, expense reimbursement provisions, conditions to consummation and availability of necessary financing), is more favorable to the Allergan Shareholders from a financial point of view than the Acquisition (taking into account any proposal by AbbVie to amend the terms of this Agreement).
"ANDA" means an abbreviated new drug application submitted pursuant to 21 U.S.C. § 355(j).
"Antitrust Laws" means the Sherman Act of 1890, the Clayton Act of 1914, the Federal Trade Commission Act of 1914, the HSR Act and all other federal, state and foreign applicable Laws in effect from time to time that are designed or intended to prohibit, restrict or regulate actions having the purpose or effect of monopolization or restraint of trade.
"Bribery Act" means the United Kingdom Bribery Act 2010.
"Bribery Legislation" means all and any of the following: the FCPA; the Organization For Economic Co-operation and Development Convention on Combating Bribery of Foreign Public Officials in International Business Transactions and related implementing legislation; the relevant Law in England and Wales relating to bribery and/or corruption, including, the Public Bodies Corrupt Practices Act 1889; the Prevention of Corruption Act 1906 as supplemented by the Prevention of Corruption Act 1916 and the Anti-Terrorism, Crime and Security Act 2001; the Bribery Act; the Proceeds of Crime Act 2002; the relevant Laws in Ireland relating to bribery and/or corruption including the Criminal Justice (Corruption Offences) Act 2018 of Ireland; and any antibribery or anti-corruption related provisions in criminal and anti-competition laws and /or anti-bribery, anti-corruption and/or antimoney laundering Laws of any jurisdiction in which the Allergan Group operates.
"Bridge Credit Agreement" means that certain 364-Day Bridge Credit Agreement, dated as of the date hereof, among AbbVie, the lenders party thereto and Morgan Stanley Senior Funding, Inc., as administrative agent, an executed copy of which has been provided to Allergan on the date hereof.
"Business Day" means any day, other than a Saturday, Sunday or a day on which banks in Ireland or in New York are authorized or required by applicable Law to be closed.
"Cash Consideration" means US$120.30 in cash per Allergan Share, as it may be adjusted pursuant to Section 8.1(c)(v).
"Clearances" means all consents, clearances, approvals, permissions, license, variance, exemption, authorization, acknowledgement, permits, nonactions, Orders and waivers to be obtained from, and all registrations, applications, notices and filings to be made with or provided to, any Governmental Entity or other Third Party in connection with the implementation of the Scheme and/or the Acquisition.
"Code" means the United States Internal Revenue Code of 1986.
"Completion" means the completion of the Acquisition.
"Concert Parties" means such Persons as are deemed to be Acting in Concert with AbbVie pursuant to Rule 3.3 of Part A of the Takeover Rules.
"Conditions" means the conditions to the Scheme and the Acquisition set out in paragraphs 1, 2, 3, 4 and 5 of Appendix III of the Rule 2.5 Announcement, and "Condition" means any one of the Conditions.
"Confidentiality Agreement" means the confidentiality agreement between Allergan and AbbVie dated as of May 30, 2019.
"Contract" means any legally binding contract, agreement, obligation, understanding or instrument, lease, license or other legally binding commitment or undertaking of any nature.
"Court Hearing" means the hearing by the High Court of the Petition to sanction the Scheme under Section 453 of the Act.
"Court Meeting" means the meeting or meetings of the Allergan Shareholders or, if applicable, the meeting or meetings of any class or classes of Allergan Shareholders (and, in each case, any adjournment or postponement thereof) convened by (i) resolution of the Allergan Board or (ii) order of the High Court, in either case, pursuant to Section 450 of the Act to consider and, if thought fit, approve the Scheme (with or without amendment).
"Court Meeting Resolution" means the resolution to be proposed at the Court Meeting for the purposes of approving and implementing the Scheme.
"Court Order" means the Order or Orders of the High Court sanctioning the Scheme under Section 453 of the Act and confirming the reduction of capital that forms part of it under Sections 84 and 85 of the Act.
"EC Merger Regulation" means the Council Regulation (EC) No 139/2004 of 20 January 2004 on the control of concentrations between undertakings.
"Effective Date" means the date on which the Scheme becomes effective in accordance with its terms or, if the Acquisition is implemented by way of a Takeover Offer, the date on which the Takeover Offer has become (or has been declared) unconditional in all respects in accordance with the provisions of the Takeover Offer Documents and the Takeover Rules.
"Effective Time" means the time on the Effective Date at which the Court Order and a copy of the minute required by Section 86 of the Act are registered by the Registrar of Companies or, if the Acquisition is implemented by way of a Takeover Offer, the time on the Effective Date at which the Takeover Offer becomes (or is declared) unconditional in all respects in accordance with the provisions of the Takeover Offer Documents and the Takeover Rules.
"EGM" means the extraordinary general meeting of the Allergan Shareholders (and any adjournment or postponement thereof) to be convened in connection with the Scheme, expected to be held as soon as the preceding Court Meeting shall have been concluded (it being understood that if the Court Meeting is adjourned or postponed, the EGM shall be correspondingly adjourned or postponed).
"EGM Resolutions" means, collectively, the following resolutions to be proposed at the EGM: (i) an ordinary resolution to approve the Scheme and to authorize the Allergan Board to take all such action as it considers necessary or appropriate to implement the Scheme; (ii) a special resolution to cancel, subject to the approval of the High Court, the issued share capital of Allergan (other than any Allergan Shares held by any member of the AbbVie Group); (iii) an ordinary resolution authorizing the Allergan Board to allot new ordinary shares to Acquirer Sub pursuant to this Agreement and the Scheme by capitalization of the reserve arising from the cancellation of the issued share capital of Allergan pursuant to the resolution described in clause (ii); (iv) a special resolution amending the Allergan Memorandum and Articles of Association in accordance with Section 4.5 of this Agreement (the resolutions described in the foregoing clauses (i) through (iv), the "Required EGM Resolutions"); (v) an ordinary resolution that any motion by the Chairperson of the Allergan Board to adjourn or postpone the EGM, or any adjournments or postponements thereof, to another time and place if necessary or appropriate to solicit additional proxies if there are insufficient votes at the time of the EGM to approve the Scheme or any of the Required EGM Resolutions to be approved; and (vi) any other resolutions as Allergan reasonably determines to be necessary or desirable for the purposes of implementing the Acquisition as have been approved by AbbVie (such approval not to be unreasonably withheld, conditioned or delayed).
"End Date" means June 25, 2020; provided, that if as of such date any of Conditions 3(ii), 3(iii), 3(iv) or 3(v) (with respect to Condition 3(v), only if the failure of such Condition to have been satisfied as of such date is an Order or Law under any Antitrust Law) have not been satisfied, and on such date all other Conditions (other than Conditions 2(iii) and 2(iv)) have been satisfied (or, in the sole discretion of the applicable Party, waived (where applicable)) or would be satisfied (or, in the sole discretion of the applicable Party, waived (where applicable)) if the Acquisition were completed on such date, the "End Date" shall be September 25, 2020.
"Environmental Law" means each applicable Law relating to (i) the protection, preservation or restoration of the environment (including air, surface water, groundwater, drinking water supply, surface land, subsurface land, plant and animal life or any other natural resource), or (ii) the exposure to, or the use, storage, recycling, treatment, generation, transportation, processing, handling, labeling, production, release or disposal of, Hazardous Substances.
"Environmental Permits" means all consents, clearances, approvals, permissions, licenses, variances, exemptions, authorizations, acknowledgements, approvals, permits and orders of Governmental Entities required by Environmental Law and affecting, or relating to, the business of Allergan or any of its Subsidiaries.
"Equity Award Conversion Ratio" means the sum, rounded to the nearest one thousandth, of (a) the Exchange Ratio and (b) the quotient obtained by dividing (i) the Cash Consideration by (ii) the VWAP of AbbVie Shares.
"Equity Securities" means, with respect to any Person, (i) any shares of capital or capital stock (including any ordinary shares) or other voting securities of, or other ownership interest in, such Person, (ii) any securities of such Person convertible into or exchangeable for cash or shares of capital or capital stock or other voting securities of, or other ownership interests in, such Person or any of its Subsidiaries, (iii) any warrants, calls, options or other rights to acquire from such Person, or other obligations of such Person to issue, any shares of capital or capital stock or other voting securities of, or other ownership interests in, or securities convertible into or exchangeable for shares of capital or capital stock or other voting securities of, or other ownership interests in, such Person or any of its Subsidiaries, or (iv) any restricted shares, stock appreciation rights, restricted units, performance units, contingent value rights, "phantom" stock or similar securities or rights issued by or with the approval of such Person that are derivative of, or provide economic benefits based, directly or indirectly, on the value or price of, any shares of capital or capital stock or other voting securities of, other ownership interests in, or any business, products or assets of, such Person or any of its Subsidiaries.
"ERISA" means the United States Employee Retirement Income Security Act of 1974.
"ERISA Affiliate" means any Person that, together with any member of the Allergan Group, is (or at any relevant time has or would be) treated as a single employer under Section 414 of the Code.
"Exchange Act" means the United States Securities Exchange Act of 1934.
"Exchange Agent" means the bank or trust company appointed by AbbVie (and reasonably acceptable to Allergan) to act as exchange agent for the payment of the Scheme Consideration.
"Expenses Reimbursement Agreement" means the expenses reimbursement agreement dated as of the date hereof between AbbVie and Allergan, the terms of which have been approved by the Panel.
"FCPA" means the United States Foreign Corrupt Practices Act of 1977.
"FDA" means the United States Food and Drug Administration.
"FDCA" means the United States Food, Drug and Cosmetic Act of 1938.
"Filing" means any registration, petition, statement, application, schedule, form, declaration, notice, notification, report, submission or other filing.
"Financing" means the debt financing provided by the Bridge Credit Agreement and any other third party debt financing that is necessary, or that is otherwise incurred or intended to be incurred by AbbVie or any of the Subsidiaries of AbbVie, to refinance or refund any existing indebtedness for borrowed money of Allergan, AbbVie or any of their respective Subsidiaries in each case in connection with the transactions contemplated hereby, or to fund the Cash Consideration payable by Acquirer Sub in the Scheme or (as the case may be) the Takeover Offer, including the offering or private placement of debt securities or the incurrence of credit facilities.
"Financing Sources" means (i) the Persons that have committed to provide or arrange or otherwise entered into agreements in connection with the Financing, including the parties to any joinder agreements, engagement letters, indentures or credit agreements entered into pursuant thereto or relating thereto, but excluding in each case, for clarity, the Parties and their Subsidiaries, (ii) the Affiliates of the Persons set forth in clause (i) above and (iii) the Representatives and the respective successors and assigns of the Persons set forth in clauses (i) and (ii) above.
"GAAP" means U.S. generally accepted accounting principles.
"Government Official" means (i) any official, officer, employee, or representative of, or any Person acting in an official capacity for or on behalf of, any Governmental Entity, (ii) any political party, party official or candidate for political office or (iii) any company, business, enterprise or other entity owned or controlled by any Person described in the foregoing clause (i) or (ii) of this definition.
"Governmental Entity" means any United States, Irish or other foreign or supranational, federal, state or local governmental commission, board, body, division, political subdivision, bureau or other regulatory authority or agency, including courts and other judicial bodies, or any competition, antitrust or supervisory body, central bank, public international organization or other governmental, trade or regulatory agency or body, securities exchange or any self-regulatory body or authority, including any instrumentality or entity designed to act for or on behalf of the foregoing, in each case, in any jurisdiction, including, the Panel, the High Court, the SEC, and each Allergan Regulatory Agency.
"Governmental Healthcare Program" means any federal healthcare program as defined in 42 U.S.C. § 1320a-7b(f), including Medicare, Medicaid, TRICARE, CHAMPVA, and state healthcare programs (as defined therein), and any other healthcare program administered by a Governmental Entity.
"Group" means a "group" as defined in Section 13(d) of the Exchange Act.
"Hazardous Substance" means any substance, material or waste that is listed, defined, designated or classified as hazardous, toxic, radioactive, dangerous or a "pollutant" or "contaminant" or words of similar meaning under any Environmental Law or that is otherwise regulated by any Governmental Entity with jurisdiction over the environment or natural resources, including petroleum or any derivative or byproduct thereof, radon, radioactive material, asbestos or asbestos-containing material, urea formaldehyde, foam insulation or polychlorinated biphenyls.
"Healthcare Laws" means all Laws relating to healthcare, including: Title XVIII of the Social Security Act, 42 U.S.C. §§ 1395-1395lll (the Medicare statute); Title XIX of the Social Security Act, 42 U.S.C. §§ 1396-1396w-5 (the Medicaid statute); the Federal Health Care Program Anti-Kickback Statute, 42 U.S.C. § 1320a-7b(b); the False Claims Act, 31 U.S.C. §§ 3729-3733; the Program Fraud Civil Remedies Act, 31 U.S.C. §§ 3801-3812; the Anti-Kickback Act of 1986, 41 U.S.C. §§ 51-58; the Civil Monetary Penalties Law, 42 U.S.C. §§ 1320a-7a and 1320a-7b; the Exclusion Laws, 42 U.S.C. § 1320a 7; the Health Insurance Portability and Accountability Act of 1996, as amended by the Health Information Technology for Economic and Clinical Health Act (Title XIII of the American Recovery and Reinvestment Act of 2009); any similar international, federal, state and local Laws that address the subject matter of the foregoing; and the Patient Protection and Affordable Care Act of 2010.
"High Court" means the High Court of Ireland.
"HSR Act" means the United States Hart-Scott-Rodino Antitrust Improvements Act of 1976.
"Indentures" means, collectively, those certain indentures (i) dated as of August 24, 2009, relating to the 3.250% Senior Notes due 2022 and 4.625% Senior Notes due 2042 issued by Allergan Finance, LLC; (ii) dated as of September 14, 2010, relating to the 3.375% Senior Notes due 2020 issued by Allergan, Inc.; (iii) dated as of March 12, 2013, relating to the 2.800% Senior Notes due 2023 issued by Allergan, Inc.; (iv) dated as of December 10, 2013, relating to the 5.000% Senior Notes due 2021 issued by Allergan Sales, LLC; (v) dated as of January 31, 2014, relating to the 4.875% Senior Notes due 2021 issued by Allergan Sales, LLC; (vi) dated as of June 19, 2014, relating to the 3.850% Senior Notes due 2024 and 4.850% Senior Notes due 2044 issued by Allergan Funding SCS; and (vii) dated as of March 12, 2015, relating to the USD-denominated Floating Rate Senior Notes due 2020, Euro-denominated Floating Rate Senior Notes due 2020, 3.000% Senior Notes due 2020, 0.500% Senior Notes due 2021, 3.450% Senior Notes due 2022, 1.500% Senior Notes due 2023, 1.250% Senior Notes due 2024, 3.800% Senior Notes due 2025, 2.625% Senior Notes due 2028, 2.125% Senior Notes due 2029, 4.550% Senior Notes due 2035 and 4.750% Senior Notes due 2045 issued by Allergan Funding SCS.
"Intellectual Property" means any and all rights in or associated with any of the following, whether or not registered, including all rights therein and associated therewith, arising in the United States or any other jurisdiction throughout the world: (i) trademarks, service marks, trade names, trade dress, logos, slogans, Internet domain names, Internet account names (including social networking and media names) and other indicia of origin, together with all goodwill associated therewith or symbolized thereby, and all registrations and applications relating to the foregoing; (ii) patents and pending patent applications, and all divisions, continuations, continuations-in-part, reissues and reexaminations, and any extensions thereof; (iii) works of authorship (whether or not copyrightable), registered and unregistered copyrights (including those in Software), all registrations and applications to register the same, and all renewals, extensions, reversions and restorations thereof, including moral rights of authors, and database rights; (iv) trade secrets, rights in technology, confidential or proprietary information and other know-how, including inventions (whether or not patentable or reduced to practice), concepts, methods, processes, protocols, assays, formulations, formulae, technical, research, clinical and other data, databases, designs, specifications, schematics, drawings, algorithms, models and methodologies; (v) rights in Software; and (vi) other similar types of proprietary rights or other intellectual property.
"Ireland" or "Republic of Ireland" means Ireland, excluding Northern Ireland, and the word "Irish" shall be construed accordingly.
"IT Assets" means any and all computers, Software, firmware, middleware, servers, workstations, routers, hubs, switches, data communications lines and other information technology equipment, and all associated documentation, owned by, or licensed or leased to, Allergan or any of its Subsidiaries.
"knowledge" means in relation to Allergan, the actual knowledge, after due inquiry, of the Persons listed in Section 1.1(a) of the Allergan Disclosure Schedule, and in relation to AbbVie, the actual knowledge, after due inquiry, of the Persons listed in Section 1.1(a) of the AbbVie Disclosure Schedule. None of the individuals set forth in Section 1.1(a) of the Allergan Disclosure Schedule or Section 1.1(a) of the AbbVie Disclosure Schedule shall have any personal liability or obligations regarding such knowledge.
"Law" means any federal, state, local, foreign or supranational law, statute, ordinance, rule, regulation, judgment, order, injunction, decree, executive order or agency requirement of any Governmental Entity.
"Licensed Intellectual Property" means any and all Intellectual Property owned by a Third Party and licensed (including sublicensed) to any member of the Allergan Group.
"Lien" means, with respect to any property or asset, any mortgage, lien, license, pledge, charge, security interest or encumbrance of any kind in respect of such property or asset (including in each case any license to, or covenant not to sue in respect of, Intellectual Property).
"Northern Ireland" means the counties of Antrim, Armagh, Derry, Down, Fermanagh and Tyrone on the island of Ireland.
"NYSE" means the New York Stock Exchange.
"Order" means any order, writ, decree, judgment, award, injunction, ruling, settlement or stipulation issued, promulgated, made, rendered or entered into by or with any Governmental Entity or arbitrator (in each case, whether temporary, preliminary or permanent).
"Organizational Documents" means articles of association, articles of incorporation, certificate of incorporation, constitution, by-laws, limited liability company agreement, operating agreement or other equivalent organizational document, as appropriate.
"Owned Intellectual Property" means any and all Intellectual Property owned or purported to be owned by any member of the Allergan Group.
"Panel" means the Irish Takeover Panel.
"Parties" means Allergan and the AbbVie Parties and "Party" shall mean either Allergan, on the one hand, or AbbVie or the AbbVie Parties (whether individually or collectively), on the other hand (as the context requires).
"Permitted Lien" means (i) any Liens for Taxes (A) not yet due and payable or (B) which are being contested in good faith by appropriate proceedings and with respect to which adequate reserves have been established in accordance with GAAP, (ii) carriers', warehousemen's, mechanics', materialmen's, repairmen's or other similar Liens, (iii) pledges or deposits in connection with workers' compensation, unemployment insurance and other social security legislation, (iv) gaps in the chain of title evident from the records of the applicable Governmental Entity maintaining such records, easements, rights-of-way, covenants, restrictions and other encumbrances of record as of the date of this Agreement, (v) easements, rights-of-way, covenants, restrictions and other encumbrances incurred in the ordinary course of business that do not materially detract from the value or the use of the property subject thereto, (vi) statutory landlords' liens and liens granted to landlords under any lease, (vii) any purchase money security interests, equipment leases or similar financing arrangements, (viii) any Liens which are disclosed on the Allergan Balance Sheet, or the notes thereto, or (ix) any Liens that are not material to Allergan and its Subsidiaries, taken as a whole.
"Person" means any individual, corporation, partnership, limited liability company, association, trust or other entity or organization, including a government or political subdivision or an agency or instrumentality of such government or political subdivision.
"Petition" means the petition to the High Court seeking the Court Order.
"Registrar of Companies" means the Registrar of Companies in Dublin, Ireland.
"Regulatory Information Service" means a regulatory information service as defined in the Takeover Rules.
"Representatives" means, in relation to any Person, the directors, officers, employees, agents, investment bankers, financial advisors, legal advisors, accountants, brokers, finders, consultants or other representatives of such Person.
"Resolutions" means the EGM Resolutions and the Court Meeting Resolution, which will be set out in the Scheme Document.
"Rule 2.5 Announcement" means the announcement to be made by the Parties pursuant to Rule 2.5 of the Takeover Rules for the purposes of the Acquisition, in the form agreed to by on or on behalf of the Parties.
"Sanctioned Country" means any of Crimea, Cuba, Iran, North Korea, Sudan, and Syria.
"Sanctioned Person" means any Person with whom dealings are restricted or prohibited under any Sanctions Laws, including the Sanctions Laws of the United States, the United Kingdom, the European Union or the United Nations, including (i) any Person identified in any list of Sanctioned Persons maintained by (A) the United States Department of Treasury, Office of Foreign Assets Control, the United States Department of Commerce, Bureau of Industry and Security or the United States Department of State, (B) Her Majesty's Treasury of the United Kingdom, (C) any committee of the United Nations Security Council, or (D) the European Union, (ii) any Person located, organized, or resident in, organized in, or a Governmental Entity of, any Sanctioned Country and (iii) any Person which is directly or indirectly fifty percent (50%) or more owned or controlled by, or acting for the benefit or on behalf of, a Person described in clause (i) or (ii).
"Sanctions Laws" means all applicable Laws concerning economic sanctions, including embargoes, export restrictions, the ability to make or receive international payments, the freezing or blocking of assets of targeted Persons, the ability to engage in transactions with specified Persons or countries or the ability to take an ownership interest in assets of specified Persons or located in a specified country, including any applicable Laws threatening to impose economic sanctions on any person for engaging in proscribed behavior.
"Scheme" means the proposed scheme of arrangement under Chapter 1 of Part 9 of the Act and the capital reduction under Sections 84 and 85 of the Act to effect the Acquisition pursuant to this Agreement, on such terms and in such form as is consistent with the terms agreed to by the Parties as set out in the Rule 2.5 Announcement, including any revision thereof as may be agreed between the Parties in writing, and, if required, by the High Court.
"Scheme Document" means a document (or relevant sections of the Proxy Statement comprising the Scheme Document) (including any amendments or supplements thereto) to be distributed to Allergan Shareholders and, for information only, to Allergan Equity Award Holders containing (i) the Scheme, (ii) the notice or notices of the Court Meeting and EGM, (iii) an explanatory statement as required by Section 452 of the Act with respect to the Scheme, (iv) such other information as may be required or necessary pursuant to the Act, the Exchange Act or the Takeover Rules and (v) such other information as Allergan and AbbVie shall agree.
"Scheme Recommendation" means the recommendation of the Allergan Board that Allergan Shareholders vote in favor of the Resolutions.
"SEC" means the United States Securities and Exchange Commission.
"Securities Act" means the United States Securities Act of 1933.
"Significant Subsidiary" means a significant subsidiary as defined in Rule l-02(w) of Regulation S-X of the Securities Act.
"Software" means all (i) computer programs and other software including any and all software implementations of algorithms, models, methodologies, assemblers, applets, compilers, development tools, design tools and user interfaces, whether in source code or object code form, (ii) databases and compilations, including all data and collections of data, whether machine readable or otherwise, and (iii) updates, upgrades, modifications, improvements, enhancements, derivative works, new versions, new releases and corrections to or based on any of the foregoing.
"Subsidiary" means, with respect to any Person, any entity of which securities or other ownership interests having ordinary voting power to elect a majority of the board of directors or other persons performing similar functions are directly or indirectly owned by such Person. For purposes of this Agreement, a Subsidiary shall be considered a "wholly owned Subsidiary" of a Person if such Person directly or indirectly owns all of the securities or other ownership interests (excluding any securities or other ownership interests held by an individual director or officer required to hold such securities or other ownership interests pursuant to applicable Law) of such Subsidiary.
"Takeover Offer" means an offer in accordance with Section 3.6 for the entire issued share capital of Allergan (other than any Allergan Shares beneficially owned by AbbVie or any member of the AbbVie Group (if any) and any Allergan Shares held by any member of the Allergan Group) including any amendment or revision thereto pursuant to this Agreement, the full terms of which would be set out in the Takeover Offer Document or (as the case may be) any revised offer documents.
"Takeover Offer Document" means, if, following the date of this Agreement, AbbVie elects to implement the Acquisition by way of the Takeover Offer in accordance with Section 3.6, the document to be despatched to Allergan Shareholders and others jointly by AbbVie and Acquirer Sub containing, among other things, the Takeover Offer, the Conditions (except as AbbVie determines pursuant to and in accordance with Section 3.6 not to be appropriate in the case of a Takeover Offer) and certain information about AbbVie, Acquirer Sub and Allergan and, where the context so requires, includes any form of acceptance, election, notice or other document reasonably required in connection with the Takeover Offer.
"Takeover Panel Act" means the Irish Takeover Panel Act 1997.
"Takeover Rules" means the Irish Takeover Panel Act 1997, Takeover Rules, 2013.
"Third Party" means any Person or Group, other than Allergan or any of its Affiliates, in the case of AbbVie and Acquirer Sub, or other than AbbVie or any of its Affiliates, in the case of Allergan, and the Representatives of such Persons, in each case, acting in such capacity.
"U.S." or "United States" means the United States, its territories and possessions, any State of the United States and the District of Columbia, and all other areas subject to its jurisdiction.
"VWAP of AbbVie Shares" means the volume weighted average price of an AbbVie Share for a ten trading day period, starting with the opening of trading on the eleventh trading day prior to the Completion Date to the closing of trading on the second to last trading day prior to the Completion Date, as reported by Bloomberg.
"Willful Breach" means a material breach of this Agreement that is the consequence of an act or omission by a party with the actual knowledge that the taking of such act or such omission to take action would be a material breach of this Agreement.
Each of the following terms is defined in the Section set forth opposite such term:
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AbbVie............................................................................................................................... Preamble
AbbVie Balance Sheet................................................................................................ Section 6.2(e)
AbbVie Capitalization Date.................................................................................... Section 6.2(b)(i)
AbbVie Disclosure Schedule.......................................................................................... Section 6.2
AbbVie Equity Awards........................................................................................... Section 6.2(b)(i)
AbbVie Financing Information............................................................................... Section 3.4(b)(i)
AbbVie Options....................................................................................................... Section 6.2(b)(i)
AbbVie Performance Awards................................................................................. Section 6.2(b)(i)
AbbVie Restricted Stock Units............................................................................... Section 6.2(b)(i)
AbbVie RSAs.......................................................................................................... Section 6.2(b)(i)
AbbVie SEC Documents........................................................................................ Section 6.2(d)(i)
Acquirer Sub....................................................................................................................... Preamble
Agreement.......................................................................................................................... Preamble
Allergan Alternative Proposal NDA........................................................................... Section 5.3(b)
Allergan Approval Time............................................................................................. Section 5.3(b)
Allergan Balance Sheet............................................................................................... Section 6.1(g)
Allergan Capitalization Date................................................................................... Section 6.1(c)(i)
Allergan Change of Recommendation................................................................... Section 5.3(a)(ii)
Allergan Disclosure Schedule......................................................................................... Section 6.1
Allergan Exchange Fund......................................................................................... Section 8.1(d)(i)
Allergan Insurance Policies........................................................................................ Section 6.1(u)
Allergan Material Contract...................................................................................... Section 6.1(t)(i)
Allergan Memorandum and Articles of Association.................................................. Section 6.1(a)
Allergan Note Offers and Consent Solicitations........................................................ Section 7.9(b)
Allergan Permits..................................................................................................... Section 6.1(h)(ii)
Allergan Registered IP............................................................................................ Section 6.1(q)(i)
Allergan Replacement Option......................................................................................... Section 4.1
Allergan Replacement Share Award........................................................................... Section 4.2(a)
Allergan SEC Documents........................................................................................ Section 6.1(e)(i)
Allergan Supplemental Indenture............................................................................... Section 7.9(b)
Benefits Continuation Period...................................................................................... Section 7.4(a)
Claim Expenses........................................................................................................... Section 7.3(a)
Completion Date......................................................................................................... Section 8.1(a)
Consent Solicitations.................................................................................................. Section 7.9(b)
Covered Individual............................................................................................... Section 5.1(b)(xii)
D&O Claim................................................................................................................. Section 7.3(a)
D&O Indemnified Parties........................................................................................... Section 7.3(a)
D&O Indemnifying Parties......................................................................................... Section 7.3(a)
Debt Offer Documents................................................................................................ Section 7.9(b)
Equitable Exceptions.............................................................................................. Section 6.1(d)(i)
Exchange Ratio....................................................................................................... Section 8.1(c)(ii)
Exchange Ratio Modification Number................................................................... Section 8.1(c)(v)
Excluded Scheme Share.............................................................................................. Section 3.3(c)
Financing Information............................................................................................ Section 7.9(a)(ii)
Fractional Entitlements........................................................................................... Section 8.1(c)(ii)
Historical Financial Statements............................................................................... Section 7.9(a)(i)
internal controls..................................................................................................... Section 6.1(e)(vi)
IRS.......................................................................................................................... Section 6.1(o)(v)
Lease............................................................................................................................ Section 6.1(r)
Marketing Material.................................................................................................. Section 7.9(a)(i)
Maximum Premium.................................................................................................... Section 7.3(b)
New Plans................................................................................................................... Section 7.4(b)
Offers to Exchange..................................................................................................... Section 7.9(b)
Offers to Purchase....................................................................................................... Section 7.9(b)
Old Plans..................................................................................................................... Section 7.4(b)
PBGC...................................................................................................................... Section 6.1(j)(ii)
principal executive officer...................................................................................... Section 6.1(e)(v)
principal financial officer....................................................................................... Section 6.1(e)(v)
Proxy Statement....................................................................................................... Section 3.1(a)(i)
Reverse Termination Payment.................................................................................... Section 9.2(a)
Sarbanes-Oxley Act................................................................................................ Section 6.1(e)(ii)
Scheme Consideration............................................................................................ Section 8.1(c)(ii)
Section 7.2(d) Categories........................................................................................... Section 7.2(d)
Share Cap................................................................................................................ Section 8.1(c)(v)
Share Consideration................................................................................................ Section 8.1(c)(ii)
Specified Termination................................................................................................ Section 9.2(b)
Subscription Amount.................................................................................................. Section 3.3(c)
Subscription Completion............................................................................................ Section 3.3(c)
Tax.......................................................................................................................... Section 6.1(o)(v)
Tax Authority......................................................................................................... Section 6.1(o)(v)
Tax Return.............................................................................................................. Section 6.1(o)(v)
Taxable................................................................................................................... Section 6.1(o)(v)
Taxation.................................................................................................................. Section 6.1(o)(v)
Taxes...................................................................................................................... Section 6.1(o)(v)
Title IV Plan............................................................................................................ Section 6.1(j)(ii)
Transaction Litigation................................................................................................... Section 7.10
Section 1.2 Construction.
(a) The following rules of interpretation shall apply to this Agreement: (i) the words "hereof", "hereby", "herein" and "hereunder" and words of like import used in this Agreement shall refer to this Agreement as a whole and not to any particular provision of this Agreement; (ii) the table of contents and captions in this Agreement are included for convenience of reference only and shall be ignored in the construction or interpretation hereof; (iii) references to Articles and Sections are to Articles and Sections of this Agreement unless otherwise specified; (iv) all schedules annexed to this Agreement or referred to in this Agreement, including the Allergan Disclosure Schedule and the AbbVie Disclosure Schedule, are incorporated in and made a part of this Agreement as if set forth in full in this Agreement; (v) any capitalized term used in any schedule annexed to this Agreement, including the Allergan Disclosure Schedule or the AbbVie Disclosure Schedule, but not otherwise defined therein shall have the meaning set forth in this Agreement; (vi) any singular term in this Agreement shall be deemed to include the plural, and any plural term the singular, and references to any gender shall include all genders; (vii) whenever the words "include", "includes" or "including" are used in this Agreement, they shall be deemed to be followed by the words "without limitation", whether or not they are in fact followed by those words or words of like import; (viii) "writing", "written" and comparable terms refer to printing, typing and other means of reproducing words (including electronic media) in a visible form; (ix) references to any applicable Law shall be deemed to refer to such applicable Law as amended from time to time and to any rules or regulations promulgated thereunder; (x) references to any Contract are to that Contract as amended, modified or supplemented from time to time in accordance with the terms hereof and thereof; provided, that with respect to any Contract listed on any schedule annexed to this Agreement or referred to in this Agreement, including the Allergan Disclosure Schedule or the AbbVie Disclosure Schedule, all such amendments, modifications or supplements (other than such amendments, modifications or supplements that are immaterial) must also be listed in the appropriate schedule; (xi) references to any Person include the successors and permitted assigns of that Person; (xii) references "from" or "through" any date mean, unless otherwise specified, "from and including" or "through and including", respectively; (xiii) references to "dollars" and "$" means U.S. dollars; (xiv) the term "made available" and words of similar import mean that the relevant documents, instruments or materials were (A) with respect to AbbVie, posted and made available to AbbVie on the Allergan due diligence data site (or in any "clean room" or as otherwise provided on an "outside counsel only" basis), or, with respect to Allergan, posted or made available to Allergan on the AbbVie due diligence data site (or in any "clean room" or as otherwise provided on an "outside counsel only" basis), as applicable, in each case, prior to the date hereof; or (B) filed or furnished to the SEC prior to the date hereof; (xv) the word "extent" in the phrase "to the extent" shall mean the degree to which a subject or other theory extends and such phrase shall not mean "if"; (xvi) any reference to an Irish legal term for any action, remedy, method of judicial proceeding, legal document, legal status, court, official or any legal concept or thing shall, in respect of any jurisdiction other than Ireland, be deemed to include a reference to what most nearly approximates in that jurisdiction to the Irish legal term, (xvii) references to times are to New York City times unless otherwise specified; and (xviii) the Parties have participated jointly in the negotiation and drafting of this Agreement and, in the event an ambiguity or question of intent or interpretation arises, this Agreement shall be construed as jointly drafted by the Parties and no presumption or burden of proof shall arise favoring or disfavoring any Party by virtue of the authorship of any provision of this Agreement.
ARTICLE 2
RULE 2.5 ANNOUNCEMENT, SCHEME DOCUMENT AND Allergan EQUITY AWARD HOLDER PROPOSAL
Section 2.1 Rule 2.5 Announcement.
(a) Each Party confirms that its respective board of directors (or a duly authorized committee thereof) has approved the contents and release of the Rule 2.5 Announcement.
(b) Following the execution of this Agreement, Allergan and AbbVie shall jointly, in accordance with, and for the purposes of, the Takeover Rules, procure the release of the Rule 2.5 Announcement to a Regulatory Information Service by no later than 11:59 a.m., New York City time, on June 25, 2019, or such later time as may be agreed between the Parties in writing.
(c) The obligations of Allergan and AbbVie under this Agreement, other than the obligations under Section 2.1(b), shall be conditional on the release of the Rule 2.5 Announcement to a Regulatory Information Service.
(d) Allergan confirms that, as of the date hereof, the Allergan Board considers that the terms of the Scheme as contemplated by this Agreement are fair and reasonable and that the Allergan Board has resolved to recommend to the Allergan Shareholders that they vote in favor of the Resolutions. The recommendation of the Allergan Board that the Allergan Shareholders vote in favor of the Resolutions, and the related opinion of the financial adviser to the Allergan Board, are set out in the Rule 2.5 Announcement and, subject to Section 5.3, shall be incorporated in the Scheme Document and any other document sent to Allergan Shareholders in connection with the Acquisition.
(e) The Conditions are hereby incorporated in and shall constitute a part of this Agreement.
Section 2.2 Scheme. Subject to Section 3.6:
(a) Allergan agrees that it will propose the Scheme to the Allergan Shareholders in the manner set out in Article 3 and, subject to the satisfaction or, in the sole discretion of the applicable Party, waiver (where permissible under the provisions of the Rule 2.5 Announcement and/or the Scheme Document) of the Conditions (with the exception of Conditions 2(iii) and 2(iv) and any other Conditions that by their nature are to be satisfied on the Sanction Date (as defined in Appendix III of the Rule 2.5 Announcement), but subject to the satisfaction or waiver (where permissible under the provisions of the Rule 2.5 Announcement and/or the Scheme Document) of such Conditions), will, in the manner set out in Article 3, petition the High Court to sanction the Scheme so as to facilitate the implementation of the Acquisition;
(b) each of AbbVie and Acquirer Sub agrees that it will participate in the Scheme and agrees to be bound by its terms, as proposed by Allergan to the Allergan Shareholders, and that it shall, subject to the satisfaction or, in the sole discretion of the applicable Party, waiver (where permissible under the provisions of the Rule 2.5 Announcement and/or the Scheme Document) of the Conditions, effect the Acquisition through the Scheme on the terms set out in this Agreement and the Scheme; and
(c) each of the Parties agrees that it will perform all of the obligations required of it in respect of the Acquisition on the terms set out in this Agreement and/or the Scheme, and each will, subject to the terms and conditions of this Agreement, including Section 7.2, use its reasonable best efforts to take such other steps as are within its power and are reasonably required of it for the proper implementation of the Scheme, including those required of it pursuant to this Agreement in connection with the Completion.
Section 2.3 Change in Shares. If at any time during the period between the date of this Agreement and the earlier of (i) the Effective Time and (ii) the valid termination of this Agreement pursuant to and in accordance with Article 9, the outstanding Allergan Shares or AbbVie Shares shall have been changed into, or exchanged for, a different number of shares or a different class, by reason of any subdivision, reclassification, reorganization, recapitalization, split, combination, contribution or exchange of shares, or a stock dividend or dividend payable in any other securities shall be declared with a record date within such period, or any similar event shall have occurred, the Cash Consideration and the Share Consideration and any payments to be made under Article 4 and any other number or amount contained in this Agreement which is based upon the price or number of the Allergan Shares or the AbbVie Shares, as the case may be, shall be correspondingly adjusted to provide the holders of Allergan Shares and AbbVie Shares the same economic effect as contemplated by this Agreement prior to such event. Nothing in this Section 2.3 shall be construed to permit any Party to take any action that is otherwise prohibited or restricted by any other provision of this Agreement.
Section 2.4 Allergan Equity Award Holder Proposal.
(a) Subject to the posting of the Scheme Document to the Allergan Shareholders in accordance with Section 3.1, the Parties agree that the Allergan Equity Award Holder Proposal will be made to Allergan Equity Award Holders in respect of their respective holdings of Allergan Options and/or Allergan Share Awards in accordance with Rule 15 of the Takeover Rules and the terms of the Allergan Share Plans.
(b) The Allergan Equity Award Holder Proposal shall be despatched as a joint letter from Allergan and AbbVie and the Parties shall reasonably agree to the final form of the letter to be issued in respect of the Allergan Equity Award Holder Proposal and all other documentation necessary to effect the Allergan Equity Award Holder Proposal.
(c) Except as required by applicable Law, the High Court and/or the Panel, no Party shall amend the Allergan Equity Award Holder Proposal after its despatch without the consent of each other Party (such consent not to be unreasonably withheld, conditioned or delayed).
ARTICLE 3
IMPLEMENTATION OF THE SCHEME
Section 3.1 Responsibilities of Allergan in Respect of the Scheme. Allergan shall:
(a) (i) be responsible for the preparation of a proxy statement to be sent to the Allergan Shareholders in connection with the matters to be submitted at the Court Meeting and the EGM (such proxy statement, as amended or supplemented, the "Proxy Statement") and the Scheme Document and all other documentation necessary to effect the Scheme and to convene the EGM and Court Meeting, (ii) provide AbbVie with drafts of the Proxy Statement and the Scheme Document and afford AbbVie reasonable opportunity to review and comment on the Proxy Statement and the Scheme Document and such other documents and shall consider such comments in good faith and (iii) subject to the foregoing clauses (i) and (ii), as promptly as reasonably practicable after the date hereof, cause the Proxy Statement and the Scheme Document to be filed with the SEC and the Panel (in accordance with Rule 41.1(b) of the Takeover Rules);
(b) for the purpose of implementing the Scheme, instruct a barrister (of senior counsel standing) and provide AbbVie and its Representatives with the opportunity to attend any meetings with such barrister to discuss matters pertaining to the Scheme and any issues arising in connection with it (except to the extent the barrister is to advise on matters relating to the fiduciary duties of the directors of Allergan or their responsibilities under the Takeover Rules);
(c) as promptly as reasonably practicable, notify AbbVie upon the receipt of any comments from the Panel or the SEC on, or any request from the Panel or the SEC for amendments or supplements to, the Proxy Statement, the Scheme Document, the Allergan Equity Award Holder Proposal and the related forms of proxy and provide AbbVie with copies of all material written correspondence between it and its Representatives and the Panel and/or the SEC relating to such documents;
(d) use its reasonable best efforts to respond to and resolve all Panel and SEC comments with respect to the Proxy Statement and the Scheme Document as promptly as practicable after receipt thereof;
(e) as promptly as reasonably practicable, notify AbbVie of any other matter of which it becomes aware which would reasonably be expected to materially delay or prevent filing of the Proxy Statement or the Scheme Document with the SEC and the Panel, as applicable, or implementation of the Scheme as the case may be;
(f) prior to filing or the despatch of any amendment or supplement to the Proxy Statement or the Scheme Document requested by the Panel or the SEC, or responding in writing to any comments of the Panel or the SEC with respect thereto, Allergan shall provide AbbVie with a reasonable opportunity to review and comment on such document or response and consider in good faith such comments;
(g) cause the Proxy Statement to be mailed as promptly as reasonably practicable after the date on which the SEC confirms that it will not review the Proxy Statement or that it has no further comments on the Proxy Statement;
(h) to the extent that clearance of the Proxy Statement or the Scheme Document by the Panel might require that waivers and/or derogations in respect of the Takeover Rules be sought and obtained from the Panel, make a submission for (and use reasonable best efforts to have approved) such waiver or derogation as promptly as reasonably practicable after having provided AbbVie with a reasonable opportunity to review and comment on such submission and considering in good faith such comments;
(i) provide AbbVie with drafts of any and all pleadings, affidavits, petitions and other filings prepared by Allergan for submission to the High Court in connection with the Scheme prior to their filing, and afford AbbVie reasonable opportunities to review and comment on all such documents and consider in good faith such comments;
(j) as promptly as reasonably practicable (taking into account any requirements of the Panel with respect to the Scheme Document and the SEC review (if any) with respect to the Proxy Statement, that must be satisfied prior to the release of the Scheme Document), make all necessary applications to the High Court in connection with the implementation of the Scheme (including issuing appropriate proceedings requesting the High Court to give directions under Section 450(5) of the Act as to what are the appropriate meetings to be held and to order that the Court Meeting be convened as promptly as is reasonably practicable following the Rule 2.5 Announcement and the SEC review (if any) of the Proxy Statement by the SEC), and to use its reasonable best efforts to ensure that the hearing of such proceedings occurs as promptly as is reasonably practicable in order to facilitate the despatch of the Scheme Document and seek such directions of the High Court as it considers necessary or desirable in connection with such Court Meeting and thereafter comply with such directions;
(k) procure the publication of the requisite advertisements and despatch of the Scheme Document (in a form acceptable to the Panel), Proxy Statement and the related forms of proxy for the use at the Court Meeting and the EGM (the form of which shall be agreed between the Parties, acting reasonably) (i) to Allergan Shareholders on the register of members of Allergan on the record date as agreed with the High Court, as promptly as reasonably practicable after securing approval of the High Court to despatch such documents, and (ii) to the holders of the Allergan Options and the Allergan Share Awards as of such date, for information only, as promptly as reasonably practicable after securing approval of the High Court to despatch such documents, and thereafter shall publish and/or post such other documents and information (the form of which shall be agreed between the Parties, acting reasonably) as the High Court and/or the Panel may approve or direct from time to time;
(l) unless the Allergan Board has effected an Allergan Change of Recommendation pursuant to and in accordance with Section 5.3, and subject to the obligations of the Allergan Board under the Takeover Rules, procure that the Proxy Statement and the Scheme Document include the Scheme Recommendation;
(m) include in the Scheme Document a notice convening the EGM to be held immediately following the Court Meeting to consider and, if thought fit, approve the EGM Resolutions;
(n) prior to the Court Meeting, keep AbbVie reasonably informed on a reasonably current basis (in each case to the extent Allergan reasonably has access to such information) of the number of proxy votes received in respect of resolutions to be proposed at the Court Meeting and/or the EGM, and in any event provide such number promptly upon the request of AbbVie or its Representatives and, unless the Allergan Board has effected an Allergan Change of Recommendation pursuant to and in accordance with Section 5.3, use reasonable best efforts to solicit proxies as may be necessary to pass the Resolutions at the Court Meeting and/or the EGM;
(o) notwithstanding any Allergan Change of Recommendation, unless this Agreement has been validly terminated pursuant to and in accordance with Article 9, hold the Court Meeting and the EGM on the date set out in the Scheme Document, or such later date as may be agreed in writing by the Parties (such agreements not to be unreasonably withheld, conditioned or delayed), and in such a manner as shall be approved, if necessary by the High Court and/or the Panel, and propose the Resolutions without any amendments, unless such amendments have been agreed to in writing by AbbVie, such agreement not to be unreasonably withheld, conditioned or delayed;
(p) subject to the terms of this Agreement, afford all such cooperation and assistance as may reasonably be requested of it by AbbVie in respect of the preparation and verification of any document or in connection with any Clearance or confirmation required for the implementation of the Scheme, including the provision to AbbVie in a timely manner of such information and confirmations relating to it, its Subsidiaries and any of its or their respective directors or employees as AbbVie may reasonably request;
(q) assume responsibility for the information relating to it or any of its Subsidiaries contained in the Scheme Document, the Proxy Statement or any other document sent to Allergan Shareholders or filed with the High Court or in any announcement;
(r) review and provide comments (if any) in a reasonably timely manner on all documentation submitted to it by AbbVie;
(s) following the Court Meeting and EGM, assuming the Resolutions are duly passed (including by the requisite majorities required under Section 453 of the Act in the case of the Court Meeting) and all other Conditions are satisfied or, in the sole discretion of the applicable Party, waived (where permissible under the terms of the Rule 2.5 Announcement and/or the Scheme Document) (with the exception of Conditions 2(iii) and 2(iv) and any other Conditions that are by their nature to be satisfied on the Sanction Date, but subject to the satisfaction or waiver (where permissible under the provisions of the Rule 2.5 Announcement and/or the Scheme Document) of such Conditions), take all necessary steps on the part of Allergan to prepare and issue, serve and lodge all such court documents as are required to seek the sanction of the High Court to the Scheme as soon as possible thereafter;
(t) give such undertakings as are required by the High Court in connection with the Scheme as are reasonably necessary or desirable to implement the Scheme; and
(u) keep AbbVie reasonably informed as to the performance of the obligations and responsibilities required of Allergan pursuant to the Scheme.
Section 3.2 Responsibilities of AbbVie and Acquirer Sub in Respect of the Scheme. AbbVie and Acquirer Sub shall:
(a) either (i) instruct counsel to appear on its behalf at the Court Hearing and undertake to the High Court to be bound by the terms of the Scheme (including the issuance of the Share Consideration pursuant thereto) insofar as it relates to AbbVie or Acquirer Sub, or (ii) provide a written undertaking to the High Court to be bound by the terms of the Scheme (including the issuance of the Share Consideration pursuant thereto) insofar as it relates to AbbVie or Acquirer Sub;
(b) if, and to the extent that, it or any of its Concert Parties owns or is interested in Allergan Shares, exercise all of its rights and, insofar as lies within its powers, procure that each of its Concert Parties shall exercise all of their respective rights, in respect of such Allergan Shares so as to implement, and otherwise support the implementation of, the Scheme, including by voting (and, in respect of interests in Allergan held via contracts for difference or other derivative instruments, insofar as lies within its powers, procuring that instructions are given to the holder of the underlying Allergan Shares to vote) in favor of the Resolutions or, if required by Law, the High Court or the Takeover Rules, refraining from voting, at any Court Meeting and/or EGM as the case may be;
(c) keep Allergan reasonably informed as to the performance of the obligations and responsibilities required of AbbVie and Acquirer Sub pursuant to the Scheme;
(d) subject to the terms of this Agreement (including Section 7.2 hereof) and the Scheme, afford all such cooperation and assistance as may reasonably be requested of it by Allergan in respect of the preparation and verification of any document or in connection with any Clearance or confirmation required for the implementation of the Scheme, including the provision to Allergan in a timely manner of such information and confirmations relating to it, its Subsidiaries and any of its or their respective directors or employees as Allergan may reasonably request (including for the purposes of preparing the Scheme Document);
(e) assume responsibility for the information relating to it or any of its Subsidiaries contained in the Scheme Document, the Proxy Statement or any other document sent to Allergan Shareholders or filed with the High Court or in any announcement;
(f) review and provide comments (if any) in a reasonably timely manner on all documentation submitted to it by Allergan;
(g) to the extent that clearance of the Proxy Statement or the Scheme Document by the Panel might require that waivers and/or derogations in respect of the Takeover Rules be sought and obtained from the Panel, make a submission for (and use reasonable best efforts to have approved) such waiver or derogation as promptly as reasonably practicable after having provided Allergan with a reasonable opportunity to review and comment on such submission and considering in good faith such comments; and
(h) as promptly as reasonably practicable, notify Allergan of any other matter of which it becomes aware which would reasonably be expected to materially delay or prevent filing of the Proxy Statement or the Scheme Document with the SEC and the Panel, as applicable, or implementation of the Scheme, as the case may be.
Section 3.3 Mutual Responsibilities of the Parties.
(a) If any of the Parties becomes aware of any information that, pursuant to the Takeover Rules, the Act, the Securities Act or the Exchange Act, should be disclosed in an amendment or supplement to the Scheme Document or the Proxy Statement, then such Party shall promptly inform the other Party thereof and the Parties shall cooperate with each other in submitting or filing such amendment or supplement with the Panel, the SEC and/or the High Court, as applicable, and, if required, in mailing such amendment or supplement to the Allergan Shareholders and, for information only, if required, to the holders of the Allergan Options or Allergan Share Awards. Each of the Parties agrees to promptly (i) correct any information provided by it for use in the Scheme Document or the Proxy Statement, as applicable, if and to the extent that such information shall have become false or misleading in any material respect and (ii) supplement the information provided by it specifically for use in the Scheme Document or the Proxy Statement, as applicable, to include any information that shall become necessary in order to make the statements in the Scheme Document or the Proxy Statement, as applicable, in light of the circumstances under which they were made, not misleading. Allergan further agrees to cause the Scheme Document or the Proxy Statement, as applicable, as so corrected or supplemented promptly to be filed with the Panel and the SEC and to be despatched to its stockholders, in each case as and to the extent required by applicable Law. For purposes of this Section 3.3(a), any information concerning the Allergan Group will be deemed to have been provided by Allergan, and any information concerning the AbbVie Group will be deemed to have been provided by AbbVie and/or Acquirer Sub.
(b) Each Party shall provide the other Party with reasonable prior notice of any proposed material oral communication with the SEC, the Panel or the High Court and, except to the extent prohibited by the SEC, the Panel or the High Court, afford the other Party reasonable opportunity to participate therein, other than with respect to any such communication to the extent related to an Allergan Alternative Proposal or the termination of this Agreement pursuant to and in accordance with Article 9.
(c) Except as the Panel may otherwise direct and subject to the Panel's waiving any obligation for AbbVie or Acquirer Sub to make a cash offer or provide a cash alternative under Rule 11 of the Takeover Rules, and to ensure that Acquirer Sub is the sole member of Allergan at the Effective Time, on such date as the Parties shall agree but in any event prior to the Effective Time, Acquirer Sub agrees to subscribe for, and Allergan agrees to allot and issue to Acquirer Sub, one Allergan Share (the "Excluded Scheme Share"), in consideration for which Acquirer Sub shall pay, or cause to be paid to Allergan, an amount equal to the nominal value of one Allergan Share (the "Subscription Amount"). Completion of the subscription for the Excluded Scheme Share (the "Subscription Completion") shall take place at a location of the Parties' choosing on such date as the Parties shall agree but in any event prior to the Effective Time. At the Subscription Completion: (i) Acquirer Sub shall (A) subscribe for the Excluded Scheme Share, and (B) pay, or cause to be paid, the Subscription Amount to Allergan in cash, and (ii) Allergan shall (A) allot and issue the Excluded Scheme Share to Acquirer Sub (or its nominee) credited as fully paid, (B) procure that all appropriate entries are made in the statutory records of Allergan in respect of the Excluded Scheme Share, and (C) issue and deliver to Acquirer Sub a share certificate in respect of the Excluded Scheme Share.
Section 3.4 Dealings with the Panel.
(a) Each of the Parties will (i) give the other reasonable prior notice of any proposed meeting or material substantive discussion or correspondence between it or its Representatives with the Panel, or any amendment to be proposed to the Scheme in connection therewith, and, except to the extent any such correspondence relates to an Allergan Alternative Proposal or the valid termination of this Agreement pursuant to and in accordance with Article 9, afford the other reasonable opportunities to review and make comments and suggestions with respect to the same and consider in good faith such comments and suggestions, and (ii) except to the extent any such meeting, discussion, correspondence or submission relates to an Allergan Alternative Proposal or the valid termination of this Agreement pursuant to and in accordance with Article 9, keep the other reasonably informed of all such meetings, discussions or correspondence that it or its Representative(s) have with the Panel and not participate in any meeting or discussion with the Panel concerning this Agreement or the transactions contemplated by this Agreement unless it consults with the other Party in advance, and, unless prohibited by the Panel, gives such other Party the opportunity to attend and provide copies of all written submissions it makes to the Panel and copies (or, where verbal, a verbal or written summary of the substance) of the Panel responses thereto provided always that any correspondence or other information required to be provided under this Section 3.4 may be redacted:
(i) to remove references concerning the valuation of the businesses of Allergan;
(ii) to prevent the exchange of confidential information as required by applicable Law (provided that the redacting Party shall use its reasonable best efforts to cause such information to be provided in a manner that would not result in such confidentiality concerns); and
(iii) as necessary to address reasonable privilege concerns (provided that the redacting Party shall use its reasonable best efforts to cause such information to be provided in a manner that would not result in such privilege concerns).
(b) Allergan undertakes, if so reasonably requested by AbbVie to, as promptly as practicable, provide its written consent to AbbVie and to the Panel in respect of any application made by AbbVie to the Panel:
(i) to redact any commercially sensitive or confidential information specific to AbbVie's financing arrangements for the Acquisition ("AbbVie Financing Information") from any documents that AbbVie is required to display pursuant to Rule 26(b)(xi) of the Takeover Rules;
(ii) for a derogation from the requirement under the Takeover Rules to disclose AbbVie Financing Information in the Scheme Document, any supplemental document or other document sent to Allergan Shareholders or the holders of the Allergan Options or Allergan Share Awards pursuant to the Takeover Rules;
(iii) for a derogation from Rule 16.1 and/or 20.1 of the Takeover Rules to permit AbbVie to implement, and to pay fees to lenders in connection with, its Financing and syndication arrangements with respect to its Financing, and to provide information to lenders and prospective lenders on such terms as the Panel may permit; and
(iv) for a derogation from the disclosure requirements of Rule 24.3 of the Takeover Rules, seeking consent to the aggregation of dealings for purposes of disclosure in the Scheme Document and seeking consent to the aggregation on a bi-weekly basis of changes in information announced pursuant to Rule 2.10 of the Takeover Rules.
(c) AbbVie undertakes, if so requested by Allergan to, as promptly as practicable, provide its written consent to Allergan and to the Panel in respect of any application made by Allergan to the Panel to permit entering into and effecting the retention, bonus and/or benefit arrangements contemplated by Section 5.1(b)(xii) of the Allergan Disclosure Schedule.
(d) AbbVie and Allergan undertake, if so requested by the other Party to, as promptly as reasonably practicable, issue its written consent to the other Party and to the Panel in respect of any application reasonably requesting any derogation, permission or consent from the Panel in connection with the Takeover Rules.
(e) Notwithstanding the foregoing provisions of this Section 3.4, neither Allergan nor AbbVie shall be required to take any action pursuant to the foregoing provisions (a) through (d) if such action is prohibited by the Panel (unless the Panel decision is successfully appealed by either Allergan or AbbVie).
(f) Nothing in this Agreement shall in any way limit the Parties' obligations under the Takeover Rules.
Section 3.5 No Scheme Amendment by Allergan. Except as required by applicable Law, the High Court and/or the Panel, Allergan shall not take any of the following actions after despatch of the Scheme Document, in each case, without the prior written consent of AbbVie:
(a) amend the Scheme;
(b) adjourn or postpone (or propose an adjournment or postponement of) the Court Meeting or the EGM; provided, however, that Allergan may, without the consent of, but after consultation with, AbbVie, adjourn or postpone (or propose to adjourn or postpone) the Court Meeting or EGM if (i) in the case of adjournment, such adjournment was requested by the Allergan Shareholders (but only to the extent the proposal for such adjournment was not proposed by Allergan or any of its Affiliates or their respective Representatives), (ii) reasonably necessary to ensure that any required supplement or amendment to the Scheme Document or Proxy Statement is provided to the Allergan Shareholders or to permit dissemination of information which is material to the Allergan Shareholders voting at the Court Meeting or the EGM (but only for so long as the Allergan Board determines in good faith, after having consulted with outside counsel, as is reasonably necessary or advisable to give the Allergan Shareholders sufficient time to evaluate any such disclosure or information), or (iii) as of the time the Court Meeting or EGM is scheduled (as set forth in the Scheme Document or Proxy Statement), there are insufficient Allergan Shares represented (either in person or by proxy) (A) to constitute a quorum necessary to conduct the business of the Court Meeting or the EGM (but only until a meeting can be held at which there are a sufficient number of Allergan Shares represented to constitute a quorum) or (B) voting for the approval of the Court Resolutions or the EGM Resolutions, as applicable (but only until a meeting can be held at which there are a sufficient number of votes of Allergan Shareholders to approve the Court Meeting Resolutions or the EGM Resolutions, as applicable); provided, further, that, notwithstanding the foregoing, other than any adjournments or postponements required by applicable Law, including adjournments or postponements to the extent reasonably necessary or advisable to ensure that any required supplement or amendment to the Proxy Statement is provided or made available to Allergan Shareholders or to permit dissemination of information which is material to shareholders voting at the Court Meeting and EGM and to give the Allergan Shareholders sufficient time to evaluate any such supplement or amendment or other information, no such adjournment or postponement pursuant to clause (i) or (iii) shall, without the prior written consent of AbbVie (such consent not to be unreasonably withheld, conditioned or delayed), be for a period exceeding 15 Business Days and Allergan may not adjourn or postpone the Court Meeting or the EGM pursuant to clause (i) or (iii) more than three times; or
(c) amend the Resolutions (in each case, in the form set out in the Scheme Document) after despatch of the Scheme Document without the consent of AbbVie (such consent not to be unreasonably withheld, conditioned or delayed).
Section 3.6 Switching to a Takeover Offer.
(a) Subject to the terms of this Section 3.6, in the event that AbbVie reasonably determines that a competitive situation (as that term is defined in the Takeover Rules) exists or, based on facts known at the time, may reasonably be expected to arise in connection with the Acquisition, AbbVie may elect (subject to receiving the Panel's consent, if required) to implement the Acquisition by way of the Takeover Offer (rather than the Scheme), whether or not the Scheme Document has been posted.
(b) If AbbVie elects to implement the Acquisition by way of the Takeover Offer, Allergan undertakes to provide AbbVie and its Representatives as promptly as reasonably practicable with all such information about the Allergan Group (including directors and their connected persons) as may reasonably be required for inclusion in the Takeover Offer Document (and any prospectus in connection with the Share Consideration) and to provide all such other assistance as may reasonably be required by the Takeover Rules in connection with the preparation of the Takeover Offer Document, including reasonable access to, and ensuring the provision of reasonable assistance by, its management and Representatives.
(c) If AbbVie elects to implement the Acquisition by way of a Takeover Offer, Allergan agrees:
(i) that the Takeover Offer Document will contain provisions consistent with the terms and conditions set out in the Rule 2.5 Announcement, the relevant Conditions and such other further terms and conditions as agreed (including any modification thereto) between AbbVie and the Panel; provided, however, that the terms and conditions of the Takeover Offer shall be at least as favorable to the Allergan Shareholders and the holders of Allergan Options and Allergan Share Awards as those which would apply in relation to the Scheme (except for the 80% acceptance condition contemplated by paragraph 9 of Appendix III to the Rule 2.5 Announcement);
(ii) to reasonably co-operate and consult with AbbVie in the preparation of the Takeover Offer Document or any other document or filing (including any necessary prospectus in respect of the Share Consideration) which is required for the purposes of implementing the Acquisition; and
(iii) that, subject to the obligations of the Allergan Board under the Takeover Rules, and unless the Allergan Board has made an Allergan Change of Recommendation pursuant to and in accordance with Section 5.3, the Takeover Offer shall incorporate a recommendation to the Allergan Shareholders from the Allergan Board to accept the Takeover Offer and such recommendation shall not subsequently be withdrawn, adversely modified or qualified except as contemplated by Section 5.3.
(d) If AbbVie elects to implement the Acquisition by way of the Takeover Offer in accordance with Section 3.6(a), the Parties mutually agree:
(i) to prepare and file with, or submit to, the SEC, the Panel and the High Court, all documents, amendments and supplements required to be filed therewith or submitted thereto pursuant to the Takeover Rules, the Securities Act, the Exchange Act, or otherwise by applicable Law in connection with the Takeover Offer and to make any applications or initiate any appearances as may be required by or desirable to the High Court for the purpose of discontinuing, cancelling or terminating the High Court proceedings initiated in connection with the Scheme and, unless the Allergan Board has made an Allergan Change of Recommendation, each Party shall have reasonable opportunities to review and make comments on all such documents, amendments and supplements and, following good faith consideration of such comments by the other Party and approval of such documents, amendments and supplements by the other Party, which approval shall not be unreasonably withheld, conditioned or delayed, file or submit, as the case may be, such documents, amendments and supplements with or to the SEC, the Panel and the High Court (as applicable);
(ii) to provide the other Party with any comments received from the SEC, the Panel or the High Court on any documents filed by it with the SEC, the Panel or the High Court promptly after receipt thereof, other than with respect to any such documents to the extent related to an Allergan Alternative Proposal; and
(iii) to provide the other Party with reasonable prior notice of any proposed material oral communication with the SEC, the Panel or the High Court and, except to the extent prohibited by the SEC, the Panel or the High Court, afford the other Party reasonable opportunity to participate therein, other than with respect to any such communication to the extent related to an Allergan Alternative Proposal.
(e) If the Takeover Offer is consummated, AbbVie shall cause Acquirer Sub (or their respective designees) to effect as promptly as reasonably practicable, following it becoming entitled under the Act to do so, a compulsory acquisition of any Allergan Shares under section 457 of the Act not acquired in the Takeover Offer for the same consideration per share as provided for in the Takeover Offer.
(f) For clarity and except as may be required by the Takeover Rules (and without limiting any other provision of this Agreement), nothing in this Section 3.6 shall require Allergan to provide AbbVie with any information with respect to, or to otherwise take or fail to take any action in connection with Allergan's consideration of or response to, any actual or potential Allergan Alternative Proposal.
ARTICLE 4
EQUITY AWARDS
Section 4.1 Allergan Options. As of immediately prior to the Effective Time, by virtue of the occurrence of the Effective Time and without any action on the part of the holder thereof, each Allergan Option that is outstanding and unexercised immediately prior to the Effective Time shall be substituted with an option, granted under the AbbVie Share Plan (an "Allergan Replacement Option"), to acquire (a) that number of whole AbbVie Shares (rounded down to the nearest whole share) equal to the product obtained by multiplying (i) the number of Allergan Shares subject to such Allergan Option immediately prior to the Effective Time by (ii) the Equity Award Conversion Ratio, (b) at an exercise price per AbbVie Share (rounded up to the nearest whole cent) equal to the quotient obtained by dividing (i) the exercise price per Allergan Share of such Allergan Option by (ii) the Equity Award Conversion Ratio. Except as otherwise provided in this Section 4.1, each such Allergan Replacement Option granted under the AbbVie Share Plan pursuant to this Section 4.1 shall continue to have, and shall be subject to, the same terms and conditions that applied to the corresponding Allergan Option immediately prior to the Effective Time, except for terms rendered inoperative by reason of the transactions contemplated by this Agreement or for such other immaterial administrative or ministerial changes as in the reasonable and good faith determination of AbbVie are appropriate to effectuate the administration of the Allergan Replacement Options and are not adverse (other than in any de minimis respect) to any holders of Allergan Options.
Section 4.2 Allergan Share Awards.
(a) As of immediately prior to the Effective Time, by virtue of the occurrence of the Effective Time and without any action on the part of the holder thereof, each Allergan Share Award that is outstanding immediately prior to the Effective Time shall, by virtue of the occurrence of the Effective Time and without any action on the part of the holders thereof, be substituted with an award, granted under the AbbVie Share Plan (an "Allergan Replacement Share Award"), with respect to a number of whole AbbVie Shares (rounded up to the nearest whole share) equal to the product obtained by multiplying (i) the applicable number of Allergan Shares subject to such Allergan Share Award (including any corresponding dividend equivalent units) immediately prior to the Effective Time by (ii) the Equity Award Conversion Ratio. Each Allergan PSU Award shall be converted into an AbbVie restricted stock unit award, and for any Allergan PSU Award with a performance period that remains subject to performance vesting conditions as of the date hereof (i.e., any Allergan PSU Award for which the level of performance vesting has not yet been determined), the number of Allergan Shares underlying such Allergan PSU Award shall be equal to 130% of the target number of Allergan Shares subject to such Allergan PSU Award. Except as otherwise provided in this Section 4.2(a), each Allergan Replacement Share Award granted under the AbbVie Share Plan pursuant to this Section 4.2(a) shall continue to have, and shall be subject to, the same terms and conditions (including, for any Allergan PSU Award, the time vesting conditions provided in the applicable award agreement, but excluding any performance-based vesting conditions) that applied to the corresponding Allergan Share Award immediately prior to the Effective Time, except for terms rendered inoperative by reason of the transactions contemplated by this Agreement or for such other immaterial administrative or ministerial changes as in the reasonable and good faith determination of AbbVie are appropriate to effectuate the administration of the Allergan Replacement Share Awards and are not adverse (other than in any de minimis respect) to any holders of Allergan Share Awards.
(b) The actions contemplated by this Section 4.2 shall be taken in accordance with Section 409A and, if applicable, Section 422 of the Code.
Section 4.3 Other Actions in Connection With Substitution of Allergan Options and Allergan Share Awards.
(a) As soon as practicable after the Effective Time, AbbVie shall deliver to the holders of Allergan Replacement Options and Allergan Replacement Share Awards appropriate notices setting forth such holders' rights, and the applicable award agreements evidencing the grants of such Allergan Replacement Options and Allergan Replacement Share Awards. The Allergan Replacement Options and Allergan Replacement Share Awards will be settled in AbbVie Shares, and AbbVie shall take all corporate action necessary to effectuate the foregoing. Notwithstanding the foregoing, and for purposes of clarity, it is understood by AbbVie, Allergan and Acquirer Sub that the Allergan Replacement Options and Allergan Replacement Share Awards shall be awarded and issued under the AbbVie Share Plan. For clarity, the terms and conditions applicable to such Allergan Replacement Options and Allergan Replacement Share Awards shall be no less favorable than the terms and conditions (other than, in the case of the Allergan PSU Awards, as provided above, performance-based vesting conditions) set forth in the Allergan Share Plans and the award agreements pursuant to which the replaced Allergan Options and Allergan Share Awards were originally granted, notwithstanding that the Allergan Replacement Options and Allergan Replacement Share Awards will be issued under the AbbVie Share Plan and corresponding award agreements issued thereunder. For clarity, the Allergan Replacement Options and Allergan Replacement Share Awards shall comply with the requirements of "Qualified Replacement Awards" with respect to any Allergan Share Awards granted under the Allergan 2013 Plan.
(b) AbbVie shall take all corporate action necessary to reserve for issuance a sufficient number of AbbVie Shares for delivery with respect to Allergan Replacement Options and Allergan Replacement Share Awards substituted by it in accordance with Section 4.1, Section 4.2(a) and this Section 4.3. To the extent necessary, AbbVie shall, no later than the tenth day following the Effective Date, file a registration statement on Form S-8 (or any successor or other appropriate form) with respect to the AbbVie Shares subject to such Allergan Replacement Options and Allergan Replacement Share Awards pursuant to Section 4.1, Section 4.2(a) and this Section 4.3.
Section 4.4 Reasonable Best Efforts. Each of the Parties shall use its reasonable best efforts to take all actions reasonably necessary to effectuate the transactions contemplated by this Article 4, including having the applicable board or committee administering the plans governing the affected awards, adopt resolutions necessary to effect the foregoing.
Section 4.5 Amendment of Articles. Allergan shall procure that a special resolution be proposed to the Allergan Shareholders at the EGM proposing that the Allergan Memorandum and Articles of Association be amended so that any Allergan Shares allotted following the EGM will either be subject to the terms of the Scheme or acquired by AbbVie for the same consideration per Allergan Share as shall be payable to Allergan Shareholders under the Scheme (depending upon the timing of such allotment); provided, however, that nothing in such amendment to the Allergan Memorandum and Articles of Association shall prohibit the sale (whether on a stock exchange or otherwise) of any Allergan Shares issued on the exercise of Allergan Options or vesting or settlement of Allergan Share Awards, as applicable, following the EGM but prior to the sanction of the Scheme by the High Court, it being always acknowledged that each and every Allergan Share will be bound by the terms of the Scheme.
ARTICLE 5
ALLERGAN AND ABBVIE CONDUCT
Section 5.1 Conduct of Business by Allergan.
(a) From the date of this Agreement until the earlier of the Completion and valid termination of this Agreement pursuant to and in accordance with Article 9, except (x) as prohibited or required by applicable Law, (y) as set forth in Section 5.1 of the Allergan Disclosure Schedule, or (z) as otherwise required or expressly contemplated by this Agreement, unless AbbVie shall otherwise consent in writing (which consent shall not be unreasonably withheld, conditioned or delayed), Allergan shall, and shall cause each of its Subsidiaries to, use commercially reasonable efforts (1) to conduct its business in the ordinary course of business consistent with past practice in all material respects and in compliance in all material respects with all applicable Laws, and (2) to preserve intact its business organization and relationships with customers, members, suppliers, licensors, licensees and other Third Parties and keep available the services of its present officers and employees; provided, however, that no action taken by Allergan or its Subsidiaries with respect to matters explicitly permitted by an exception to any of Section 5.1(b)(i) through (xvi) will be a breach of this sentence.
(b) Without limiting the generality of the foregoing, except (A) as prohibited or required by applicable Law, (B) as set forth in Section 5.1 of the Allergan Disclosure Schedule, or (C) as otherwise required or expressly contemplated by this Agreement, without AbbVie's prior written consent (which, except in the case of 5.1(b)(xvi) (with respect to the settlement of any Action set forth on Section 7.1(e) of the Allergan Disclosure Schedule), shall not be unreasonably withheld, conditioned or delayed), Allergan shall not, and shall cause each of its Subsidiaries not to:
(i) in the case of Allergan and each of its Significant Subsidiaries, amend its Organizational Documents other than, with respect to each Significant Subsidiary, amendments to Organizational Documents that would not prohibit or hinder, impede or delay in any material respect the consummation of the transactions contemplated hereby (including the Acquisition);
(ii) (A) subject to the provisions in Section 5.3, merge or consolidate with any other Person, or acquire (including by merger, consolidation, or acquisition of stock or assets) any interest in any corporation, partnership, other business organization or any division or business thereof or any assets, securities or property that (in the case of such assets, securities or property) constitute all or a material portion of such Person or any division or business thereof, other than (1) transactions (x) solely among Allergan and one or more of its wholly owned Subsidiaries or (y) solely among Allergan's wholly owned Subsidiaries and (2) acquisitions of inventory or equipment in the ordinary course of business consistent with past practice, or (B) adopt a plan of complete or partial liquidation, dissolution, recapitalization or restructuring, other than a liquidation or dissolution of any of Allergan's immaterial wholly owned Subsidiaries;
(iii) (A) split, combine or reclassify any shares of its capital stock (other than transactions (1) solely among Allergan and one or more of its wholly owned Subsidiaries or (2) solely among the Allergan's wholly owned Subsidiaries), (B) amend any term or alter any rights of any of its outstanding Equity Securities, (C) declare, set aside or pay any dividend or make any other distribution (whether in cash, stock, property or any combination thereof) in respect of any Equity Securities, other than (x) the declaration and payment by Allergan of quarterly cash dividends on the outstanding Allergan Shares in an amount per quarter not to exceed $0.74 per outstanding Allergan Share and with the timing of the declaration, record and payment dates in any given quarter materially consistent with the timing of the declaration, record and payment dates for the comparable quarter in the prior fiscal year and (y) dividends or distributions by a Subsidiary of Allergan to Allergan or a wholly owned Subsidiary of Allergan, or (D) redeem, repurchase, cancel or otherwise acquire or offer to redeem, repurchase, or otherwise acquire any of its Equity Securities or any Equity Securities of any Subsidiary of Allergan, other than (x) repurchases of Allergan Shares in connection with the exercise of Allergan Options or the vesting or settlement of Allergan Share Awards (including in satisfaction of any amounts required to be deducted or withheld under applicable Law) in accordance with the terms of such Allergan Equity Awards (I) outstanding as of the date of this Agreement (in accordance with their existing terms as of the date hereof) or (II) granted after the date of this Agreement (to the extent expressly permitted by Section 5.1(b)(iii) of the Allergan Disclosure Schedule) and (y) transactions among Allergan and its wholly owned Subsidiaries or among Allergan's wholly owned Subsidiaries;
(iv) issue, deliver or sell, or authorize the issuance, delivery or sale of, any Equity Securities, other than (A) the issuance of any Allergan Shares upon the exercise of Allergan Options, the accrual of any dividend equivalents under any dividend equivalent rights applicable to any Allergan Equity Awards, or the vesting or settlement of the Allergan Share Awards, and/or the withholding of Allergan Shares to satisfy Tax obligations pertaining to the exercise of Allergan Options or the vesting or settlement of Allergan Equity Awards or to satisfy the exercise price with respect to Allergan Options or to effectuate an optionee direction upon exercise of an Allergan Options that, in each case, are (x) outstanding as of the date of this Agreement (in accordance with their existing terms as of the date hereof), or (y) granted after the date of this Agreement (to the extent expressly permitted by Section 5.1(b)(iii) of the Allergan Disclosure Schedule), (B) transactions with respect to any employer stock fund under the Allergan Benefit Plans that are tax-qualified retirement or non-qualified supplemental savings retirement plans which are taken in accordance with the existing terms of such Allergan Benefit Plans as of the date hereof and applicable Law, or (C) in connection with transactions (1) solely among Allergan and one or more of its wholly owned Subsidiaries or (2) solely among Allergan's wholly owned Subsidiaries;
(v) authorize, make or incur any capital expenditures or obligations or liabilities in connection therewith in excess of $400 million in the aggregate during fiscal year 2019 or in excess of $87.5 million in the aggregate during any fiscal quarter in 2020;
(vi) sell, lease, license, transfer or otherwise dispose of any Subsidiary of Allergan or any assets, securities or properties of the Allergan Group, other than (A) sales or dispositions of inventory, goods, services, tangible personal property (including equipment) or other immaterial assets, in each case in the ordinary course of business consistent with past practice, (B) transactions (1) solely among Allergan and one or more of its wholly owned Subsidiaries or (2) solely among Allergan's wholly owned Subsidiaries or (C) any non-exclusive license of Intellectual Property granted in connection with a settlement of a claim of litigation entered into by Allergan or by any of its Subsidiaries in the ordinary course of business consistent with past practice and in accordance with Section 5.1(b)(xvi);
(vii) sell, assign, license (including sublicense), abandon, allow to lapse, transfer or otherwise dispose of, or create or incur any Lien (other than a Permitted Lien) on, any material Intellectual Property, other than in the ordinary course of business consistent with past practice (A) pursuant to non-exclusive licenses, (B) for the purpose of abandoning, allowing to lapse or otherwise disposing of immaterial, obsolete or worthless assets or (C) for the purpose of abandoning or allowing to lapse patent applications or applications to register Intellectual Property during the ordinary course of prosecution;
(viii) (A) make any material loans, advances or capital contributions to any other Person, other than (1) loans, advances or capital contributions (a) by Allergan to or in, as applicable, one or more of its wholly owned Subsidiaries or (b) by any Subsidiary of Allergan to or in, as applicable, Allergan or any wholly owned Subsidiary of Allergan, or (2) capital contributions required under the terms of Contracts in effect as of the date hereof, or (B) incur, assume, guarantee or repurchase or otherwise become liable for any indebtedness for borrowed money, issue or sell any debt securities or any options, warrants or other rights to acquire debt securities (in each case, whether, directly or indirectly, on a contingent basis or otherwise) or enter into any interest rate or currency swaps, forward currency or interest rate contracts or other interest rate or currency hedging arrangements, other than (1) borrowings under Allergan's or its Subsidiaries' existing credit facilities (as in effect as of the date hereof) or credit facilities incurred in compliance with this Section 5.1(b)(viii)(B) in accordance with the terms thereof and commercial paper arrangements backstopped thereby, (2) intercompany indebtedness among Allergan and its wholly owned Subsidiaries or among Allergan's wholly owned Subsidiaries, (3) indebtedness for borrowed money incurred to replace, renew, extend, refinance or refund any existing indebtedness of Allergan or any of its Subsidiaries set forth in Section 5.1(b)(viii) of the Allergan Disclosure Schedule, which indebtedness is (a) (i) prepayable or redeemable at any time (subject to customary notice requirements) without penalty (other than customary eurocurrency rate breakage) or (ii) on terms (including, with respect to tenor, that the tenor of such indebtedness does not exceed the tenor of the indebtedness being replaced, renewed, extended, refinanced or refunded at the time it was originally incurred) that are substantially consistent with those contained in the indebtedness being replaced, renewed, extended, refinanced or refunded (other than with respect to the interest rate applicable thereto, which shall be on commercially reasonable terms) and (b) not in a principal amount greater than such indebtedness being replaced, renewed, extended, refinanced or refunded or, in the case of any "revolving" credit facility, the aggregate amount that may be incurred under the credit agreement governing such indebtedness being replaced, renewed, extended, refinanced or refunded (as in effect as of the date hereof), (4) guarantees of third party indebtedness of Allergan or its wholly owned Subsidiaries outstanding on the date hereof or otherwise incurred in compliance with this Section 5.1(b)(viii)(B) and (5) entry by Allergan or its Subsidiaries into interest rate or currency swaps, forward currency or interest rate contracts or other interest rate or currency hedging arrangements, in each case in the ordinary course of business consistent with past practice;
(ix) create or incur any Lien (other than a Permitted Lien) on any material assets or properties other than (A) Liens created or incurred in the ordinary course of business consistent with past practice, (B) pursuant to non-exclusive licenses or (C) Liens that may be discharged at or prior to the Completion;
(x) other than in connection with any matter to the extent specifically permitted by any other subclause of Section 5.1(b) or by Section 5.1 of the Allergan Disclosure Schedule (A) enter into any Allergan Material Contract other than in the ordinary course of business consistent with past practice (except that no Allergan Material Contract that is a collaboration agreement, product license agreement, joint venture or similar strategic partnership containing exclusivity or non-competition restrictions of the type described in Section 6.1(A)(t)(i)(C) shall be entered into) or (B) terminate, renew, extend or in any material respect modify or amend (including waiving, releasing or assigning any material right or claim thereunder) any Allergan Material Contract, other than in the ordinary course of business consistent with past practice (except that no Allergan Material Contract that is a collaboration agreement, product license agreement, joint venture or similar strategic partnership containing exclusivity or non-competition restrictions of the type described in Section 6.1(A)(t)(i)(C) shall be terminated, renewed, extended or in any material respect modified or amended);
(xi) [reserved];
(xii) except as required by the terms of an Allergan Benefit Plan as in effect on the date hereof, (A) grant (or increase the value of) any change in control, equity or equity-based awards, or severance, termination or similar pay, to (or amend any existing arrangement with) any current or former director, officer, employee or individual independent contractor of Allergan or any of its Subsidiaries (each, a "Covered Individual"), (B) enter into any employment, deferred compensation or other similar agreement (or any extension of, or amendment to, any such existing agreement) with any Covered Individual at global grade level 16 or above, (C) establish, adopt, enter into, amend or terminate any Allergan Benefit Plan (or any plan, program, policy, scheme, trust, fund, practice, agreement or arrangement that would be an Allergan Benefit Plan if in effect on the date hereof) (including any union or works council agreement), provided that, notwithstanding this clause (C), Allergan and its Subsidiaries may (I) enter into or make amendments to such Allergan Benefit Plans and labor agreements in the ordinary course of business consistent with past practice that neither contravene the other covenants set forth in this Section 5.1(b)(xii) nor materially increase the annual cost to Allergan of maintaining the affected Allergan Benefit Plans or other plan, trust, fund policy, practice, agreement or agreement or arrangement which would, if in effect as of the date of this Agreement, constitute an Allergan Benefit Plan, (II) enter into third party contracts for the provision of services to such Allergan Benefit Plans, including benefit administration, that will not materially increase the annual cost to Allergan of maintaining the affected Allergan Benefit Plan or other plan, trust, fund policy, practice, or agreement or arrangement, and (III) enter into (x) employment agreements with employees in the U.S. terminable on less than thirty (30)-days' notice without penalty or liability and (y) employment agreements with employees in non-U.S. jurisdictions that are terminable without any liability beyond the minimum required by applicable Law, in each case, in the ordinary course of business consistent with past practice and only with respect to any Covered Individual below global grade level 16, (D) increase (except as expressly permitted by Section 5.1(b)(xii) of the Allergan Disclosure Schedule), or accelerate the payment, vesting or funding of, the incentive, equity or equity-based awards, bonus opportunity or other compensation payable under any Allergan Benefit Plan or otherwise, (E) hire or terminate (other than for "cause") any individual who would be upon hire (or is at the time of termination) at global grade level 16 or above, or (F) pay or provide any compensation or benefit to any Covered Individual at global level grade 16 or above, other than the continued payment of compensation and the continued provision of existing benefits in the ordinary course of business consistent with past practice;
(xiii) make any material change in any method of financial accounting or financial accounting principles or practices, except for any such change required by reason of (or, in the reasonable good-faith judgment of Allergan, advisable under) a change in GAAP or applicable Law or SEC Policy;
(xiv) [reserved];
(xv) (A) make, change or revoke any material Tax election; (B) change the annual Tax accounting period of any material Subsidiary; (C) adopt or change any material method of Tax accounting; (D) enter into any material closing agreement with respect to Taxes; or (E) settle or surrender any material Tax claim, audit or assessment for an amount in excess of reserves therefor on the financial statements of Allergan and its Subsidiaries; provided that no term of such settlement or surrender would be reasonably expected to materially increase the Tax liability of AbbVie, Allergan or their respective Subsidiaries following the Closing;
(xvi) settle or compromise, or propose to settle or compromise, any Action involving or against Allergan or any of its Subsidiaries (including any Action involving or against any officer or director of Allergan or any of its Subsidiaries in their capacities as such, but excluding any Action, audit, claim or other proceeding in respect of Taxes), other than any settlement or compromise (or proposed settlement or compromise) that (A)(i) does not involve or otherwise relate to, directly or indirectly, any current or former Allergan Product or any current or former material Owned Intellectual Property or material Licensed Intellectual Property, (ii) is for an amount not to exceed $10 million individually or $50 million in the aggregate, and (iii) does not involve any material non-monetary relief, including anything that would restrict the operation or conduct of Allergan or any of its Subsidiaries in any material respect (or, following Completion, of AbbVie or any of its Subsidiaries in any material respect) or (B) solely involves matters in which Allergan and each of its Subsidiaries party thereto (if any) is a plaintiff; provided that, notwithstanding anything to the contrary in the foregoing, in no case shall Allergan or any of its Subsidiaries settle any Action set forth on Section 7.1(e) of the Allergan Disclosure Schedule without the prior written consent of AbbVie; or
(xvii) agree, commit or propose to do any of the foregoing.
Section 5.2 Conduct of Business by AbbVie.
(a) From the date of this Agreement until the earlier of the Completion and valid termination of this Agreement pursuant to and in accordance with Article 9, except (A) as prohibited or required by applicable Law, (B) as set forth in Section 5.1 of the AbbVie Disclosure Schedule, or (C) as otherwise required or expressly contemplated by this Agreement, without Allergan's prior written consent (which consent shall not be unreasonably withheld, conditioned or delayed), AbbVie shall not, and shall cause each of its Subsidiaries not to:
(i) amend AbbVie's or Acquirer Sub's Organizational Documents in any manner that would prohibit or hinder, impede or delay in any material respect the consummation of the transactions contemplated hereby (including the Acquisition); provided that any amendment to its certificate of incorporation to increase the authorized number of shares of any class or series of the capital stock of AbbVie or to create a new series of capital stock of AbbVie shall in no way be restricted by the foregoing;
(ii) acquire (including by merger, consolidation, or acquisition of stock or assets) any interest in any corporation, partnership, other business organization or any division thereof or any assets, securities or property, or otherwise purchase, lease, license or otherwise enter into a transaction, in each case that would prohibit or delay beyond the End Date the consummation of the transactions contemplated hereby (including the Acquisition);
(iii) declare, set aside or pay any dividend or make any other distribution payable in cash, stock, property or any combination thereof in respect of any Equity Securities, other than (A) the declaration and payment by AbbVie of quarterly cash dividends on the outstanding AbbVie Shares in an amount per quarter not to exceed $1.07 per outstanding AbbVie Share (as such amount may be increased in a manner consistent with past practice by AbbVie) with the timing of the declaration, record and payment dates in any given quarter materially consistent with the timing of the declaration, record and payment dates for the comparable quarter in the prior fiscal year, and (B) dividends or distributions by a Subsidiary of AbbVie to AbbVie or a wholly owned Subsidiary of AbbVie;
(iv) split, combine or reclassify any of its capital stock, except for any such transaction by a wholly owned Subsidiary of AbbVie which remains a wholly owned Subsidiary after consummation of such transaction; or
(v) agree, commit or propose to do the foregoing.
Section 5.3 Non-Solicitation.
(a) No Solicitation or Negotiation. Subject to any actions which Allergan is required to take so as to comply with the requirements of the Takeover Rules, from the date of this Agreement until the earlier of Effective Time and the valid termination of this Agreement pursuant to and in accordance with Article 9, except as otherwise set forth in this Section 5.3, Allergan shall not, and it shall cause its Subsidiaries and its and their respective directors, officers and employees not to, and it shall use reasonable best efforts to cause its and its Subsidiaries' other Representatives not to, directly or indirectly:
(i) solicit, initiate or take any action to knowingly facilitate or knowingly encourage (including by way of furnishing information to any Person in connection with) the submission of any Allergan Alternative Proposal or any indication, proposal or inquiry that would reasonably be expected to lead to an Allergan Alternative Proposal;
(ii) enter into or participate in any discussions or negotiations with, furnish any information relating to Allergan or any of its Subsidiaries to, or afford access to the business, properties, assets, books or records of Allergan or any of its Subsidiaries to, otherwise cooperate in any way with, or knowingly assist, participate in, knowingly facilitate or knowingly encourage any effort by, any Third Party that would reasonably be expected to seek to make, or has made, an Allergan Alternative Proposal (except to notify such Person as to the existence of the provisions of this Section 5.3);
(iii) (A) withdraw or qualify, amend or modify in any manner adverse to AbbVie, the Scheme Recommendation or the recommendation contemplated by Section 3.6(c), if applicable, (B) fail to include the Scheme Recommendation in the Scheme Document or the Proxy Statement, (C) recommend, adopt or approve or publicly propose to recommend, adopt or approve any Allergan Alternative Proposal or (D) fail to reaffirm the Scheme Recommendation in a statement complying with Rule 14e-2(a) under the Exchange Act with regard to an Allergan Alternative Proposal or in connection with such action by the close of business on the 10th Business Day after the commencement of such Allergan Alternative Proposal under Rule 14e-2(a) (any of the foregoing in this clause (iii), an "Allergan Change of Recommendation");
(iv) take any action to make any "moratorium", "control share acquisition", "fair price", "supermajority", "affiliate transactions" or "business combination statute or regulation" or other similar anti-takeover laws and regulations under applicable Law inapplicable to any Third Party or any Allergan Alternative Proposal; or
(v) enter into any agreement in principle, letter of intent, term sheet, merger agreement, acquisition agreement, option agreement or other agreement providing for or relating to an Allergan Alternative Proposal (other than an Allergan Alternative Proposal NDA).
Nothing contained herein shall prevent the Allergan Board from (x) complying with Rule 14e-2(a) under the Exchange Act with regard to an Allergan Alternative Proposal, so long as any action taken or statement made to so comply is consistent with this Section 5.3(a) or (y) making any required disclosure to the Allergan Shareholders if the Allergan Board determines in good faith, after consultation with outside legal counsel, that the failure to take such action would reasonably be expected to be inconsistent with applicable Law; provided that any Allergan Change of Recommendation involving or relating to an Allergan Alternative Proposal may only be made in accordance with the provisions of Section 5.3(b), Section 5.3(c), Section 5.3(d) and Section 5.3(e). For clarity, a "stop, look and listen" disclosure or similar communication of the type contemplated by Rule 14d-9(f) under the Exchange Act shall not constitute an Allergan Change of Recommendation.
Additionally, Allergan shall, and shall cause its Subsidiaries and its and their respective directors, officers and employees to, and shall use reasonable best efforts to cause its and its Subsidiaries' other Representatives to, cease immediately and cause to be terminated any and all existing activities, discussions or negotiations, if any, with any Third Party conducted prior to the date of this Agreement with respect to any Allergan Alternative Proposal or with respect to any indication, proposal or inquiry that could reasonably be expected to lead to an Allergan Alternative Proposal. Allergan will promptly (and in each case within 72 hours from the date of this Agreement) request from each Person (and such Person's Representatives) that has executed a confidentiality agreement during the last eighteen months in connection with its consideration of making an Allergan Alternative Proposal to return or destroy (as provided in the terms of such confidentiality agreement) all confidential information concerning Allergan or any of its Subsidiaries and shall promptly (and in each case within 72 hours from the date of this Agreement) terminate all physical and electronic data access previously granted to each such Person.
(b) Responding to Allergan Alternative Proposals. Notwithstanding Section 5.3(a), if at any time prior to the receipt of the Allergan Shareholder Approval (the "Allergan Approval Time") (and in no event after the Allergan Approval Time), the Allergan Board receives a written Allergan Alternative Proposal made after the date hereof which has not resulted from a breach in any material respect of this Section 5.3, the Allergan Board, directly or indirectly through its Representatives, may (i) contact the Third Party that has made such Allergan Alternative Proposal in order to ascertain facts or clarify terms for the sole purpose of the Allergan Board informing itself about such Allergan Alternative Proposal and such Third Party, and (ii) (x) engage in negotiations or discussions with any such Third Party that has made such an unsolicited written Allergan Alternative Proposal, (y) furnish to such Third Party and its Representatives and financing sources nonpublic information relating to Allergan or any of its Subsidiaries pursuant to a confidentiality agreement with terms no less favorable in the aggregate to Allergan than those contained in the Confidentiality Agreement, a copy of which shall be provided, promptly after its execution, to AbbVie for informational purposes (such confidentiality agreement, the "Allergan Alternative Proposal NDA"); provided that all such non-public information (to the extent that such information has not been previously provided or made available to AbbVie) is provided or made available to AbbVie, as the case may be, substantially concurrently with the time it is provided or made available to such Third Party; provided, further, that prior to and as a condition of taking any actions described in this clause (ii), the Allergan Board determines in good faith, after consultation with a financial advisor of nationally recognized reputation and outside legal counsel, that such Allergan Alternative Proposal either constitutes or could reasonably be expected to lead to an Allergan Superior Proposal.
(c) Notice. Allergan shall notify AbbVie promptly (but in any event within 48 hours) if any Allergan Alternative Proposal or any indication, proposal or inquiry by a Third Party that would reasonably be expected to make an Allergan Alternative Proposal, is received by Allergan. Each such notice shall be provided in writing and shall identify the Third Party making, and, to the extent applicable, the material terms and conditions (including price) of, any such Allergan Alternative Proposal, indication, proposal or inquiry. Following such initial notice, Allergan shall keep AbbVie reasonably informed, on a reasonably current basis, of any material changes in the status and details of any such Allergan Alternative Proposal, indication, proposal or inquiry and shall promptly (but in no event later than 24 hours after receipt) provide to AbbVie copies of all material correspondence and written materials sent or provided by or to Allergan or any of its Subsidiaries (or any of its or their respective Representatives) that describes any terms or conditions of any Allergan Alternative Proposal. Neither Allergan nor any of its Subsidiaries will enter into any agreement with any Person which prohibits Allergan from providing any information to AbbVie in accordance with, or otherwise complying with, this Section 5.3.
(d) Fiduciary Exception to Allergan Change of Recommendation Provision. Notwithstanding anything to the contrary in this Agreement, but subject to Section 5.3(e), prior to the Allergan Approval Time (and in no event after the Allergan Approval Time), the Allergan Board may (A) make an Allergan Change of Recommendation, or (B) terminate this Agreement in accordance with Section 9.1(a)(ii)(B) in order to substantially concurrently enter into a definitive agreement providing for an Allergan Superior Proposal if (x) in the case of such an action taken in connection with an Allergan Alternative Proposal, the Allergan Alternative Proposal has not been withdrawn and the Allergan Board determines in good faith, after consultation with outside legal counsel and a financial advisor of nationally recognized reputation, that such Allergan Alternative Proposal constitutes an Allergan Superior Proposal, or (y) in the case of an Allergan Change of Recommendation contemplated by clause (A) above involving or relating to an Allergan Intervening Event (and not involving any Allergan Alternative Proposal), the Allergan Board determines in good faith, after consultation with outside legal counsel and a financial advisor of nationally recognized reputation, that the failure to take such action would reasonably be expected to be inconsistent with its directors' fiduciary duties under applicable Law.
(e) Last Look. The Allergan Board and Allergan, as applicable, shall not take any of the actions contemplated by Section 5.3(d) unless prior to taking such action (i) Allergan has notified AbbVie, in writing at least three Business Days before taking such action, that Allergan intends to take such action, which notice attaches, in the case of an Allergan Change of Recommendation pursuant to Section 5.3(d)(A) in response to an Allergan Superior Proposal or the termination of this Agreement pursuant to Section 5.3(d)(B) and Section 9.1(a)(ii)(B), the most current version of each proposed Contract providing for or related to such Allergan Superior Proposal (including any Contract relating to financing or expense reimbursement) and the identity of the Third Party(ies) making the Allergan Superior Proposal or, in the case of an Allergan Intervening Event, a reasonably detailed description of the facts relating to such Allergan Intervening Event, (ii) if requested by AbbVie, during such three Business Day period, Allergan and its Representatives shall have discussed and negotiated in good faith with AbbVie (to the extent that AbbVie desires to so discuss or negotiate) regarding any proposal by AbbVie to amend the terms of this Agreement in response to such Allergan Superior Proposal or other potential Allergan Change of Recommendation and (iii) after such three Business Day period, the Allergan Board determines in good faith, after consultation with a financial advisor of nationally recognized reputation and outside legal counsel and taking into account any proposal by AbbVie to amend the terms of this Agreement, that in the case of any such action in connection with an Allergan Alternative Proposal, such Allergan Alternative Proposal continues to constitute an Allergan Superior Proposal (it being understood and agreed that in the event of any amendment to the financial terms or other material terms of any such Allergan Superior Proposal, a new written notification from Allergan consistent with that described in clause (i) of this Section 5.3(e) shall be required, and a new notice period under clause (i) of this Section 5.3(e) shall commence, during which notice period Allergan shall be required to comply with the requirements of this Section 5.3(e) anew, except that such new notice period shall be for two Business Days (as opposed to three Business Days)). After delivery of such written notice pursuant to this Section 5.3(e), Allergan shall promptly inform AbbVie of all material developments affecting the material terms of any such Allergan Superior Proposal and shall promptly provide AbbVie with copies of any additional written materials received or sent that are material to such Allergan Superior Proposal.
ARTICLE 6
REPRESENTATIONS AND WARRANTIES
Section 6.1 Allergan Representations and Warranties. (A) Subject to Section 10.8 and except as disclosed (i) in any publicly available Allergan SEC Document filed prior to the date hereof or (ii) in the disclosure schedule delivered by Allergan to AbbVie immediately prior to the execution of this Agreement (the "Allergan Disclosure Schedule"), Allergan represents and warrants to AbbVie as follows:
(a) Qualification, Organization, Subsidiaries, etc. Allergan is duly incorporated and validly existing under the Laws of Ireland. Allergan has all requisite corporate power and authority required to own or lease all of its properties or assets and to carry on its business as now conducted. Allergan is duly qualified to do business and is in good standing in each jurisdiction where such qualification is necessary, except for those jurisdictions where failure to be so qualified or in good standing has not had and would not reasonably be expected to have, individually or in the aggregate, an Allergan Material Adverse Effect. Prior to the date of this Agreement, Allergan has made available to AbbVie true and complete copies of the Memorandum and Articles of Association of Allergan (the "Allergan Memorandum and Articles of Association").
(b) Subsidiaries.
(i) Each Subsidiary of Allergan is a corporation or other entity duly incorporated or organized, validly existing and in good standing (except to the extent such concept is not applicable under applicable Law of such Subsidiary's jurisdiction of incorporation or organization, as applicable) under the Laws of its jurisdiction of incorporation or organization and has all corporate or other organizational powers and authority, as applicable, required to own, lease and operate its properties and assets and to carry on its business as now conducted, except for those jurisdictions where failure to be so organized, validly existing and in good standing or to have such power has not had and would not reasonably be expected to have, individually or in the aggregate, an Allergan Material Adverse Effect. Each such Subsidiary is duly qualified to do business and is in good standing in each jurisdiction where such qualification is necessary, except for those jurisdictions where failure to be so qualified or in good standing has not had and would not reasonably be expected to have, individually or in the aggregate, an Allergan Material Adverse Effect.
(ii) All of the outstanding Equity Securities of each Subsidiary of Allergan have been validly issued and are fully paid and nonassessable (except to the extent such concepts are not applicable under applicable Law of such Subsidiary's jurisdiction of incorporation or organization, as applicable) and are owned by Allergan or one of its wholly-owned Subsidiaries, directly or indirectly, free and clear of any Lien (other than any restrictions imposed by applicable Law) and free of preemptive rights, rights of first refusal, subscription rights or similar rights of any Person and transfer restrictions (other than transfer restrictions under applicable Law or under the organizational documents of such Subsidiary). Except for the Equity Securities of its Subsidiaries, Allergan does not own, directly or indirectly, any capital stock or other Equity Securities of any Person.
(c) Capitalization.
(i) The authorized capital of Allergan consists of 1,000,000,000 Allergan Shares, 10,000,000 Allergan Preferred Shares and 40,000 deferred ordinary shares of €1.00 each. As of June 21, 2019 (the "Allergan Capitalization Date"), there were outstanding (A) (x) 327,823,649 Allergan Shares (excluding any Allergan Restricted Stock Awards), (y) no Allergan Preferred Shares, and (z) no deferred ordinary shares of €1.00 each, (B) Allergan Options to purchase an aggregate of 6,342,839 Allergan Shares, (C) 2,861,395 Allergan Shares were subject to outstanding Allergan RSU Awards (other than Allergan PSU Awards), (D) no Allergan Shares were subject to outstanding Allergan Restricted Stock Awards, (E) 482,892 Allergan Shares were subject to outstanding Allergan PSU Awards, determined assuming performance was achieved at 130% of target, and (F) 19,799,855 additional Allergan Shares were reserved for issuance pursuant to the Allergan Share Plans. Except as set forth in this Section 6.1(A)(c)(i) and for changes since the Allergan Capitalization Date resulting from (x) the exercise or vesting and settlement of Allergan Equity Awards outstanding on such date (in accordance with their existing terms in effect as of the date hereof) or issued on or after such date to the extent permitted by Section 5.1 or (y) the issuance of Equity Securities of Allergan on or after the date hereof to the extent permitted by Section 5.1, there are no issued, reserved for issuance or outstanding Equity Securities of Allergan.
(ii) All outstanding Equity Securities of Allergan have been, and all Equity Securities that may be issued pursuant to any employee stock option or other compensation plan or arrangement will be, when issued in accordance with the respective terms thereof, duly authorized and validly issued, fully paid and nonassessable and free of preemptive rights. No Subsidiary of Allergan owns any Equity Securities of Allergan. There are no outstanding bonds, debentures, notes or other indebtedness of Allergan having the right to vote (or convertible into, or exchangeable for, securities having the right to vote) on any matters on which stockholders of Allergan have the right to vote. As of the date of this Agreement, there are no outstanding obligations of Allergan or any of its Subsidiaries to repurchase, redeem or otherwise acquire any Equity Securities of Allergan or its Subsidiaries. Neither Allergan nor any of its Subsidiaries is a party to any agreement with respect to the voting of any Equity Securities of Allergan.
(iii) As of the date hereof, Allergan has made available to AbbVie a true and complete list, as of the Allergan Capitalization Date, of all outstanding Allergan Equity Awards, including, the date of grant, the type of the award, the vesting schedule, whether subject to performance conditions, the number of Allergan Shares subject to such type of award (based on the aggregate number of shares granted on the grant date and vesting on the applicable vesting date), and, for Allergan Options, the applicable exercise price. As of the Allergan Capitalization Date, the aggregate amount of any accrued but unpaid dividend equivalent rights relating to outstanding Allergan Equity Awards was $3,131,885.66.
(d) Corporate Authority Relative to this Agreement; No Violation.
(i) Allergan has all requisite corporate power and authority to enter into this Agreement and the Expenses Reimbursement Agreement and, subject to receipt of the Allergan Shareholder Approval, to consummate the transactions contemplated hereby and thereby, including the Acquisition. The execution and delivery of this Agreement and the Expenses Reimbursement Agreement and the consummation of the transactions contemplated hereby (including the Acquisition) and thereby have been duly and validly authorized by the Allergan Board and, except for (A) the Allergan Shareholder Approval and (B) the filing of the required documents and other actions in connection with the Scheme with, and to receipt of the required approval of the Scheme by, the High Court, and the filing of the Court Order with the Registrar of Companies, no other corporate proceedings on the part of Allergan are necessary to authorize the consummation of the transactions contemplated hereby (including the Acquisition) and pursuant to the Expenses Reimbursement Agreement. On or prior to the date hereof, the Allergan Board has determined that the transactions contemplated by this Agreement are fair to and in the best interests of Allergan and the Allergan Shareholders and adopted a resolution to make, subject to Section 5.3 and to the obligations of the Allergan Board under the Takeover Rules, the Scheme Recommendation and the recommendation contemplated by Section 3.6(c). This Agreement has been duly and validly executed and delivered by Allergan and, assuming this Agreement constitutes the valid and binding agreement of the AbbVie Parties, constitutes the valid and binding agreement of Allergan, enforceable against Allergan in accordance with its terms, subject to (x) applicable bankruptcy, insolvency, examinership, reorganization, moratorium or other similar Laws, now or hereafter in effect, relating to creditors' rights generally and (y) general equitable principles, whether considered in a proceeding at law or equity (together, (x) and (y), "Equitable Exceptions").
(ii) The execution, delivery and performance by Allergan of this Agreement and the Expenses Reimbursement Agreement and the consummation by Allergan of the transactions contemplated hereby (including the Acquisition) and thereby require no action by or in respect of, Clearances of, or Filings with, any Governmental Entity other than (A) compliance with the provisions of the Act, (B) compliance with the Takeover Panel Act and the Takeover Rules, (C) compliance with any applicable requirements of the HSR Act, (D) compliance with and Filings under any Antitrust Laws of any non-U.S. jurisdictions, (E) compliance with any applicable requirements of the Securities Act, the Exchange Act and any other applicable U.S. state or federal securities laws or pursuant to the rules of the NYSE, and (F) any other actions, Clearances or Filings the absence of which has not had and would not reasonably be expected to have, individually or in the aggregate, an Allergan Material Adverse Effect.
(iii) The execution, delivery and performance by Allergan of this Agreement and the Expenses Reimbursement Agreement and the consummation of the transactions contemplated hereby (including the Acquisition) and thereby do not and will not (A) contravene, conflict with, or result in any violation or breach of any provision of the Organizational Documents of Allergan, (B) assuming compliance with the matters referred to in Section 6.1(A)(d)(ii) and receipt of the Allergan Shareholder Approval, contravene, conflict with or result in any violation or breach of any provision of any applicable Law, (C) assuming compliance with the matters referred to in Section 6.1(A)(d)(ii) and receipt of the Allergan Shareholder Approval, require any Clearance or other action by any Person under, constitute a default, or an event that, with or without notice or lapse of time or both, would constitute a default, under, or cause or permit the termination, cancellation, acceleration or other change of any right or obligation or the loss of any benefit to which Allergan or any of its Subsidiaries is entitled under, any provision of any Allergan Permit or any Contract binding upon Allergan or any of its Subsidiaries or any Clearance (including Clearances required by Contract) affecting, or relating in any way to, the assets or business of Allergan and its Subsidiaries, or (D) result in the creation or imposition of any Lien on any asset of Allergan or any of its Subsidiaries, except, in the case of each of clauses (B) through (D), as has not had and would not reasonably be expected to have, individually or in the aggregate, an Allergan Material Adverse Effect.
(e) Reports.
(i) Allergan has timely filed with or furnished to the SEC all reports, schedules, forms, statements, prospectuses, registration statements and other documents required to be filed with or furnished to the SEC by Allergan since January 1, 2017 (collectively, together with any exhibits and schedules thereto and other information incorporated therein, the "Allergan SEC Documents"). No Subsidiary of Allergan is required to file any report, schedule, form, statement, prospectus, registration statement or other document with the SEC.
(ii) As of its filing date (or, if amended or superseded by a filing prior to the date of this Agreement, on the date of such amended or superseding filing), the Allergan SEC Documents filed or furnished prior to the date of this Agreement complied, and each Allergan SEC Document filed or furnished subsequent to the date of this Agreement (assuming, in the case of the Proxy Statement, that the representation and warranty set forth in Section 6.2(j)is true and correct) will comply, in all material respects with the applicable requirements of NYSE, the Securities Act, the Exchange Act and the Sarbanes-Oxley Act of 2002 (the "Sarbanes-Oxley Act"), as the case may be.
(iii) As of its filing date (or, if amended or superseded by a filing prior to the date of this Agreement, on the date of such amended or superseding filing), each Allergan SEC Document filed or furnished prior to the date of this Agreement did not, and each Allergan SEC Document filed or furnished subsequent to the date of this Agreement (assuming, in the case of the Proxy Statement, that the representation and warranty set forth Section 6.2(j) is true and correct) will not, contain any untrue statement of a material fact or omit to state any material fact necessary in order to make the statements made therein, in light of the circumstances under which they were made, not misleading.
(iv) Allergan is, and since January 1, 2017 has been, in compliance in all material respects with (A) the applicable provisions of the Sarbanes-Oxley Act and (B) the applicable listing and corporate governance rules and regulations of NYSE.
(v) Allergan and its Subsidiaries have established and maintain disclosure controls and procedures (as defined in Rule 13a-15 under the Exchange Act). Such disclosure controls and procedures are designed to ensure that material information relating to Allergan, including its consolidated Subsidiaries, is made known to Allergan's principal executive officer and its principal financial officer by others within those entities, including during the periods in which the periodic reports required under the Exchange Act are being prepared. Except as have not been and would not reasonably be expected to be, individually or in the aggregate, material to the Allergan Group, taken as a whole, such disclosure controls and procedures are effective in timely alerting Allergan's principal executive officer and principal financial officer to material information required to be included in Allergan's periodic and current reports required under the Exchange Act. For purposes of this Agreement, "principal executive officer" and "principal financial officer" shall have the meanings given to such terms in the Sarbanes-Oxley Act.
(vi) Allergan and its Subsidiaries have established and maintain a system of internal controls over financial reporting (as defined in Rule 13a-15 under the Exchange Act) ("internal controls") designed to provide reasonable assurance regarding the reliability of Allergan's financial reporting and the preparation of Allergan's financial statements for external purposes in accordance with GAAP. Allergan's principal executive officer and principal financial officer have disclosed, based on their most recent evaluation of such internal controls prior to the date of this Agreement, to Allergan's auditors and the audit committee of the Allergan Board (A) all significant deficiencies and material weaknesses in the design or operation of internal controls which are reasonably likely to adversely affect Allergan's ability to record, process, summarize and report financial information and (B) any fraud, whether or not material, that involves management or other employees who have a significant role in internal controls.
(vii) Since January 1, 2017, each of the principal executive officer and principal financial officer of Allergan (or each former principal executive officer and principal financial officer of Allergan, as applicable) has made all certifications required by Rules 13a-14 and 15d-14 under the Exchange Act and Sections 302 and 906 of the Sarbanes-Oxley Act and any related rules and regulations promulgated by the SEC and NYSE, and the statements contained in any such certifications are true and complete in all material respects as of the date on which they were made.
(f) Financial Statements.
(i) The audited consolidated financial statements and unaudited consolidated interim financial statements of Allergan included or incorporated by reference in the Allergan SEC Documents present fairly in all material respects, in conformity with GAAP applied on a consistent basis during the periods presented (except as may be indicated in the notes thereto), the consolidated financial position of Allergan and its Subsidiaries as of the dates thereof and their consolidated results of operations and cash flows for the periods then ended (subject to normal and recurring year-end audit adjustments in the case of any unaudited interim financial statements). Such consolidated financial statements have been prepared in all material respects from the books and records of Allergan and its Subsidiaries.
(ii) Since January 1, 2017 until the date hereof, Allergan has not received written notice from the SEC or any other Governmental Entity indicating that any of its accounting policies or practices are or may be the subject of any review, inquiry, investigation or challenge by the SEC or any other Governmental Entity.
(g) No Undisclosed Liabilities. There are no liabilities or obligations of Allergan or any of its Subsidiaries of any kind whatsoever, whether accrued, contingent, absolute, determined, determinable or otherwise, that would be required by GAAP to be reflected on the consolidated balance sheet of Allergan and its Subsidiaries, other than (i) liabilities or obligations disclosed and provided for in Allergan's consolidated balance sheet (or the notes thereto) as of March 31, 2019 (the "Allergan Balance Sheet"), (ii) liabilities or obligations incurred in the ordinary course of business consistent with past practice since the date of the Allergan Balance Sheet, (iii) liabilities arising in connection with the transactions contemplated hereby, and (iv) other liabilities or obligations that have not had and would not reasonably be expected to have, individually or in the aggregate, an Allergan Material Adverse Effect. There are no off-balance sheet arrangements of any type pursuant to any off-balance sheet arrangement required to be disclosed pursuant to Item 303(a)(4) of Regulation S-K promulgated under the Securities Act that have not been so described in the Allergan SEC Documents.
(h) Compliance with Law; Permits.
(i) Allergan and each of its Subsidiaries are, and since January 1, 2017 have been, in compliance with all applicable Laws, except for failures to be in compliance as have not been and would not reasonably be expected to be, individually or in the aggregate, material to the Allergan Group, taken as a whole.
(ii) Except as has not been and would not reasonably be expected to be, individually or in the aggregate, material to the Allergan Group, taken as a whole, Allergan and each of its Subsidiaries hold all consents, clearances, permits, approvals, permissions, licenses, variances, exemptions, authorizations, acknowledgements, approvals and orders of any Governmental Entity necessary for the operation of its respective businesses, other than Allergan Regulatory Permits (the "Allergan Permits"). Allergan and each of its Subsidiaries are, and since January 1, 2017 have been, in compliance with the terms of the Allergan Permits, except for failures to be in compliance as have not been and would not reasonably be expected to be, individually or in the aggregate, material to the Allergan Group, taken as a whole. There is no Action pending, or, to the knowledge of Allergan, threatened, that seeks or would reasonably be expected to result in (nor is there, to the knowledge of Allergan, any existing condition, situation or set of circumstances that would reasonably be expected to result in) the revocation, cancellation, termination, non-renewal or adverse modification of any Allergan Permit, except where such revocation, cancellation, termination, non-renewal or adverse modification has not been and would not reasonably be expected to be, individually or in the aggregate, material to the Allergan Group, taken as a whole.
(i) Environmental Laws and Regulations. Except as has not had and would not reasonably be expected to have, individually or in the aggregate, an Allergan Material Adverse Effect:
(i) no notice, notification, demand, request for information, citation, summons or order has been received, no complaint has been filed, no penalty has been assessed, and no claim, action, suit, proceeding or investigation (including a review) is pending or, to the knowledge of Allergan, threatened by any Governmental Entity or other Person relating to Allergan or any of its Subsidiaries that relates to, or arises under, any Environmental Law, Environmental Permit or Hazardous Substance;
(ii) Allergan and its Subsidiaries are, and since January 1, 2017 have been, in compliance with all Environmental Laws and all Environmental Permits and hold all applicable Environmental Permits; and
(iii) to Allergan's knowledge, as of the date hereof, there is no existing condition, situation or set of circumstances that could reasonably be expected to result in AbbVie or any of its Subsidiaries incurring any liability or obligation pursuant to any applicable Environmental Laws.
(j) Employee Benefit Plans.
(i) Section 6.1(A)(j)(i) of the Allergan Disclosure Schedule sets forth a true and complete list as of the date of this Agreement of each material Allergan Benefit Plan.
(ii) Except with respect to an Allergan Benefit Plan listed on Section 6.1(A)(j)(i) of the Allergan Disclosure Schedule, neither Allergan nor any of its Subsidiaries nor any of their respective ERISA Affiliates sponsors, maintains or contributes to (or has any obligation to contribute to), or has any current or contingent liability or obligation under or with respect to any multiemployer plan, as defined in Section 3(37) of ERISA, any plan that is or was subject to Section 412 or 430 of the Code or Section 302 or Title IV of ERISA (each, a "Title IV Plan"), or any post-employment or post-retirement medical, dental, disability, hospitalization, life or similar welfare benefits (whether insured or self-insured) to any director, officer, employee or individual independent contractor (including any former director, officer, employee or individual independent contractor) of Allergan or any of its Subsidiaries or any of their respective survivors, dependents or beneficiaries or any other Person (other than coverage mandated by applicable Law for which the covered Person pays the full cost of coverage). Except as specifically described in Section 6.1(A)(j)(ii) of the Allergan Disclosure Schedule, and except as has not had and would not reasonably be expected to have, individually or in the aggregate, an Allergan Material Adverse Effect with respect to each Title IV Plan: (A) no reportable event (within the meaning of Section 4043 of ERISA) has occurred within the last three years, or, to the knowledge of Allergan, is expected to occur whether as a result of the transactions contemplated by this Agreement or otherwise; (B) the minimum funding standard under Section 430 of the Code has been satisfied and no waiver of any minimum funding standard or extension of any amortization periods has been requested or granted; (C) all contributions required under Section 302 of ERISA and Section 412 of the Code have been timely made; (D) all amounts due to the Pension Benefit Guaranty Corporation ("PBGC") pursuant to Section 4007 of ERISA have been timely paid; (E) with respect to each Title IV Plan for which there has been a significant reduction in the rate of future benefit accrual as referred to in Section 204(h) of ERISA, the requirements of Section 204(h) of ERISA have been complied with; (F) no liability under Title IV of ERISA has been incurred by Allergan, its Subsidiaries or any ERISA Affiliate that has not been satisfied in full; (G) there has been no event described in Section 4062(e) of ERISA, and the transactions contemplated by this Agreement will not result in any event described in Section 4062(e) of ERISA; (H) to the knowledge of Allergan, no event has occurred or circumstances exist that could result in a liability under or with respect to Section 4069 of ERISA; and (I) no notice of intent to terminate any Title IV Plan has been filed and no amendment to treat a Title IV Plan as terminated has been adopted and no proceeding has been commenced by the PBGC to terminate any Title IV Plan.
(iii) Except as has not had and would not reasonably be expected to have, individually or in the aggregate, an Allergan Material Adverse Effect, each Allergan Benefit Plan that is intended to be qualified under Section 401(a) of the Code has received a current favorable determination from the Internal Revenue Service or may rely upon a current opinion or advisory letter from the Internal Revenue Service and, no circumstances exist that would reasonably be expected to result in any such letter being revoked or not being reissued.
(iv) Except as has not had and would not reasonably be expected to have, individually or in the aggregate, an Allergan Material Adverse Effect: (A) each Allergan Benefit Plan has been established, maintained, funded, and administered in accordance with its terms and in compliance with all applicable Laws, including ERISA and the Code; (B) no Action (other than routine claims for benefits) is pending or, to Allergan's knowledge, is threatened against, with respect to any Allergan Benefit Plan; (C) there has been no "prohibited transaction" within the meaning of Section 4975 of the Code or Section 406 of ERISA and no breach of fiduciary duty (as determined under ERISA) has occurred with respect to any Allergan Benefit Plan; (D) all contributions (including all employer contributions and employee salary reduction contributions), distributions, reimbursements and premium payments that are due have been timely made in accordance with the terms of the Allergan Benefit Plan and the requirements of applicable Law; (E) all Allergan Benefit Plans that are required to be funded are fully funded, and amounts have been accrued for any unfunded Allergan Benefit Plans to the extent required under applicable international accounting standards; (F) no events have occurred with respect to any Allergan Benefit Plan that would reasonably be expected to result in the assessment of any excise Taxes or penalties against Allergan or any of its Subsidiaries; and (G) neither Allergan nor any of its Subsidiaries has incurred (whether or not assessed), or is reasonably expected to incur or to be subject to, any Tax or other penalty with respect to the reporting requirements under Sections 6055 and 6056 of the Code, as applicable, or under Section 4980B, 4980D or 4980H of the Code.
(v) With respect to each Covered Individual, neither the execution and the delivery of this Agreement nor the consummation of the transactions contemplated hereby could (either alone or together with any other event), directly or indirectly: (A) result in any payment or benefit (including any bonus, retention, severance, retirement or job security payment or benefit or otherwise) or (B) accelerate the time of payment or vesting or trigger any payment or obligation to fund (through a grantor trust or otherwise) or otherwise set aside assets to secure to any extent any compensation or benefits under, or increase the amount payable or trigger any other obligation under, any Allergan Benefit Plan or otherwise.
(vi) Neither the execution and delivery of this Agreement nor the consummation of the transactions contemplated hereby will result in any amount paid or payable by Allergan or any of its Subsidiaries that could, individually or with any other such payment, be classified as an "excess parachute payment" within the meaning of Section 280G of the Code not deductible by Allergan or any of its Subsidiaries under Section 280G of the Code or result in any excise Tax on any Covered Individual under Section 4999 of the Code. Neither Allergan nor any of its Subsidiaries has any obligation to gross-up, indemnify or otherwise reimburse any Person for any Tax incurred by such Person, including under Section 409A or 4999 of the Code.
(vii) Each Allergan Benefit Plan that constitutes a "nonqualified deferred compensation plan" (within the meaning of Section 409A of the Code) has been operated and maintained, in form and operation, in all material respects in accordance with all applicable requirements of Section 409A of the Code and all applicable guidance of the Department of Treasury and Internal Revenue Service. No amount under any Allergan Benefit Plan is subject to the interest and additional tax set forth under Section 409A(a)(1)(B) of the Code.
(k) Absence of Certain Changes or Events.
(i) From the date of the Allergan Balance Sheet through the date hereof, the business of Allergan and its Subsidiaries has been conducted in all material respects in the ordinary course of business consistent with past practice.
(ii) Since the date of the Allergan Balance Sheet until the date hereof, there has not been any event, effect, development, occurrence or change that has had, or would reasonably be expected to have, individually or in the aggregate, an Allergan Material Adverse Effect.
(l) Investigations; Litigation. As of the date hereof, there is no Action pending or, to the knowledge of Allergan, threatened against or affecting Allergan, any of its Subsidiaries, any present or former officers, directors or employees of Allergan or any of its Subsidiaries in their respective capacities as such, or any of the respective properties or assets of Allergan or any of its Subsidiaries, before (or, in the case of threatened Actions, that would be before) any Governmental Entity (i) that has been or would reasonably be expected to be, individually or in the aggregate, material to the Allergan Group, taken as a whole or (ii) that would in any manner challenge or seek to prevent, enjoin or alter any of the other transactions contemplated hereby. As of the date hereof, there is no Order outstanding or, to the knowledge of Allergan, threatened against or affecting Allergan, any of its Subsidiaries, any present or former officers, directors or employees of Allergan or any of its Subsidiaries in their respective capacities as such, or any of the respective properties or assets of any of Allergan or any of its Subsidiaries, that has been or would reasonably be expected to be, individually or in the aggregate, material to the Allergan Group, taken as a whole or that would prevent, enjoin or materially delay any of the other transactions contemplated hereby.
(m) Information Supplied. The information relating to Allergan and its Subsidiaries to be contained in the Scheme Document, the Proxy Statement and any other documents filed or furnished with or to the High Court, the SEC or pursuant to the Act and the Takeover Rules in each case in connection with the Acquisition will not, on the date the Scheme Document and the Proxy Statement (and any amendment or supplement thereto) is first proposed to Allergan Shareholders and at the time of the Court Meeting, contain any untrue statement of any material fact or omit to state any material fact required to be stated therein or necessary in order to make the statements therein, at the time and in light of the circumstances under which they were made, not false or misleading. The Proxy Statement and any related documents will comply in all material respects as to form with the requirements of the Exchange Act and the rules and regulations promulgated thereunder. The parts of the Scheme Document and any related documents for which the Allergan Directors are responsible under the Takeover Rules and any related filings for which the Allergan Directors are responsible under the Takeover Rules will comply in all material respects as to form with the requirements of the Takeover Rules and the Act. Notwithstanding the foregoing provisions of this Section 6.1(A)(m), no representation or warranty is made by Allergan with respect to information or statements made or incorporated by reference in the Scheme Document or the Proxy Statement which were not supplied by or on behalf of Allergan.
(n) Regulatory Matters.
(i) Except for such failures to hold, be valid and in full force and effect or be in compliance with (as applicable) as have not been, and would not reasonably be expected to be, individually or in the aggregate, material to the Allergan Group, taken as a whole, (A) each of Allergan and its Subsidiaries holds all Allergan Regulatory Permits; (B) all Allergan Regulatory Permits are valid and in full force and effect; and (C) since January 1, 2017, Allergan and its Subsidiaries have been in compliance with the terms of all Allergan Regulatory Permits. As of the date hereof, there is no Action pending, or, to the knowledge of Allergan, threatened that seeks, or, to the knowledge of Allergan, any existing condition, situation or set of circumstances that would reasonably be expected to result in, the revocation, cancellation, termination, non-renewal or adverse modification of any Allergan Regulatory Permit, except where such revocation, cancellation, termination, non-renewal or adverse modification has not been, and would not reasonably be expected to be, individually or in the aggregate, material to the Allergan Group, taken as a whole.
(ii) Neither Allergan nor any of its Subsidiaries are party to any material corporate integrity agreements, monitoring agreements, deferred prosecution agreements, consent decrees, settlement orders, corrective action plans, or similar agreements, obligations, or Orders with or imposed by any Governmental Entity.
(iii) All pre-clinical and clinical investigations in respect of an Allergan Product conducted or sponsored by Allergan or any of its Subsidiaries are currently being, and since January 1, 2017 until the date hereof have been, conducted in compliance with all applicable Laws administered, issued or enforced by the applicable Allergan Regulatory Agencies, including (A) FDA standards for the design, conduct, performance, monitoring, auditing, recording, analysis and reporting of clinical trials contained in Title 21 parts 50, 54, 56, 312, 314 and 320 of the Code of Federal Regulations, and (B) any applicable international, federal, state and provincial applicable Laws restricting the collection, use and disclosure of individually identifiable health information and personal information, except, in each case, for such noncompliance that has not been, and would not reasonably be expected to be, individually or in the aggregate, material to the Allergan Group, taken as a whole.
(iv) Except as has not been, and would not reasonably be expected to be, individually or in the aggregate, material to the Allergan Group, since January 1, 2017 until the date hereof, neither Allergan nor any of its Subsidiaries has received any written notice from the FDA or any other Allergan Regulatory Agency which would reasonably be expected to lead to the denial, limitation, revocation, or rescission of any of Allergan Regulatory Permits or of any application for marketing approval currently pending before the FDA or such other Allergan Regulatory Agency.
(v) Since January 1, 2017 until the date hereof, all reports, documents, claims, permits, notices, and other Filings required to be filed, maintained or furnished to the FDA or any other Allergan Regulatory Agency by Allergan or any of its Subsidiaries have been so filed, maintained or furnished in accordance with the applicable requirements related thereto, except where failure to file, maintain or furnish such reports, documents, claims, permits, notices, or Filings has not been, and would not reasonably be expected to be, individually or in the aggregate, material to the Allergan Group, taken as a whole. All such reports, documents, claims, permits, notices, and Filings were true and complete in all material respects on the date filed (or were corrected in or supplemented by a subsequent Filing). Since January 1, 2017, neither Allergan nor any of its Subsidiaries, nor, to the knowledge of Allergan, any officer, employee, agent or distributor of Allergan or any of its Subsidiaries, has made an untrue statement of a material fact or a fraudulent statement to the FDA or any other Allergan Regulatory Agency, failed to disclose a material fact required to be disclosed to the FDA or any other Allergan Regulatory Agency, or committed an act, made a statement, or failed to make a statement, in each such case, related to the business of Allergan or any of its Subsidiaries, that, at the time such disclosure was made, would reasonably be expected to provide a basis for the FDA to invoke its policy respecting "Fraud, Untrue Statements of Material Facts, Bribery, and Illegal Gratuities", set forth in 56 Fed. Reg. 46191 (September 10, 1991) or for any other Allergan Regulatory Agency to invoke any similar policy, except for any act or statement or failure to make a statement that has not been, and would not reasonably be expected to be, individually or in the aggregate, material to the Allergan Group, taken as a whole.
(vi) Except as would not reasonably be expected to be, individually or in the aggregate, material to the Allergan Group, taken as a whole, since January 1, 2017, neither Allergan nor any of its Subsidiaries, nor any officer, director, "managing employee" (as such term is defined in 42 C.F.R § 1001.2), employee, or, to the knowledge of Allergan, agent or distributor of Allergan or any of its Subsidiaries: (A) has been debarred or convicted of any crime or engaged in any conduct for which debarment is mandated by 21 U.S.C. § 335a(a) or any similar applicable Law or authorized by 21 U.S.C. § 335a(b) or any similar applicable Law applicable in other jurisdictions in which material quantities of any of the Allergan Products are sold or intended by Allergan to be sold; or (B) has been excluded from participation in any Governmental Healthcare Program or convicted of any crime or engaged in any conduct for which such Person could be excluded from participating in any Governmental Healthcare Program under Section 1128 of the Social Security Act of 1935, as amended, or any similar applicable Law or program.
(vii) Except as has not been, and would not reasonably be expected to be, individually or in the aggregate, material to the Allergan Group, taken as a whole, each Allergan Product is being or since January 1, 2017 has been developed, manufactured, stored, distributed and marketed in compliance with all applicable Laws administered, issued, or enforced by the applicable Allergan Regulatory Agencies, including those relating to investigational use, marketing approval, current good manufacturing practices, packaging, labeling, advertising, record keeping, reporting, and security. There is no Action pending or, to the knowledge of Allergan, threatened, including any prosecution, injunction, seizure, civil fine, debarment, suspension or recall, in each case alleging any violation applicable to any Allergan Product by Allergan or any of its Subsidiaries of any applicable Allergan Regulatory Law, except as has not been, and would not reasonably be expected to be, individually or in the aggregate, material to the Allergan Group, taken as a whole.
(viii) Since January 1, 2017 until the date hereof, neither Allergan nor any of its Subsidiaries have voluntarily or involuntarily initiated, conducted or issued, or caused to be initiated, conducted or issued, any material recall, field corrections, market withdrawal or replacement, safety alert, warning, "dear doctor" letter, investigator notice, or other notice or action to wholesalers, distributors, retailers, healthcare professionals or patients relating to an alleged lack of safety, efficacy or regulatory compliance of any Allergan Product, other than notices or actions that are not, individually or in the aggregate, material to Allergan and its Subsidiaries, taken as a whole. To the knowledge of Allergan, there are no facts as of the date hereof with respect to any applicable Law of any applicable Allergan Regulatory Agencies which are reasonably likely to cause, and neither Allergan nor any of its Subsidiaries has received any written notice from the FDA or any other Allergan Regulatory Agency since January 1, 2017 until the date hereof regarding, (i) the recall, market withdrawal or replacement of any Allergan Product sold or intended to be sold by Allergan or its Subsidiaries (other than recalls, withdrawals or replacements that are not material to Allergan or its Subsidiaries, taken as a whole), (ii) a material change in the marketing classification or a material change in the labeling of any such Allergan Products, (iii) a termination or suspension of the manufacturing, marketing, or distribution of such Allergan Products, or (iv) a material negative change in reimbursement status of an Allergan Product.
(ix) Since January 1, 2017, Allergan and its Subsidiaries have been in compliance in all material respects with all applicable Healthcare Laws. Allergan and its Subsidiaries maintain a compliance program having the elements of an effective corporate compliance and ethics program identified in U.S.S.G. § 8B2.1 in all material respects. There are no outstanding compliance complaints or reports, ongoing internal compliance investigations, or outstanding compliance corrective actions, except where such complaints, reports, investigations, or corrective actions have not been, and would not reasonably be expected to be, individually or in the aggregate, material to the Allergan Group, taken as a whole.
(o) Tax Matters.
(i) Except as has not had and would not reasonably be expected to have, individually or in the aggregate, an Allergan Material Adverse Effect: (A) all Tax Returns that are required to be filed by or with respect to Allergan or any of its Subsidiaries have been timely filed (taking into account any extension of time within which to file), and all such Tax Returns are true, correct and complete; (B) Allergan and its Subsidiaries have, within the time and manner prescribed by applicable Law, paid all Taxes required to be paid by any of them, including any Taxes required to be withheld from amounts owing to any employee, creditor, or third party (in each case, whether or not shown on any Tax Return), except with respect to matters being contested in good faith through appropriate proceedings or for which adequate reserves have been established in accordance with GAAP on the financial statements of Allergan and its Subsidiaries; (C) all Taxes due and payable by Allergan or any of its Subsidiaries have been adequately provided for, in accordance with GAAP, in the financial statements of Allergan and its Subsidiaries for all periods ending on or before the date of such financial statements; (D) during the last three years, no claim has been made in writing by a Tax Authority in a jurisdiction where any of Allergan or its Subsidiaries does not file Tax Returns that such Person is or may be subject to taxation by that jurisdiction; (E) there are no liens for Taxes upon any property or assets of Allergan or any of its Subsidiaries, except for Permitted Liens; (F) no Tax Authority has asserted, or threatened in writing to assert, a Tax liability in connection with an audit or other administrative or court proceeding involving Taxes of Allergan or any of its Subsidiaries; and (G) neither Allergan or any of its Subsidiaries is a party to any agreement or arrangement relating to the apportionment, sharing, assignment or allocation of Taxes (other than (x) an agreement or arrangement solely between or among Allergan and/or one or more of its Subsidiaries or (y) customary Tax indemnification provisions in ordinary course commercial agreements that are not primarily related to Taxes), or has any liability for Taxes of any Person (other than Allergan or any of its Subsidiaries) under U.S. Treasury Regulation Section 1.1502-6 (or any similar provision of state, local or non-U.S. Law) or as a transferee or successor.
(ii) None of Allergan or any of its Subsidiaries is or has been a party to any "listed transaction," as defined in section 6707A(c)(2) of the Code and Treasury Regulation Section 1.6011-4(b), or any similar provision of state, local or non-U.S. Law.
(iii) Since January 1, 2017 to the date hereof, neither Allergan nor any of its Subsidiaries has constituted a "distributing corporation" or a "controlled corporation" (within the meaning of Section 355(a)(l)(A) of the Code) in a distribution of stock intended to qualify for tax-free treatment under Section 355 of the Code (or any similar provision of state, local, or non-U.S. Law).
(iv) Allergan is, and at all times since its formation has been, properly treated as a foreign corporation for U.S. federal income Tax purposes.
(v) As used in this Agreement, (A) the term "Tax" (including the plural form "Taxes" and, with correlative meaning, the terms "Taxable" and "Taxation") means any and all taxes (including customs duties or fines), fees, levies, imposts, duties or other similar assessments in the nature of a tax, imposed by or payable to any federal, state, provincial, local or non-U.S. Tax Authority, and includes all U.S. federal, state, local and non- U.S. gross or net income, gain, profits, windfall profits, franchise, gross receipts, estimated, capital, documentary, transfer, ad valorem, premium, environmental, customs duty, capital stock, severances, stamp, payroll, sales, employment, unemployment compensation, social security, disability, use, property, unclaimed property, withholding or backup withholding, excise, production, value added and occupancy taxes, together with all interest, penalties and additions imposed with respect thereto, (B) the term "Tax Return" means all returns and reports (including elections, declarations, disclosures, schedules, estimates, claims for refunds and information returns) filed or required to be filed with a Tax Authority relating to Taxes, including all attachments thereto and any amendments or supplements thereof and (C) the term "Tax Authority" means any Governmental Entity responsible for the assessment, collection or enforcement of laws relating to Taxes (including the United States Internal Revenue Service (the "IRS") and the Irish Revenue Commissioners and any similar state, local, or non-U.S. revenue agency).
(p) Labor Matters.
(i) No member of the Allergan Group is a party to, or bound by, any collective bargaining agreement, Contract or other agreement or binding understanding with a labor union, labor organization, works council, or similar employee representative. No member of the Allergan Group is or, since January 1, 2017, has been subject to a labor dispute, strike or work stoppage except as has not had and would not reasonably be expected to have, individually or in the aggregate, an Allergan Material Adverse Effect. To the knowledge of Allergan, there are and, since January 1, 2017, there have been no organizational efforts with respect to the formation of a collective bargaining unit presently being made or threatened involving employees of the Allergan Group, except for those the formation of which has not had and would not reasonably be expected to have, individually or in the aggregate, an Allergan Material Adverse Effect.
(ii) The transactions contemplated by this Agreement will not require the consent of, or advance notification to, any works councils, unions or similar labor organizations with respect to any employees of the Allergan Group, except for where the failure to obtain any such consent or make any such advance notifications (A) has not had and would not reasonably be expected to have, individually or in the aggregate, an Allergan Material Adverse Effect or (B) would not materially delay or frustrate the consummation of the transactions contemplated hereby (including the Acquisition).
(q) Intellectual Property.
(i) Except as has not been, and would not reasonably be expected to be, individually or in the aggregate, material to the Allergan Group, taken as a whole: (1) none of the registrations (including patents, trademarks and copyrights, and material domain name registrations) and applications for registration for Owned Intellectual Property or for material Licensed Intellectual Property that is exclusively licensed to Allergan or any of its Subsidiaries (the "Allergan Registered IP") has lapsed, expired, or been abandoned, and (2) no Allergan Registered IP or other Allergan Intellectual Property has been adjudged invalid or unenforceable, and, to the knowledge of Allergan, all Allergan Intellectual Property is subsisting, and no Allergan Registered IP is invalid or unenforceable.
(ii) Except for such failures of each of the following clauses (i) through (iii) to be true and correct as have not been, and would not reasonably be expected to be, individually or in the aggregate, material to the Allergan Group, taken as a whole, (i) Allergan and its Subsidiaries are the sole and exclusive owners of all right, title and interest in and to the Owned Intellectual Property and hold all of their right, title and interest in and to all of the Owned Intellectual Property free and clear of all Liens (other than non-exclusive licenses granted by Allergan or one of its Subsidiaries in the ordinary course of business and other Permitted Liens), (ii) to the knowledge of Allergan, the Owned Intellectual Property and the Licensed Intellectual Property include all of the Intellectual Property necessary to, or used or held for use in, the conduct of the respective businesses of Allergan and its Subsidiaries as currently conducted, and (iii) to the knowledge of Allergan, there exist no material restrictions on the use of any of the Owned Intellectual Property.
(iii) Except for such failures of each of the following clauses (i) through (iii) to be true and correct as have not been, and would not reasonably be expected to be, individually or in the aggregate, material to the Allergan Group taken as a whole, (i) to the knowledge of Allergan, neither Allergan nor any of its Subsidiaries nor the conduct of their respective businesses has infringed, misappropriated, diluted or otherwise violated any Intellectual Property rights of any Third Party, (ii) there is no claim, action, suit, investigation or proceeding pending or, to the knowledge of Allergan, threatened against or affecting Allergan or any of its Subsidiaries (A) alleging that Allergan or any of its Subsidiaries has infringed, misappropriated, diluted or otherwise violated any Intellectual Property rights of any Third Party or (B) based upon, or challenging or seeking to deny or restrict, the rights of Allergan or any of its Subsidiaries in any of Allergan Intellectual Property (including any challenges to the validity, enforceability, registerability, ownership or use of any Allergan Intellectual Property, other than in the ordinary course of applying for patents or trademarks), and (iii) to the knowledge of Allergan, no Third Party has infringed, misappropriated, diluted or otherwise violated any Allergan Intellectual Property.
(iv) Except as has not had and would not reasonably be expected to have, individually or in the aggregate, an Allergan Material Adverse Effect, (i) Allergan and its Subsidiaries have provided reasonable notice of their privacy and personal data collection and use policies on their websites and other customer and public communications and Allergan and its Subsidiaries have complied with such policies and all applicable Laws relating to (A) the privacy of the users of Allergan's and its Subsidiaries' respective products, services and websites and (B) the collection, use, storage, processing or disclosure of any personally-identifiable information (including personal health information) and other data or information collected, processed or stored by or on behalf of Allergan or any of its Subsidiaries, (ii) there is no claim, action, suit, investigation or proceeding pending or, to the knowledge of Allergan, threatened against Allergan or any of its Subsidiaries alleging any violation of such policies or applicable Laws, (iii) neither this Agreement nor the consummation of the transactions contemplated hereby (including the Acquisition) will violate any such policy or applicable Laws, and (iv) Allergan and its Subsidiaries have taken reasonable steps consistent with normal industry practice to protect the types of information referred to in this Section 6.1(A)(q)(iv) against loss and unauthorized access, use, modification, disclosure or other misuse, and, to the knowledge of Allergan, there has been no unauthorized access, use, modification, disclosure or other misuse of such data or information.
(v) Except as has not had and would not reasonably be expected to have, individually or in the aggregate, an Allergan Material Adverse Effect, (i) Allergan's IT Assets operate in accordance with their specifications and related documentation and perform in a manner that permits Allergan and its Subsidiaries to conduct their respective businesses as currently conducted, (ii) Allergan and its Subsidiaries take commercially reasonable actions, consistent with current industry standards, to protect the confidentiality, integrity and security of Allergan's IT Assets (and all data and other information and transactions stored or contained therein or processed or transmitted thereby) against any unauthorized use, access, interruption, modification or corruption, including the implementation of commercially reasonable data backup, disaster avoidance and recovery procedures and business continuity procedures, and (iii) there has been no unauthorized use or access or security breaches, or interruption, modification, loss or corruption of any of Allergan's IT Assets (or any data or other information or transactions stored or contained therein or processed or transmitted thereby).
(r) Real Property. Except as has not had and would not reasonably be expected to have, individually or in the aggregate, an Allergan Material Adverse Effect, (i) Allergan and each of its Subsidiaries has good, valid and marketable fee simple title to, or valid leasehold interests in, as the case may be, each parcel of real property of Allergan or any of its Subsidiaries, free and clear of all Liens, except for Permitted Liens, (ii) each lease, sublease or license (each, a "Lease") under which Allergan or any of its Subsidiaries leases, subleases or licenses any real property is, subject to the Equitable Exceptions, a valid and binding obligation of Allergan or a Subsidiary of Allergan (as the case may be) and, to the knowledge of Allergan, each of the other parties thereto, and in full force and effect and enforceable in accordance with its terms against Allergan or its Subsidiaries (as the case may be) and, to the knowledge of Allergan, each of the other parties thereto (except for such Leases that are terminated after the date of this Agreement in accordance with their respective terms, other than as a result of a default or breach by Allergan or any of its Subsidiaries of any of the provisions thereof), (iii) neither Allergan nor any of its Subsidiaries, nor, to the knowledge of Allergan, any of the other parties thereto has violated or committed or failed to perform any act which (with or without notice, lapse of time or both) would constitute a default under any provision of any Lease, and (iv) neither Allergan nor any of its Subsidiaries has received written notice that it has violated or defaulted under any Lease.
(s) Required Vote of Allergan Shareholders. The Allergan Shareholder Approval is the only vote of holders of Equity Securities of Allergan which is required to consummate the transactions contemplated hereby.
(t) Material Contracts.
(i) Section 6.1(A)(t)(i) of the Allergan Disclosure Schedule sets forth a list as of the date of this Agreement of each of the following Contracts (other than any Allergan Benefit Plan) to which Allergan or any of its Subsidiaries is a party or by which it is bound (each such Contract required to be so listed, and each of the following types of Contracts (other than any Allergan Benefit Plan) described below to which Allergan or any of its Subsidiaries becomes a party or by which it otherwise becomes bound after the date of this Agreement, an "Allergan Material Contract"):
(A) each (i) acquisition or divestiture Contract (including any Contracts pursuant to which any member of the Allergan Group has transferred or agreed to transfer ownership of any Intellectual Property) and (ii) license (including any in-license or out-license and any sublicense), collaboration agreement or similar or equivalent Contract, that, in the case of each of clauses (i) and (ii), (x) has a maximum potential value (or which otherwise requires the receipt or making of payments) in excess of $100 million (including pursuant to any "earn-out," contingent value rights, milestone payments, license fees, royalty payments, development costs or other contingent payment or value obligations), (y) involves the issuance of any Equity Securities of Allergan or any of its Subsidiaries to a Third Party following the date of this Agreement or (z) grants to any Person (other than any member of the Allergan Group) any right of first refusal, right of first negotiation, right of first offer, option to purchase, option to license, or any other similar rights with respect to any Allergan Product or any material Intellectual Property of Allergan;
(B) any Contract with any Governmental Entity that is material to Allergan and its Subsidiaries, taken as a whole, and involving or that would reasonably be expected to involve payments to or from any Governmental Entity in an amount having a maximum potential value in excess of $100 million;
(C) any Contract that (x) limits or purports to limit, in any material respect, the freedom of Allergan or any of its Subsidiaries to engage or compete in any line of business or with any Person or in any area or that would so limit or purport to limit, in any material respect, the freedom of AbbVie or any of its Affiliates to take such actions after the Effective Time, (y) contains exclusivity or "most favored nation" obligations or restrictions that restrict or purport to restrict Allergan or any of its Subsidiaries in any material respect or that would so limit or purport to limit AbbVie or any of its Affiliates after the Effective Time, (z) contains any other provisions materially restricting or purporting to materially restrict the ability of Allergan or any of its Subsidiaries to sell, market, distribute, promote, manufacture, develop, commercialize, test or research any Allergan Products through third parties or that would so limit or purport to limit AbbVie or any of its Affiliates after the Effective Time;
(D) any Contract relating to third party indebtedness for borrowed money in excess of $100 million (whether incurred, assumed, guaranteed or secured by any asset) of Allergan or any of its Subsidiaries;
(E) any Contract restricting Allergan or any of its Subsidiaries from (x) the payment of dividends (y) the making of distributions to shareholders or (z) the ability to repurchase or redeem Equity Securities;
(F) any joint venture, profit-sharing, partnership, collaboration, co-promotion, commercialization, research, development or other similar agreement, which is material to the Allergan Group, taken as a whole;
(G) any Contracts or other transactions with any (A) executive officer or director of Allergan, or (B) affiliate (as such term is defined in Rule 12b-2 promulgated under the Exchange Act) or "associates" (or members of any of their "immediate family") (as such terms are respectively defined in Rule 12b-2 and Rule 16a-1 of the Exchange Act) of any such executive officer, director or beneficial owner;
(H) any Contract involving the settlement of any Action or threatened Action (or series of related Actions) (A) which (x) will involve payments by Allergan or any of its Subsidiaries after the date hereof, or involved such payments, in excess of $100 million or (y) will impose, or imposed, materially burdensome monitoring or reporting obligations by Allergan or any of its Subsidiaries outside the ordinary course of business or material restrictions on Allergan or any Subsidiary of Allergan (or, following the Completion, on AbbVie or any Subsidiary of AbbVie) or (B) which impose material restrictions on the use of any material Intellectual Property other than, in the case of this clause (B), the granting of non-exclusive licenses or sublicenses or the granting of exclusive licenses in connection with the settlement of ANDA-related litigation in the ordinary course of business;
(I) any stockholders, investors rights, registration rights or similar agreements or arrangements with respect to the Equity Securities of Allergan or any of its Subsidiaries; and
(J) any other Contract required to be filed by Allergan pursuant to Item 601(b)(10) of Regulation S-K.
(ii) All of the Allergan Material Contracts are, subject to the Equitable Exceptions, (A) valid and binding obligations of Allergan or a Subsidiary of Allergan (as the case may be) and, to the knowledge of Allergan, each of the other parties thereto, and (B) in full force and effect and enforceable in accordance with their respective terms against Allergan or its Subsidiaries (as the case may be) and, to the knowledge of Allergan, each of the other parties thereto, in each case of (A) and (B), except for such Allergan Material Contracts that are terminated after the date of this Agreement in accordance with their respective terms, other than as a result of a default or breach by Allergan or any of its Subsidiaries of any of the provisions thereof, and except where the failure to be valid and binding obligations and in full force and effect and enforceable has not had and would not reasonably be expected to have, individually or in the aggregate, an Allergan Material Adverse Effect. To the knowledge of Allergan, as of the date hereof, no Person is seeking to terminate or challenging the validity or enforceability of any Allergan Material Contract, except such terminations or challenges which have not had and would not reasonably be expected to have, individually or in the aggregate, an Allergan Material Adverse Effect. Neither Allergan nor any of its Subsidiaries, nor, as of the date hereof, to the knowledge of Allergan, any of the other parties thereto has violated any provision of, or committed or failed to perform any act which (with or without notice, lapse of time or both) would constitute a default under any provision of, and as of the date hereof neither Allergan nor any of its Subsidiaries has received written notice that it has violated or defaulted under, any Allergan Material Contract, except for those violations and defaults (or potential defaults) which have not had and would not reasonably be expected to have, individually or in the aggregate, an Allergan Material Adverse Effect. Allergan has made available to AbbVie true and complete copies of each Allergan Material Contract as in effect as of the date hereof.
(u) Insurance. Allergan and its Subsidiaries maintain insurance coverage with reputable insurers in such amounts and covering such risks as Allergan reasonably believes, based on past experience, is adequate for the businesses and operations of Allergan and its Subsidiaries (taking into account the cost and availability of such insurance). Except as has not had and would not reasonably be expected to have, individually or in the aggregate, an Allergan Material Adverse Effect, (i) all insurance policies and fidelity bonds for which Allergan or any of its Subsidiaries is a policyholder or which cover the business, operations, employees, officers, directors or assets of Allergan or any of its Subsidiaries as of the date hereof (the "Allergan Insurance Policies") (A) are sufficient for compliance by Allergan and its Subsidiaries with all Allergan Material Contracts, and (B) will not terminate or lapse by their terms by reason of the consummation of the transactions contemplated hereby (including the Acquisition) and (ii) the execution, delivery and performance of this Agreement and the consummation of the transactions contemplated hereby (including the Acquisition) do not and will not constitute a default under, or cause or permit the termination, cancellation, acceleration or other change of any right or obligation or the loss of any benefit to which Allergan or any of its Subsidiaries is entitled under, any provision of the Allergan Insurance Policies.
(v) Opinion of Financial Advisor. The Allergan Board has received the opinion of J.P. Morgan Securities LLC, financial advisor to Allergan, to the effect that, as of the date of such opinion and based upon and subject to the various assumptions, limitations, qualifications and other matters set forth therein, the Scheme Consideration to be paid to the Allergan Shareholders pursuant to this Agreement is fair, from a financial point of view, to such holders. A written copy of such opinion will be delivered promptly to AbbVie after the date hereof for informational purposes only.
(w) Finders or Brokers. Except for J.P. Morgan Securities LLC, there is no investment banker, broker or finder who might be entitled to any fee or commission from Allergan or any of its Affiliates in connection with the transactions contemplated by this Agreement.
(x) FCPA and Anti-Corruption.
(i) Except as has not been and would not reasonably be expected to be, individually or in the aggregate, material to the Allergan Group, taken as a whole, neither Allergan nor any of its Subsidiaries, nor any director, manager or employee of Allergan or any its Subsidiary has, since January 1, 2014 in connection with the business of Allergan or any of its Subsidiaries, itself or, to the Allergan's knowledge, any of its agents, representatives, sales intermediaries, or any other third party, in each case, acting on behalf of Allergan or any Subsidiary of Allergan, taken any action in violation of the FCPA or other applicable Bribery Legislation (in each case to the extent applicable).
(ii) Neither Allergan nor any of its Subsidiaries nor, to the knowledge of Allergan, any director, manager or employee of Allergan or any Allergan Subsidiary, are, or since January 1, 2014 have been, subject to any actual or pending or, to the knowledge of Allergan, threatened civil, criminal, or administrative actions, suits, demands, claims, hearings, notices of violation, investigations, proceedings, demand letters, settlements, or enforcement actions, or made any voluntary disclosures to any Governmental Entity, involving Allergan or any of its Subsidiaries in any way relating to applicable Bribery Legislation, including the FCPA.
(iii) Allergan and each of its Subsidiaries has made and kept books and records, accounts and other records, which, in reasonable detail, accurately and fairly reflect in all material respects the transactions and dispositions of the assets of Allergan and each of its Subsidiaries as required by the FCPA.
(iv) Allergan and each of its Subsidiaries has instituted policies and procedures reasonably designed to ensure compliance with the FCPA and other applicable Bribery Legislation and maintain such policies and procedures in force.
(v) To the knowledge of Allergan, no officer, director, or employee of Allergan or any of its Subsidiaries is a Government Official.
(vi) Except for such failures of each of the following clauses (A) through (C) to be true and correct as has not been and would not reasonably be expected to be, individually or in the aggregate, material to the Allergan Group, taken as a whole, none of Allergan or any of its Subsidiaries, nor any of their respective directors, managers or employees (A) is a Sanctioned Person, (B) has, since January 1, 2014, engaged in, has any plan or commitment to engage in, direct or indirect dealings with any Sanctioned Person or in any Sanctioned Country on behalf of Allergan or any of its Subsidiaries in violation of applicable Sanctions Law or (C) has, since January 1, 2014, violated, or engaged in any conduct sanctionable under, any Sanctions Law, nor to the knowledge of Allergan, been the subject of an investigation or allegation of such a violation or sanctionable conduct.
(y) Takeover Statutes. No "fair price," "moratorium," "control share acquisition" or other similar anti-takeover statute or regulation or any anti-takeover provision in the Allergan Memorandum and Articles of Association is, or at the Effective Time will be, applicable to AbbVie or any of its respective Subsidiaries, the Acquisition or the Scheme.
(z) Transactions with Affiliates. To the knowledge of Allergan and as of the date of this Agreement, since January 1, 2017, there have been no transactions, or series of related transactions, agreements, arrangements or understandings in effect, nor are there any currently proposed transactions, or series of related transactions, agreements, arrangements or understandings, that would be required to be disclosed under Item 404 of Regulation S-K that have not been otherwise disclosed in the Allergan SEC Documents filed prior to the date hereof.
(aa) No Ownership of AbbVie Shares. Neither Allergan nor any of its Subsidiaries beneficially owns, directly or indirectly, any AbbVie Shares or other securities convertible into, exchangeable for or exercisable for AbbVie Shares, and neither Allergan nor any of its Subsidiaries has any rights to acquire any AbbVie Shares (other than any such securities owned by Allergan or any of its Subsidiaries in a fiduciary, representative or other capacity on behalf of other Persons, whether or not held in a separate account). There are no voting trusts or other agreements or understandings to which Allergan or any of its Subsidiaries is a party with respect to the voting of the capital or capital stock or other Equity Securities of Allergan or any of its Subsidiaries.
(B) No Other Representations. Except for the representations and warranties made by Allergan in Section 6.1(A) (as qualified by the applicable items disclosed in the Allergan Disclosure Schedule in accordance with Section 10.8 and the introduction to this Section 6.1), neither Allergan nor any other Person makes or has made any representation or warranty, expressed or implied, at law or in equity, with respect to or on behalf of Allergan or its Subsidiaries, their businesses, operations, assets, liabilities, financial condition, results of operations, future operating or financial results, estimates, projections, forecasts, plans or prospects (including the reasonableness of the assumptions underlying such estimates, projections, forecasts, plans or prospects) or the accuracy or completeness of any information regarding Allergan or its Subsidiaries or any other matter furnished or provided to AbbVie or made available to AbbVie in any "data rooms," "virtual data rooms," management presentations or in any other form in expectation of, or in connection with, this Agreement or the transactions contemplated hereby (including the Acquisition). Allergan and its Subsidiaries disclaim any other representations or warranties, whether made by Allergan or any of its Subsidiaries or any of their respective Affiliates or Representatives. AbbVie acknowledges and agrees that, except for the representations and warranties made by Allergan in Section 6.1(A) (as qualified by the applicable items disclosed in the Allergan Disclosure Schedule in accordance with Section 10.8 and the introduction to Section 6.1(A)), neither Allergan nor any other Person is making or has made any representations or warranty, expressed or implied, at law or in equity, with respect to or on behalf of Allergan or its Subsidiaries, their businesses, operations, assets, liabilities, financial condition, results of operations, future operating or financial results, estimates, projections, forecasts, plans or prospects (including the reasonableness of the assumptions underlying such estimates, projections, forecasts, plans or prospects) or the accuracy or completeness of any information regarding Allergan or its Subsidiaries or any other matter furnished or provided to AbbVie or made available to AbbVie in any "data rooms," "virtual data rooms," management presentations or in any other form in expectation of, or in connection with, this Agreement, or the transactions contemplated hereby or thereby. AbbVie specifically disclaims that it is relying upon or has relied upon any such other representations or warranties that may have been made by any Person, and acknowledges and agrees that Allergan and its Affiliates have specifically disclaimed and do hereby specifically disclaim any such other representations and warranties. Nothing in this Section 6.1(B) shall be construed as a waiver (or an admission of non-reliance with respect to) any claims based on fraud.
Section 6.2 AbbVie Representations and Warranties. (A) Subject to Section 10.8 and except as disclosed (i) in any publicly available AbbVie SEC Document filed prior to the date hereof, or (ii) in the disclosure schedule delivered by AbbVie to Allergan immediately prior to the execution of this Agreement (the "AbbVie Disclosure Schedule"), each of AbbVie and Acquirer Sub jointly and severally represent and warrant to Allergan as follows:
(a) Qualification, Organization, Subsidiaries, etc. Each AbbVie Party is a legal entity duly organized, validly existing and in good standing under the laws of the of its jurisdiction of organization. Each AbbVie Party has all requisite corporate power and authority required to own or lease all of its properties or assets and to carry on its business as now conducted. Each AbbVie Party is duly qualified to do business and is in good standing in each jurisdiction where such qualification is necessary, except for those jurisdictions where failure to be so qualified or in good standing has not had and would not reasonably be expected to have, individually or in the aggregate, an AbbVie Material Adverse Effect. Prior to the date of this Agreement, AbbVie has made available to Allergan true and complete copies of the Organizational Documents of each of AbbVie and Acquirer Sub, in each case, as in effect on the date of this Agreement.
(b) Capital Stock.
(i) The authorized capital stock of AbbVie consists of 4,000,000,000 AbbVie Shares and 200,000,000 AbbVie Preferred Shares. As of June 21, 2019 (the "AbbVie Capitalization Date"), there were outstanding (A) (x) 1,478,365,231 AbbVie Shares and (y) no AbbVie Preferred Shares, (B) options to purchase AbbVie Shares ("AbbVie Options") with respect to an aggregate of 6,848,750 AbbVie Shares (of which, AbbVie Options with respect to 5,011,093 AbbVie Shares were exercisable), (C) 8,190,538 restricted stock units ("AbbVie Restricted Stock Units"), (D) no restricted stock awards ("AbbVie RSAs"), and (E) 2,400,713 performance based awards ("AbbVie Performance Awards") (together with AbbVie Options, AbbVie Restricted Stock Units, AbbVie RSAs and any other equity or equity-linked awards granted after June 21, 2019, "AbbVie Equity Awards"). The AbbVie Shares to be issued as part of the Scheme Consideration have been duly authorized and, when issued and delivered in accordance with the terms of this Agreement, will have been validly issued and will be fully paid and nonassessable and the issuance thereof will be free of preemptive rights. Except as set forth in this Section 6.2(A)(b)(i) and for changes since the AbbVie Capitalization Date resulting from the exercise or vesting and settlement of AbbVie Equity Awards outstanding on such date (in accordance with their existing terms in effect as of the date hereof) or issued as set forth in Section 6.2(A)(b)(i) of the AbbVie Disclosure Schedule, there are no issued, reserved for issuance or outstanding Equity Securities of AbbVie. There are no outstanding bonds, debentures, notes or other indebtedness of AbbVie having the right to vote (or convertible into, or exchangeable for, securities having the right to vote) on any matters on which stockholders of AbbVie have the right to vote. As of the date of this Agreement, there are no outstanding obligations of AbbVie or any of its Subsidiaries to repurchase, redeem or otherwise acquire any Equity Securities of AbbVie or its Subsidiaries.
(ii) All of the issued and outstanding Equity Securities of Acquirer Sub is, and at the Effective Time will be, owned, directly or indirectly, by AbbVie, and there are no other Equity Securities of Acquirer Sub. Acquirer Sub has not held any assets, engaged in any activities or conducted any business prior to the date of this Agreement and has no, and prior to the Effective Time will have no, assets, liabilities or obligations of any nature other than those incident to its formation and pursuant to this Agreement and the Acquisition and the other transactions contemplated by this Agreement.
(c) Corporate Authority Relative to this Agreement; No Violation.
(i) Each of AbbVie and Acquirer Sub has all requisite corporate power and authority to enter into this Agreement and, with respect to AbbVie, the Expenses Reimbursement Agreement and to consummate the transactions contemplated hereby and thereby, including the Acquisition. The execution and delivery of this Agreement and the Expenses Reimbursement Agreement and the consummation of the transactions contemplated hereby (including the Acquisition) and thereby have been duly and validly authorized by the AbbVie Board and, except for the filing of the required documents in connection with the Scheme with, and to receipt of the required approval of the Scheme by, the High Court, no other corporate proceedings on the part of AbbVie or Acquirer Sub are necessary to authorize the consummation of the transactions contemplated hereby (including the Acquisition) and pursuant to the Expenses Reimbursement Agreement. This Agreement has been duly and validly executed and delivered by AbbVie and Acquirer Sub and, assuming this Agreement constitutes the valid and binding agreement of Allergan, constitutes the valid and binding agreement of AbbVie and Acquirer Sub, enforceable against AbbVie and Acquirer Sub in accordance with its terms, subject to the Equitable Exceptions.
(ii) The execution, delivery and performance by AbbVie and Acquirer Sub of this Agreement and the Expenses Reimbursement Agreement (in the case of AbbVie and the consummation by AbbVie and Acquirer Sub of the transactions contemplated hereby (including the Acquisition) and thereby require no action by or in respect of, Clearances of, or Filings with, any Governmental Entity other than (A) compliance with the provisions of the Act, (B) compliance with the Takeover Panel Act and the Takeover Rules, (C) compliance with any applicable requirements of the HSR Act, (D) compliance with and Filings under any Antitrust Laws of any non-U.S. jurisdictions, (E) compliance with any applicable requirements of the Securities Act, the Exchange Act and any other applicable U.S. state or federal securities laws or pursuant to the rules of the NYSE, and (F) any other actions, Clearances or Filings the absence of which has not had and would not reasonably be expected to have, individually or in the aggregate, an AbbVie Material Adverse Effect.
(iii) Assuming compliance with the Scheme, the Act and any directions or orders of the High Court, the execution, delivery and performance by AbbVie and Acquirer Sub of this Agreement and the Expenses Reimbursement Agreement (in the case of AbbVie) and the consummation of the transactions contemplated hereby (including the Acquisition) and thereby do not and will not (A) contravene, conflict with, or result in any violation or breach of any provision of the Organizational Documents of AbbVie or Acquirer Sub, (B) assuming compliance with the matters referred to in Section 6.2(A)(c)(ii), contravene, conflict with or result in any violation or breach of any provision of any applicable Law, (C) assuming compliance with the matters referred to in Section 6.2(A)(c)(ii), require any Clearance or other action by any Person under, constitute a default, or an event that, with or without notice or lapse of time or both, would constitute a default, under, or cause or permit the termination, cancellation, acceleration or other change of any right or obligation or the loss of any benefit to which AbbVie or any of its Subsidiaries is entitled under, any provision of any AbbVie Permit or any Contract binding upon AbbVie or any of its Subsidiaries or any Clearance (including Clearances required by Contract) affecting, or relating in any way to, the assets or business of AbbVie and its Subsidiaries, (D) result in the creation or imposition of any Lien on any asset of AbbVie or any of its Subsidiaries, except, in the case of each of clauses (B) through (D), as has not had and would not reasonably be expected to have, individually or in the aggregate, an AbbVie Material Adverse Effect.
(d) Reports.
(i) AbbVie has timely filed with or furnished to the SEC all reports, schedules, forms, statements, prospectuses, registration statements and other documents required to be filed with or furnished to the SEC by AbbVie since January 1, 2017 (collectively, together with any exhibits and schedules thereto and other information incorporated therein, the "AbbVie SEC Documents"). No Subsidiary of AbbVie is required to file any report, schedule, form, statement, prospectus, registration statement or other document with the SEC.
(ii) As of its filing date (or, if amended or superseded by a filing prior to the date of this Agreement, on the date of such amended or superseding filing), each AbbVie SEC Document filed or furnished prior to the date of this Agreement did not, and each AbbVie SEC Document filed or furnished subsequent to the date of this Agreement will not, contain any untrue statement of a material fact or omit to state any material fact necessary in order to make the statements made therein, in light of the circumstances under which they were made, not misleading.
(iii) AbbVie is, and since January 1, 2017 has been, in compliance in all material respects with (A) the applicable provisions of the Sarbanes-Oxley Act and (B) the applicable listing and corporate governance rules and regulations of NYSE.
(iv) AbbVie and its Subsidiaries have established and maintain disclosure controls and procedures (as defined in Rule 13a-15 under the Exchange Act). Such disclosure controls and procedures are designed to ensure that material information relating to AbbVie, including its consolidated Subsidiaries, is made known to AbbVie's principal executive officer and its principal financial officer by others within those entities, including during the periods in which the periodic reports required under the Exchange Act are being prepared. Except as has not been and would not reasonably be expected to be, individually or in the aggregate, material to the AbbVie Group, taken as a whole, such disclosure controls and procedures are effective in timely alerting AbbVie's principal executive officer and principal financial officer to material information required to be included in AbbVie's periodic and current reports required under the Exchange Act.
(v) AbbVie and its Subsidiaries have established and maintain a system of internal controls designed to provide reasonable assurance regarding the reliability of AbbVie's financial reporting and the preparation of AbbVie's financial statements for external purposes in accordance with GAAP. AbbVie's principal executive officer and principal financial officer have disclosed, based on their most recent evaluation of such internal controls prior to the date of this Agreement, to AbbVie's auditors and the audit committee of the AbbVie Board (A) all significant deficiencies and material weaknesses in the design or operation of internal controls which are reasonably likely to adversely affect AbbVie's ability to record, process, summarize and report financial information and (B) any fraud, whether or not material, that involves management or other employees who have a significant role in internal controls.
(e) No Undisclosed Liabilities. There are no liabilities or obligations of AbbVie or any of its Subsidiaries of any kind whatsoever, whether accrued, contingent, absolute, determined, determinable or otherwise, that would be required by GAAP to be reflected on the consolidated balance sheet of AbbVie and its Subsidiaries, other than (i) liabilities or obligations disclosed and provided for in AbbVie's consolidated balance sheet (or the notes thereto) as of March 31, 2019 (the "AbbVie Balance Sheet"), (ii) liabilities or obligations incurred in the ordinary course of business consistent with past practice since the date of the AbbVie Balance Sheet, (iii) liabilities arising in connection with the transactions contemplated hereby, and (iv) other liabilities or obligations that have not had and would not reasonably be expected to have, individually or in the aggregate, an AbbVie Material Adverse Effect. There are no off-balance sheet arrangements of any type pursuant to any off-balance sheet arrangement required to be disclosed pursuant to Item 303(a)(4) of Regulation S-K promulgated under the Securities Act that have not been so described in the AbbVie SEC Documents.
(f) Financial Statements. The audited consolidated financial statements and unaudited condensed consolidated interim financial statements of AbbVie included or incorporated by reference in the AbbVie SEC Documents present fairly in all material respects, in conformity with GAAP applied on a consistent basis during the periods presented (except as may be indicated in the notes thereto), the consolidated financial position of AbbVie and its Subsidiaries as of the dates thereof and their consolidated results of operations and cash flows for the periods then ended (subject to normal and recurring year-end audit adjustments in the case of any unaudited interim financial statements). Such consolidated financial statements have been prepared in all material respects from the books and records of AbbVie and its Subsidiaries.
(g) Compliance with Law; Permits. AbbVie and each of its Subsidiaries are, and since January 1, 2017 have been, in compliance with all applicable Laws, except for failures to comply that have not had and would not reasonably be expected to have, individually or in the aggregate, an AbbVie Material Adverse Effect.
(h) Absence of Certain Changes or Events. From March 31, 2019 through the date hereof, there has not been any event, effect, development, occurrence or change that has had, or would reasonably be expected to have, individually or in the aggregate, an AbbVie Material Adverse Effect.
(i) Investigations; Litigation. As of the date hereof, there is no Action pending or, to the knowledge of AbbVie, threatened against or affecting AbbVie, any of its Subsidiaries, any present or former officers, directors or employees of AbbVie or any of its Subsidiaries in their respective capacities as such, or any of the respective properties or assets of AbbVie or any of its Subsidiaries, before (or, in the case of threatened Actions, that would be before) any Governmental Entity (i) that has been or would reasonably be expected to have, individually or in the aggregate, an AbbVie Material Adverse Effect or (ii) that would in any manner challenge or seek to prevent, enjoin or alter any of the other transactions contemplated hereby. As of the date hereof, there is no Order outstanding or, to the knowledge of AbbVie, threatened against or affecting AbbVie, any of its Subsidiaries, any present or former officers, directors or employees of AbbVie or any of its Subsidiaries in their respective capacities as such, or any of the respective properties or assets of any of AbbVie or any of its Subsidiaries, that has been or would reasonably be expected to have, individually or in the aggregate, an AbbVie Material Adverse Effect.
(j) Information Supplied. The information provided by and relating to AbbVie and its Subsidiaries to be contained in the Scheme Document, the Proxy Statement and any other documents filed or furnished with or to the High Court, the SEC or pursuant to the Act and the Takeover Rules in each case in connection with the Acquisition will not, on the date the Scheme Document and the Proxy Statement (and any amendment or supplement thereto) is first proposed to Allergan Shareholders and at the time of the Court Meeting, contain any untrue statement of any material fact or omit to state any material fact required to be stated therein or necessary in order to make the statements therein, at the time and in light of the circumstances under which they were made, not false or misleading.
(k) Opinion of Financial Advisor. The AbbVie Board has received the opinion of Morgan Stanley & Co. LLC, financial advisor to AbbVie, to the effect that, as of the date of such opinion and based upon and subject to the various assumptions, limitations, qualifications and other matters set forth therein, the Scheme Consideration to be paid to the Allergan Shareholders pursuant to this Agreement is fair, from a financial point of view, to AbbVie.
(l) Financing. At the Effective Time, AbbVie and Acquirer Sub will have sufficient cash, available lines of credit or other sources of immediately available and cleared funds to enable AbbVie and Acquirer Sub to make all required payments payable at the Effective Time in connection with the transactions contemplated under this Agreement, including the payment of expenses and fees. Notwithstanding anything contained in this Agreement to the contrary, the obligations of the AbbVie Parties under this Agreement, including their obligations to consummate the Completion, are not conditioned in any manner upon the AbbVie Parties obtaining the Financing or any other financing.
(B) No Other Representations. Except for the representations and warranties made by AbbVie in Section 6.2(A) (as qualified by the applicable items disclosed in the AbbVie Disclosure Schedule in accordance with Section 10.8 and the introduction to Section 6.2(A)), neither AbbVie nor any other Person makes or has made any representation or warranty, expressed or implied, at law or in equity, with respect to or on behalf of AbbVie or its Subsidiaries, their businesses, operations, assets, liabilities, financial condition, results of operations, future operating or financial results, estimates, projections, forecasts, plans or prospects (including the reasonableness of the assumptions underlying such estimates, projections, forecasts, plans or prospects) or the accuracy or completeness of any information regarding AbbVie or its Subsidiaries or any other matter furnished or provided to Allergan or made available to Allergan in any "data rooms," "virtual data rooms," management presentations or in any other form in expectation of, or in connection with, this Agreement or the transactions contemplated hereby (including the Acquisition). AbbVie and its Subsidiaries disclaim any other representations or warranties, whether made by AbbVie or any of its Subsidiaries or any of their respective Affiliates or Representatives. Allergan acknowledges and agrees that, except for the representations and warranties made by AbbVie in Section 6.2(A) (as qualified by the applicable items disclosed in the AbbVie Disclosure Schedule in accordance with Section 10.8 and the introduction to Section 6.2(A)), neither AbbVie nor any other Person is making or has made any representations or warranty, expressed or implied, at law or in equity, with respect to or on behalf of AbbVie or its Subsidiaries, their businesses, operations, assets, liabilities, financial condition, results of operations, future operating or financial results, estimates, projections, forecasts, plans or prospects (including the reasonableness of the assumptions underlying such estimates, projections, forecasts, plans or prospects) or the accuracy or completeness of any information regarding AbbVie or its Subsidiaries or any other matter furnished or provided to Allergan or made available to Allergan in any "data rooms," "virtual data rooms," management presentations or in any other form in expectation of, or in connection with, this Agreement, or the transactions contemplated hereby or thereby. Allergan specifically disclaims that it is relying upon or has relied upon any such other representations or warranties that may have been made by any Person, and acknowledges and agrees that AbbVie and its Affiliates have specifically disclaimed and do hereby specifically disclaim any such other representations and warranties. Nothing in this Section 6.2(B) shall be construed as a waiver (or an admission of non-reliance with respect to) any claims based on fraud.
ARTICLE 7
ADDITIONAL AGREEMENTS
Section 7.1 Access to Information; Confidentiality; Notices of Certain Events.
(a) Upon reasonable notice, Allergan shall, and shall cause its Subsidiaries to, afford to AbbVie, its Subsidiaries and its and their respective Representatives and Financing Sources, reasonable access during normal business hours, during the period from the date of this Agreement to the earlier of Completion and the date, if any, on which the Agreement is validly terminated pursuant to and in accordance with Article 9, to (i) its and its Subsidiaries' properties, contracts, commitments and books and records and (ii) all other information not made available pursuant to clause (i) of this Section 7.1(a) concerning its and its Subsidiaries' businesses, properties and personnel as AbbVie may reasonably request (in the case of each of clause (i) and (ii), in a manner so as to not unreasonably interfere with the normal business operations of Allergan or any of its Subsidiaries). During such period described in the immediately preceding sentence, upon reasonable notice and subject to applicable Law and during normal business hours, Allergan shall instruct its pertinent Representatives to reasonably cooperate with AbbVie in its review of any such information provided or made available pursuant to the immediately preceding sentence. No information or knowledge obtained in any review or investigation pursuant to this Section 7.1 shall affect or be deemed to modify any representation or warranty made by Allergan pursuant to this Agreement.
(b) Without limiting the generality of Section 7.1(a), during the period from the date of this Agreement to the earlier of the Completion and the date, if any, on which the Agreement is validly terminated pursuant to and in accordance with Article 9, Allergan agrees to, and to cause its Subsidiaries to, (i) reasonably assist and reasonably cooperate with AbbVie and its Subsidiaries to facilitate the post-Completion integration of Allergan and its Subsidiaries with AbbVie and its Subsidiaries (including, at the request of AbbVie from time to time, reasonably assisting and cooperating with AbbVie and its Subsidiaries in the planning and development of a post-Completion integration plan), and (ii) provide reasonable access to key personnel identified by AbbVie to facilitate AbbVie's efforts with respect to the post-Completion retention of such key personnel.
(c) Notwithstanding anything to the contrary in this Section 7.1 or Section 7.2, neither Allergan nor any of its respective Subsidiaries shall be required to provide access to, disclose information to or assist or cooperate with AbbVie, in each case if and to the extent such access, disclosure, assistance or cooperation (i) would, as reasonably determined based on the advice of outside counsel, jeopardize any attorney-client privilege with respect to such information, or (ii) would contravene any applicable Law or Contract to which Allergan or any of its Subsidiaries is subject or bound; provided that Allergan shall, and shall cause its Subsidiaries to, use reasonable best efforts to make appropriate substitute disclosure arrangements under circumstances in which such restrictions apply (including redacting such information (A) to remove references concerning valuation of Allergan and its Subsidiaries, taken as a whole, (B) as necessary to comply with any Contract in effect on the date hereof or after the date hereof or with applicable Law and (C) as necessary to address reasonable attorney-client, work-product or other privilege or confidentiality concerns, or entering into a joint defense or other arrangement) and to provide such information as to the applicable matter as can be conveyed. Each of Allergan and AbbVie may, as each deems advisable and necessary, reasonably designate any competitively sensitive material provided to the other under this Section 7.1 or Section 7.2 as "Outside Counsel Only Material." Such materials and the information contained therein shall be given only to the outside counsel of the recipient and, subject to any additional confidentiality or joint defense agreement the parties may mutually propose and enter into, will not be disclosed by such outside counsel to employees, officers or directors of the recipient unless express permission is obtained in advance from the source of the materials (Allergan or AbbVie, as the case may be) or its legal counsel.
(d) Each Party shall promptly notify and provide copies to the other Party of the occurrence of any event which would or would reasonably be expected to (A) prevent or materially delay the consummation of the Scheme, the Acquisition or the other transactions contemplated hereby or (B) result in the failure of any Condition; provided, that the delivery of any notice pursuant to this Section 7.1(d) shall not in and of itself (i) affect or be deemed to modify any representation, warranty, covenant, right, remedy, or condition to any obligation of any Party hereunder or (ii) update any section of Allergan Disclosure Schedule or AbbVie Disclosure Schedule. A failure of either Party to provide information pursuant to this Section 7.1(d) shall not constitute a breach for purposes of any Condition.
(e) To the extent permitted by applicable Law and without limiting Allergan's obligations pursuant to any other provision of this Agreement, with respect to the Actions set forth on Section 7.1(e) of the Allergan Disclosure Schedule, Allergan shall (i) keep AbbVie reasonably informed (on a timely basis) regarding any material developments with respect to such Actions following the date hereof and provide such additional information with respect to such Actions as AbbVie may reasonably request and (ii) consult and cooperate with AbbVie, and consider in good faith AbbVie's views, as to the strategy, defense and settlement discussions with respect to such Actions. Allergan and AbbVie will operate under this Section 7.1(e) pursuant to a common interest agreement, whereby any information shared pursuant to the foregoing sentence remains subject to the protection of the attorney-client privilege, attorney work product doctrine, common interest privilege, joint defense privilege and any and all other applicable rights, privileges, protections or immunities.
(f) Until the earlier of Completion and the date, if any, on which the Agreement is validly terminated pursuant to and in accordance with Article 9, Allergan shall, to the extent permitted by applicable Law, (i) promptly provide AbbVie with a copy of all material written correspondence received after the date hereof from the FDA or any similar Governmental Entity concerning any Allergan Product set forth on Section 7.1(f) of the Allergan Disclosure Schedule regarding the (i) withdrawal, suspension, termination, placement on inactive status (including any clinical hold) or revocation of any approval for such Allergan Product, (ii) prohibition or suspension of the supply of such Allergan Product, or (iii) new or expanded investigation, review or inquiry concerning the safety of such Allergan Product.
(g) The Parties hereby agree that all information provided to them or their respective Representatives pursuant to this Agreement shall be subject to the Confidentiality Agreement.
Section 7.2 Consents and Regulatory Approvals.
(a) The terms of the Acquisition at the date of publication of the Scheme Document shall be set out in the Rule 2.5 Announcement and the Scheme Document, to the extent required by applicable Law.
(b) Subject to the terms and conditions of this Agreement, including Section 7.2(c), each Party shall, and each shall cause its Subsidiaries to, use their respective reasonable best efforts to take, or cause to be taken, all actions and to do, or cause to be done, all things necessary, proper or advisable, to the extent permitted by applicable Law, to achieve satisfaction of the Conditions and to consummate the Acquisition and the other transactions contemplated hereby as promptly as reasonably practicable (and, in each case, no later than the End Date), including using reasonable best efforts to (x) prepare and file as promptly as reasonably practicable with any Governmental Entity or other third party all documentation to effect all Filings (and thereafter make any other required or appropriate submissions) as are necessary, proper or advisable to consummate the Acquisition and the other transactions contemplated hereby, including Allergan and AbbVie each making (A) as promptly as reasonably practicable, but in no event later than 30 days after the date hereof (unless the Parties mutually agree otherwise), an appropriate Filing of a notification and report form pursuant to the HSR Act with the Federal Trade Commission and the Antitrust Division of the United States Department of Justice with respect to the Acquisition and the other transactions contemplated hereby and requesting early termination of the waiting period under the HSR Act and (B) as promptly as reasonably practicable, any other Filing that is required and advisable under any other Antitrust Law or foreign investment Law, including making all required Filings under the Antitrust Laws in the jurisdictions listed on Section 7.2(b) of the Allergan Disclosure Schedule, (y) obtain prior to the End Date, and thereafter maintain, all Clearances required to be obtained from any Governmental Entity that are necessary and advisable to consummate the Acquisition or other transactions contemplated hereby, and complying with the terms and conditions of each Clearance (including by supplying as promptly as reasonably practicable any additional information and documentary material that may be requested pursuant to the HSR Act or other applicable Antitrust Law or foreign investment Law), and (z) cooperate with the other Parties in their efforts to comply with their obligations under this Agreement, including in seeking to obtain any required Clearances, including defending (but without any obligation to commence) any Action commenced by any Governmental Entity in connection with the transactions contemplated hereby. In parallel with informal engagement with the European Commission prior to submission of a formal filing for Clearance of the Acquisition under the EC Merger Regulation ("Pre-Notification"), AbbVie shall also promptly engage with the relevant United Kingdom Governmental Entity (the "CMA"), including by submitting a briefing paper (which may be a copy of the first draft filing to the European Commission during Pre-Notification) regarding the Acquisition to the CMA within five (5) Business Days of submission of a first draft filing to the European Commission during Pre-Notification, and by responding promptly and with due consideration to all requests for information from, or for meetings with, the CMA.
(c) Notwithstanding Section 7.2(b) or anything else in this Agreement to the contrary, nothing in this Agreement or otherwise shall obligate or otherwise require AbbVie, Acquirer Sub or any of their respective Subsidiaries to propose, agree to, commit to or effect any action (or refrain or cause to refrain from taking any action) (including, in each case, any divestiture, hold separate arrangement, licensing of rights, and/or termination, assignment, novation or modification of Contracts (or portions thereof) or other business relationships), restriction, commitment, condition, contingency, contribution, cost, expense, liability, limitation, loss, obligation, payment, requirement or term, with respect to any asset, operation, division, business, product line or business relationship of AbbVie, Allergan or any of their respective Subsidiaries, in each case as a condition to, or in connection with, (i) the expiration or termination of any applicable waiting period relating to the Acquisition under the HSR Act, (ii) obtaining any Clearance under any other applicable Antitrust Laws or foreign investment Laws or (iii) obtaining any other Clearance from a Governmental Entity or otherwise; provided, however, that AbbVie shall, and shall cause its Subsidiaries to, if necessary to resolve, avoid or eliminate impediments or objections, if any, that may be asserted with respect to the Acquisition under any Antitrust Law or foreign investment Law commit to or effect (x) a divestiture, sale or license of (or subjecting to any hold-separate order) the assets and business relationships of the Allergan Group relating to the Allergan Products listed on Schedule 7.2(c) of the Allergan Disclosure Schedule (the "Specified Products"), and (y) such other actions (including any divestiture, sale or license of (or subjecting to any hold-separate order)), with respect to any asset, operation, division, business, product line or business relationship of the Allergan Group (and not, for clarity, of AbbVie or any of its Subsidiaries) as would not, individually or in the aggregate, have (if effected) a material impact (with materiality measured relative to a company of the size and scale of the Allergan Group) on the condition (financial or otherwise), properties, assets, liabilities, business or results of operations of AbbVie and its Subsidiaries (including Allergan and its Subsidiaries) following Completion (provided, that, for clarity, the impact of the actions contemplated by the foregoing clause (x) shall not be taken into account in assessing any impact under this clause (y)). Notwithstanding anything in this Section 7.2 to the contrary, in no event shall (A) AbbVie or any of its Subsidiaries or Allergan or any of its Subsidiaries be required to agree to take or enter into any action (or refrain from taking any action) which is not conditioned upon, and shall only become effective from and after, the Completion Date, or (B) subject to the last sentence of Section 7.2(d), Allergan or any of its Subsidiaries agree to any obligation, restriction, requirement, limitation, qualification, condition, remedy or other action relating to Clearances under any Antitrust Law or foreign investment Law required to be obtained by the Parties or their respective Subsidiaries in connection with the Acquisition without the prior written consent of AbbVie, but, if requested by AbbVie in writing, Allergan shall, and shall cause its Subsidiaries to, subject to the foregoing clause (A) of this Section 7.2(c), take any such actions to obtain any of the governmental approvals described in this Section 7.2(c).
(d) Subject to the last sentence of this Section 7.2(d), AbbVie shall have the right to (i) direct, devise and implement the strategy for obtaining any necessary approval of, for responding to any request from, inquiry or investigation by (including directing the timing, nature and substance of all such responses), and shall have the right to lead all meetings and communications (including any negotiations) with, any Governmental Entity that has authority to enforce any Antitrust Law and (ii) control the defense and settlement of any Action brought by or before any Governmental Entity that has authority to enforce any Antitrust Law; provided, however, that AbbVie shall consult with Allergan and consider in good faith the views and comments of Allergan in connection with the foregoing. AbbVie shall be permitted to pull and refile, on one or more occasions, any filing made under the HSR Act, or any other Antitrust Law, or (without limiting AbbVie's required efforts to consummate the Acquisition as promptly as reasonably practicable as otherwise set forth in this Section 7.2) enter into a timing agreement with any Governmental Entity in relation to any Antitrust Law, in connection with the Acquisition or any of the other transactions contemplated hereby, provided, that, without the prior written consent of Allergan, no pull and refile shall occur after October 31, 2019. Without limiting AbbVie's rights with respect to overall strategy and control as set forth in the remainder of this Section 7.2(d), with respect to Specified Products the Parties agree to and shall comply with the provisions set forth on Section 7.2(d) of the Allergan Disclosure Schedule.
(e) To the extent permitted by applicable Law, Allergan and AbbVie shall, as promptly as reasonably practicable, (i) upon request from a Governmental Entity, furnish to such Governmental Entity, any information or documentation concerning themselves, their Subsidiaries, directors, officers and stockholders information or documentation concerning the Acquisition, the Scheme and the other transactions contemplated hereby and such other matters as may be requested and (ii) make available their respective Representatives to, upon reasonable request, any Governmental Entity, in the case of each of clauses (i) and (ii), in connection with (A) the preparation of any Filing made by or on their behalf to any Governmental Entity in connection with the Acquisition, the Scheme or any of the other transactions contemplated hereby or (B) any Governmental Entity investigation, review or approval process.
(f) Subject to Section 7.2(d), applicable Laws relating to the sharing of information and the terms and conditions of the Confidentiality Agreement and all other agreements entered into by the Parties, and subject to the proviso at the end of this Section 7.2(f), each of Allergan and AbbVie shall, and each shall cause its Subsidiaries to: (i) (A) as far in advance as reasonably practicable, notify the other party of, and provide the other party with an opportunity to consult with respect to, any Filing or material or substantive communication or inquiry it or any of its Subsidiaries intends to make with any Governmental Entity relating to the matters that are the subject of this Agreement, (B) prior to submitting any such Filing or making any such communication or inquiry, the submitting or making party shall provide the other party and its counsel a reasonable opportunity to review, and shall consider in good faith the comments of the other party and such other party's Representatives in connection with any such Filing, communication or inquiry (except HSR filings), and (C) promptly following the submission of such Filing (except HSR filings) or making of such communication or inquiry, provide the other party with a copy of any such Filing or, if in written form, a summary of any communication or inquiry; (ii) as promptly as reasonably practicable following receipt, furnish the other party with a copy of any Filing (except HSR filings) or, if in written form, material or substantive communication or inquiry, it or any of its Subsidiaries receives from any Governmental Entity relating to matters that are the subject of this Agreement; and (iii) coordinate and reasonably cooperate with the other party in exchanging such information and provide such other assistance as the other party may reasonably request in connection with this Section 7.2. Subject to Section 7.2(d), none of Allergan, AbbVie or their respective Representatives shall agree to participate in any material or substantive meeting or conference (including by telephone) with any Governmental Entity, or any member of the staff of any Governmental Entity, in respect of any Filing, Action (including the settlement of any investigation) or other inquiry regarding the Acquisition or the Scheme unless it consults with the other party in advance and, to the extent permitted by such Governmental Entity, allows the other party to participate.
(g) In the event that the latest date on which the High Court and/or the Panel would permit Completion to occur is prior to the End Date, the Parties shall use their respective reasonable best efforts to obtain consent of the High Court and/or the Panel, as applicable, to an extension of such latest date (but not beyond the End Date). If (i) the High Court and/or the Panel require the lapsing of the Scheme prior to the End Date, or (ii) Condition 1 fails to be satisfied, the Parties shall (unless and until this Agreement is validly terminated pursuant to and in accordance with Article 9) take all reasonable actions required in order to re-initiate the Scheme process as promptly as reasonably practicable (it being understood that no such lapsing described in subclause (i) or (ii) shall, in and of itself, result in a termination of, or otherwise affect any rights or obligations of any Party under, this Agreement).
Section 7.3 Directors' and Officers' Indemnification and Insurance.
(a) For a period of not less than six years from the Effective Date, AbbVie shall cause Allergan or any applicable Subsidiary thereof (collectively, the "D&O Indemnifying Parties"), to the fullest extent each such D&O Indemnifying Party is so authorized or permitted by applicable Law, as now or hereafter in effect, to: (i) indemnify and hold harmless each person who is at the date hereof, was previously, or during the period from the date hereof through the date of the Effective Time, serving as a director or officer of Allergan or any of its Subsidiaries, or at the request or for the benefit of Allergan or any of its Subsidiaries as a director, trustee or officer of any other entity or any benefit plan maintained by Allergan or any of its Subsidiaries (collectively, the "D&O Indemnified Parties"), as in effect as of the date of this Agreement, in connection with any D&O Claim and any losses, claims, damages, liabilities, Claim Expenses, judgments, fines, penalties and amounts paid in settlement (including all interest, assessments and other charges paid or payable in connection with or in respect of any thereof) relating to or resulting from such D&O Claim; and (ii) promptly advance to such D&O Indemnified Party any Claim Expenses incurred in defending, serving as a witness with respect to or otherwise participating with respect to any D&O Claim in advance of the final disposition of such D&O Claim, including payment on behalf of or advancement to the D&O Indemnified Party of any Claim Expenses incurred by such D&O Indemnified Party in connection with enforcing any rights with respect to such indemnification and/or advancement, in each case without the requirement of any bond or other security, but subject to the D&O Indemnifying Party's receipt of a written undertaking by or on behalf of such D&O Indemnified Party to repay such Claim Expenses if it is ultimately determined under applicable Law that such D&O Indemnified Party is not entitled to be indemnified. All rights to indemnification and advancement conferred hereunder shall continue as to a Person who has ceased to be a director or officer of Allergan or any of its Subsidiaries after the date hereof and shall inure to the benefit of such Person's heirs, successors, executors and personal and legal representatives. As used in this Section 7.3: (x) the term "D&O Claim" means any threatened, asserted, pending or completed Action, whether instituted by any Governmental Entity or any other Person, arising out of or pertaining to acts or omissions occurring at or prior to the Effective Time that relate to such D&O Indemnified Party's duties or service (A) as a director or officer of Allergan or the applicable Subsidiary thereof at or prior to the Effective Time (including with respect to any acts, facts, events or omissions occurring in connection with the approval of this Agreement, the Scheme, the Acquisition and the consummation of the other transactions contemplated hereby (including the Acquisition), including the consideration and approval thereof and the process undertaken in connection therewith) or (B) as a director, trustee or officer of any other entity or any benefit plan maintained by Allergan or any of its Subsidiaries (for which such D&O Indemnified Party is or was serving at the request or for the benefit of Allergan or any of its Subsidiaries) at or prior to the Effective Time; and (y) the term "Claim Expenses" means reasonable out-of-pocket attorneys' fees and all other reasonable out-of-pocket costs, expenses and obligations (including experts' fees, travel expenses, court costs, retainers, transcript fees, duplicating, printing and binding costs, as well as telecommunications, postage and courier charges) paid or incurred in connection with investigating, defending, being a witness in or participating in (including on appeal), or preparing to investigate, defend, be a witness in or participate in any D&O Claim for which indemnification is authorized pursuant to this Section 7.3(a), including any action relating to a claim for indemnification or advancement brought by a D&O Indemnified Party.
(b) For a period of not less than six years from the Effective Date, AbbVie shall cause the organizational documents of Allergan to contain provisions no less favorable with respect to indemnification, advancement of expenses and limitations on liability of directors and officers than are set forth in the Organizational Documents of Allergan as of the date of this Agreement, which provisions shall not be amended, repealed or otherwise modified for a period of at least six years from the Effective Date in any manner that would adversely affect the rights thereunder of any D&O Indemnified Party, unless any modification or amendment is required by applicable Law (but then only to the extent required by applicable Law). At Allergan's option and expense, prior to the Effective Time, Allergan may purchase (and pay in full the aggregate premium for) a six-year prepaid "tail" insurance policy (which policy by its express terms shall survive the Acquisition) of at least the same coverage and amounts and containing terms and conditions that are no less favorable to the directors and officers of Allergan or any of its Subsidiaries as Allergan's and its Subsidiaries' existing directors' and officers' insurance policy or policies with a claims period of six years from the Effective Time for D&O Claims arising from facts, acts, events or omissions that occurred on or prior to the Effective Time; provided that the premium for such tail policy shall not exceed three hundred percent (300%) of the annual amount currently paid by Allergan and its Subsidiaries for such insurance (such amount being the "Maximum Premium"). If Allergan fails to obtain such tail policy prior to the Effective Time, AbbVie shall obtain such a tail policy; provided, however, that the premium for such tail policy shall not be required to exceed the Maximum Premium; provided, further, that if such tail policy cannot be obtained or can be obtained only by paying a premium in excess of the Maximum Premium, AbbVie shall only be required to obtain as much coverage as can be obtained by paying a premium equal to the Maximum Premium. AbbVie and Allergan shall cause any such policy (whether obtained by AbbVie or Allergan) to be maintained in full force and effect, for its full term, and AbbVie shall, following the Effective Time, cause Allergan to honor all its obligations thereunder.
(c) If AbbVie or Allergan or any of their respective successors or assigns (i) consolidates with or merges with or into any other Person and shall not be the continuing or surviving company, partnership or other Person of such consolidation or merger or (ii) liquidates, dissolves or winds-up, or transfers or conveys all or substantially all of its properties and assets to any Person, then, and in each such case, proper provision shall be made so that the successors and assigns of AbbVie or Allergan, as applicable, assume the obligations set forth in this Section 7.3.
(d) The provisions of this Section 7.3 are intended to be for the express benefit of, and shall be enforceable by, each D&O Indemnified Party (who are intended to be third party beneficiaries of this Section 7.3), his or her heirs and his or her personal Representatives, shall be binding on all successors and assigns of AbbVie, and following the Effective Time, Allergan. The exculpation and indemnification provided for by this Section 7.3 shall not be deemed to be exclusive of any other rights to which a D&O Indemnified Party is entitled, pursuant to applicable Law or Contract made available to AbbVie prior to the date hereof.
Section 7.4 Employment and Benefit Matters.
(a) From the date of Completion through the earlier of (i) the second anniversary of the Effective Time, and (ii) December 31, 2021 (or, if shorter, the period of employment of the relevant Allergan Employee) (the "Benefits Continuation Period"), Acquirer Sub shall provide, and AbbVie shall cause Acquirer Sub to provide, to (i) each Allergan Employee a base salary that is no less favorable than the base salary provided to such Allergan Employee immediately prior to the Effective Time, (ii) each Allergan Employee a target annual cash bonus opportunity that is no less favorable than the target annual cash bonus opportunity provided to such Allergan Employee immediately prior to the Effective Time, (iii) an Allergan Employee who is eligible to be selected to receive an annual equity compensation opportunity (inclusive of dividend equivalent rights) as of immediately prior to the Effective Time, pursuant to the ordinary course practices of Allerganas in effect of, and disclosed to AbbVie prior to, the date hereof, shall continue to be eligible to be selected to receive an annual equity compensation opportunity, with a target grant date value that is no less favorable than the target grant date value of the annual equity compensation opportunity (inclusive of dividend equivalent rights) applicable to his or her global grade level, as reflected in the "2019 Long-Term Incentive Targets" schedule provided to AbbVie prior to the date hereof), and AbbVie shall make such grants at the same rate of participation per global grade level as disclosed to AbbVie prior to the date hereof and with the form of the equity compensation opportunity to be determined in AbbVie's sole discretion, and (iv) to the Allergan Employees as a group, employee benefits that are, in the aggregate, no less favorable than the employee benefits provided to the Allergan Employees under the Allergan Benefit Plans as in effect immediately prior to the Effective Time; provided, that for purposes of determining whether such employee benefits are no less favorable in the aggregate, any defined benefit pension plan benefits, nonqualified deferred compensation, subsidized retiree health or welfare benefits, post-termination health or welfare benefits, and retention or change in control payments or awards shall not be taken into account.
(b) In addition, Acquirer Sub shall provide, and AbbVie shall cause Acquirer Sub to provide, to each Allergan Employee who experiences a termination of employment during the Benefits Continuation Period, severance benefits that are no less favorable than the severance benefits to which such Allergan Employee would have been entitled upon such a termination of employment under any Allergan Benefit Plan that is a severance plan, policy, program, agreement or arrangement and set forth on Section 7.4(b) of the Allergan Disclosure Schedule (collectively, the "Severance Arrangements") and in which such Allergan Employee was eligible to participate as of immediately prior to the Effective Time, but only to the extent such Severance Arrangements are set forth on Section 7.4(b) of the Allergan Disclosure Schedule and were furnished to the Buyer prior to the date hereof. For purposes of determining compliance with this Section 7.4(b), only the existing terms of the Severance Arrangements will be taken into account, and any modifications to the Severance Arrangements that are effective after the date hereof but prior to the Effective Time (and are made without AbbVie's advance written consent) will be disregarded. Notwithstanding anything to the contrary in the foregoing, for each Allergan Employee who is eligible to participate in the Severance Arrangements marked with an asterisk (*) on Section 7.4(b) of the Allergan Disclosure Schedule as of immediately prior to the Effective Time, the protected period under this Section 7.4(b) shall apply to a termination of employment that occurs during the two-year period immediately following the Effective Time.
(c) For purposes of vesting, eligibility to participate and determining level of benefits under the employee benefit plans of AbbVie providing benefits to any Allergan Employees (the "New Plans"), each Allergan Employee shall be credited with his or her years of service with the Allergan Group and its predecessors before the Effective Time, to the same extent and for the same purpose as such Allergan Employee was entitled, before the Effective Time, to credit for such service under the corresponding Allergan Benefit Plan in which such Allergan Employee participated or was eligible to participate immediately prior to the Effective Time, provided that the foregoing shall not apply with respect to (A) any defined benefit pension plan or any retiree or post-termination health or welfare benefits, (B) any benefit plan that is frozen or for which participation is limited to a grandfathered population, (C) any cash- or equity-based compensation arrangements, or (E) to the extent that its application would result in a duplication of benefits or compensation with respect to the same period of service, and provided further that such service shall only be credited to the extent service with AbbVie is credited for similarly situated employees of the AbbVie Group under the New Plans. In addition, and without limiting the generality of the foregoing, (A) each Allergan Employee shall be immediately eligible to participate, without any waiting time, in any and all New Plans to the extent coverage under such New Plan is replacing comparable coverage under an Allergan Benefit Plan in which such Allergan Employee had already satisfied any such waiting period and participated immediately before the Effective Time (such plans, collectively, the "Old Plans"), and (B) for purposes of each New Plan providing medical, dental, pharmaceutical and/or vision benefits to any Allergan Employee, AbbVie shall use its reasonable best efforts to cause (1) all pre-existing condition exclusions and actively-at-work requirements of such New Plan to be waived for such employee and his or her covered dependents, unless and to the extent the individual, immediately prior to entry in the New Plans, was subject to such conditions under the comparable Old Plans, and (2) any eligible expenses incurred by such employee and his or her covered dependents during the portion of the plan year of the Old Plan ending on the date such employee's participation in the corresponding New Plan begins to be taken into account under such New Plan for purposes of satisfying all deductible, coinsurance and maximum out-of-pocket requirements applicable to such employee and his or her covered dependents for the applicable plan year as if such amounts had been paid in accordance with such New Plan.
(d) AbbVie hereby acknowledges that a "change of control" (or similar phrase) within the meaning of any Allergan Benefit Plan will occur at or prior to the Effective Time, as applicable.
(e) AbbVie and Allergan shall cooperate in respect of consultation obligations and similar notice and bargaining obligations owed to any employees or consultants of Allergan or any Subsidiary of Allergan, or any of their respective bargaining representatives, in accordance with all applicable Laws and works council or other bargaining agreements, if any. Allergan shall satisfy all such obligations prior to the Effective Time.
(f) AbbVie and Allergan agree to the additional matters set forth in Section 7.4(f) of the Allergan Disclosure Schedule.
(g) Nothing contained in this Section 7.4 (whether express or implied) shall (i) create or confer any rights, remedies or claims upon any employee of Allergan or any of its Affiliates or any right of employment or engagement or continued employment or engagement or any particular term or condition of employment or engagement for any Allergan Employee or any other Person, (ii) be considered or deemed to establish, amend, or modify any Allergan Benefit Plan or any other benefit or compensation plan, program, policy, agreement, arrangement, or Contract, (iii) prohibit or limit the ability of AbbVie or any of its Affiliates to amend, modify or terminate any benefit or compensation plan, program, policy, agreement, arrangement, or contract at any time assumed, established, sponsored or maintained by any of them or (iv) confer any rights or benefits (including any third-party beneficiary rights) on any Person other than the Parties.
Section 7.5 Stock Exchange Listing; Stock Exchange Delisting.
(a) AbbVie shall take all necessary action to cause all of the Share Consideration to be issued in the Acquisition to be approved for listing on the NYSE, subject only to official notice of issuance, prior to the Effective Date.
(b) Prior to the Effective Time, each of the Parties shall cooperate with the other Party in taking, or causing to be taken, all actions, and do or cause to be done all things, necessary, proper or advisable on its part under applicable Laws and rules and policies of the NYSE to enable the de-listing of Allergan Shares from the NYSE and the deregistration of Allergan Shares and other securities of Allergan under the Exchange Act as promptly as practicable after the Effective Time; provided that such delisting and deregistration shall not be effective until after the Effective Time.
Section 7.6 AbbVie Board of Directors. AbbVie shall take all necessary action to cause, effective at the Effective Time, (a) the number of members of the AbbVie Board to be increased by two and (b) the vacancies created by the foregoing clause (a) to be filled by two individuals, to be designated by mutual agreement of AbbVie and Allergan prior to the Effective Time, who are each serving as a director of Allergan immediately prior to the Effective Time, and who are independent with respect to AbbVie.
Section 7.7 Financing.
(a) From and after the date hereof until the earlier of the Completion and the valid termination of this Agreement pursuant to and in accordance with Article 9, in a timely manner so as not to delay the Completion, the AbbVie Parties shall use their reasonable best efforts to take, or cause to be taken, all appropriate action, and to do, or cause to be done, all things necessary, proper or advisable to consummate, no later than the date the Completion is required to occur pursuant to this Agreement, the Financing and obtain the proceeds thereof. The AbbVie Parties shall keep Allergan informed on a reasonably current basis of the status of their efforts to arrange the Financing, including providing Allergan with (i) copies of all executed credit agreements and indentures and any amendments, modifications, replacements or waivers thereto (or notice that such documents have been publicly filed) and (ii) prompt written notice of (A) the receipt of any notice or other communication from any Financing Source with respect to such Financing Source's failure or anticipated failure to fund its commitments under any definitive agreements relating to the Financing, (B) any material breach or material default by any party to such definitive agreements of which any AbbVie Party obtains knowledge, (C) any actual or, to the knowledge of any AbbVie Party, threatened in writing, withdrawal, repudiation, or termination of any of such definitive agreements, or (D) any material dispute or disagreement between or among any parties to such definitive agreements with respect to the obligations to fund the Financing or the amount of the Financing to be funded under such definitive agreements at the Completion; provided that in no event will the AbbVie Parties be under any obligation to disclose any information that is subject to attorney-client or similar privilege (provided that the AbbVie Parties shall use their respective reasonable best efforts to cause any such information to be disclosed in a manner that would not result in the loss of any such privilege).
(b) Notwithstanding anything contained in this Agreement to the contrary, the AbbVie Parties expressly acknowledge and agree that their obligations under this Agreement, including their obligations to consummate the Completion, are not conditioned in any manner upon the AbbVie Parties obtaining the Financing or any other financing.
Section 7.8 Section 16 Matters. Prior to the Effective Time, AbbVie and Allergan shall take all such steps as may be required (to the extent permitted under applicable Law) to cause any dispositions of Allergan Shares (including derivative securities with respect to Allergan Shares) or acquisitions of AbbVie Shares (including derivative securities with respect to AbbVie Shares) resulting from the transactions contemplated by this Agreement by each individual who is subject to the reporting requirements of Section 16(a) of the Exchange Act with respect to Allergan, or will become subject to such reporting requirements with respect to AbbVie, to be exempt under Rule 16b-3 promulgated under the Exchange Act.
Section 7.9 Financing Cooperation.
(a) Until the earlier of the Completion and the valid termination of this Agreement pursuant to and in accordance with Article 9, Allergan shall use its reasonable best efforts, and shall cause each of its Subsidiaries to use its reasonable best efforts, and shall use its reasonable best efforts to cause its and their respective officers, employees and advisors and other Representatives, including legal and accounting advisors, to use their reasonable best efforts, to provide to AbbVie and its Subsidiaries such assistance as may be reasonably requested by AbbVie in writing that is customary in connection with the arranging, obtaining and syndication of the Financing, including using reasonable best efforts with respect to:
(i) participating in and assisting with the due diligence, syndication or other marketing of the Financing, including using reasonable best efforts with respect to (A) the participation by members of management of Allergan with appropriate seniority in a reasonable number of meetings, presentations, road shows, drafting sessions, due diligence sessions and sessions with prospective lenders, investors and rating agencies, at times and at locations reasonably acceptable to Allergan and upon reasonable notice, (B) assisting with AbbVie's preparation of customary materials for registration statements, offering documents, private placement memoranda, bank information memoranda, prospectuses, rating agency presentations and similar documents required in connection with the Financing (collectively, "Marketing Material") and due diligence sessions related thereto, (C) delivering and consenting to the inclusion or incorporation in any SEC filing related to the Financing of the historical audited consolidated financial statements and unaudited consolidated interim financial statements of Allergan included or incorporated by reference into the Allergan SEC Documents (the "Historical Financial Statements") and (D) delivering customary authorization letters, management representation letters, confirmations, and undertakings in connection with the Marketing Material (in each case, as applicable, subject to customary confidentiality provisions and disclaimers);
(ii) timely furnishing AbbVie and its Financing Sources with historical financial and other customary information (collectively, the "Financing Information") with respect to Allergan and its Subsidiaries as is reasonably requested by AbbVie or its Financing Sources and customarily required in Marketing Material for Financings of the applicable type, including all Historical Financial Statements and other customary information with respect to Allergan and its Subsidiaries (A) of the type that would be required by Regulation S-X and Regulation S-K under the Securities Act if the Financing were incurred by AbbVie and registered on Form S-3 under the Securities Act, including audit reports of annual financial statements to the extent so required (which audit reports shall not be subject to any "going concern" qualifications), or (B) reasonably necessary to permit AbbVie to prepare pro forma financial statements customary for Financings of the applicable type;
(iii) providing to AbbVie's legal counsel and its independent auditors such customary documents and other customary information relating to Allergan and its Subsidiaries as may be reasonably requested in connection with their delivery of any customary negative assurance opinions and customary comfort letters relating to the Financing;
(iv) causing Allergan's independent auditors to provide customary cooperation with the Financing;
(v) obtaining the consents of Allergan's independent auditors to use their audit reports on the audited Historical Financial Statements of Allergan and to references to such independent auditors as experts in any Marketing Material and registration statements and related government filings filed or used in connection with the Financing;
(vi) obtaining Allergan's independent auditors' customary comfort letters and assistance with the accounting due diligence activities of the Financing Sources;
(vii) causing the Financing to benefit from the existing lender relationships of Allergan and its Subsidiaries;
(viii) providing documents reasonably requested by AbbVie or the Financing Sources relating to the repayment or refinancing of any indebtedness for borrowed money of Allergan or any of its Subsidiaries to be repaid or refinanced on the Completion Date and the release of related liens and/or guarantees (if any) effected thereby, including customary payoff letters and (to the extent required) evidence that notice of any such repayment has been timely delivered to the holders of such indebtedness, in each case in accordance with the terms of the definitive documents governing such indebtedness (provided that any such notice or payoff letter shall be expressly conditioned on the Completion);
(ix) procuring consents to the reasonable use of all of Allergan's logos in connection with the Financing (provided that such logos are used solely in a manner that is not intended to and is not reasonably likely to harm or disparage Allergan or its Subsidiaries or the reputation or goodwill of Allergan or any of its Subsidiaries); and
(x) providing at least three (3) Business Days in advance of the Completion Date such documentation and other information about Allergan and its Subsidiaries as is reasonably requested in writing by AbbVie at least ten (10) Business Days in advance of the Completion Date in connection with the Financing that relates to applicable "know your customer" and anti-money laundering rules and regulations, including without limitation, the USA PATRIOT ACT.
Notwithstanding anything to the contrary in this Section 7.9(a) or Section 7.9(b) below, (A) none of Allergan nor any of its Subsidiaries shall be required to take or permit the taking of any action pursuant to this Section 7.9(a) or Section 7.9(b) below to (i) pay any commitment or other fee or incur any liability (other than thirdparty costs and expenses that are to be promptly reimbursed by AbbVie upon request by Allergan pursuant to Section 7.9(c)), (ii) execute or deliver any definitive financing documents or any other agreement, certificate, document or instrument, or agree to any change to or modification of any existing agreement, certificate, document or instrument, in each case that would be effective prior to the Completion Date or would be effective if the Completion does not occur (except (x) to the extent required by Section 7.9(b), applicable Allergan Supplemental Indentures, (y) customary officers' certificates relating to the execution thereof that would not conflict with applicable Law and would be accurate in light of the facts and circumstances at the time delivered and (z) the authorization letter and management representation letters delivered pursuant to the clause (i)(D) above), (iii) provide access to or disclose information that Allergan or any of its Subsidiaries reasonably determines would jeopardize any attorney-client privilege of Allergan or any of its Subsidiaries (provided that Allergan shall, and shall cause its Subsidiaries to, use their respective reasonable best efforts to cause any such information to be disclosed in a manner that would not result in the loss of any such privilege), (iv) deliver or cause its Representatives to deliver any legal opinion or negative assurance letter (except, in connection with the entry into an Allergan Supplemental Indenture required by Section 7.9(b), Allergan shall, and shall cause its Subsidiaries to, use their respective reasonable best efforts to cause counsel to Allergan or its Subsidiaries, as applicable, to deliver a customary opinion of counsel to the trustee under the applicable Indenture that the Allergan Supplemental Indenture amends if such trustee requires an opinion of counsel to Allergan in connection therewith (provided that such opinions would not conflict with applicable Law and would be accurate in light of the facts and circumstances at the time delivered)), (v) be an issuer or other obligor with respect to the Financing prior to the Completion, (vi) commence any Allergan Note Offers and Consent Solicitations or (vii) prepare any pro forma financial information or projections, (B) none of the Allergan Board, officers of Allergan, or directors and officers of the Subsidiaries of Allergan shall be required to adopt resolutions or consents approving the agreements, documents or instruments pursuant to which the Financing is obtained or any Allergan Note Offers and Consent Solicitations is consummated (except the execution and delivery of any applicable Allergan Supplemental Indentures), and (C) neither Allergan nor any of its Subsidiaries shall be required to take or permit the taking of any action that would (i) interfere unreasonably with the business or operations of Allergan or its Subsidiaries, (ii) cause any representation or warranty in this Agreement to be breached by Allergan or any of its Subsidiaries (unless waived by AbbVie), (iii) cause any director, officer or employee or shareholder of Allergan or any of its Subsidiaries to incur any personal liability or (iv) result in a material violation or breach of, or a default under, any material Contract to which Allergan or any of its Subsidiaries is a party, the Organizational Documents of Allergan or its Subsidiaries or any applicable Law. AbbVie shall cause all non-public or other confidential information provided by or on behalf of Allergan or any of its Subsidiaries or Representatives pursuant to this Section 7.9 to be kept confidential in accordance with the Confidentiality Agreement; provided, that Allergan acknowledges and agrees that the confidentiality undertakings that will be obtained in connection with syndication of the Financing will be in a form customary for use in the syndication of acquisition-related debt during a takeover offer period in compliance with the requirements of the Panel and the Takeover Rules.
(b) Cooperation as to Certain Indebtedness. AbbVie or one or more of its Subsidiaries may (i) commence any of the following: (A) one or more offers to purchase any or all of the outstanding debt issued under the Indentures for cash (the "Offers to Purchase"); or (B) one or more offers to exchange any or all of the outstanding debt issued under the Indentures for securities issued by AbbVie or any of its Affiliates (the "Offers to Exchange"); and (ii) solicit the consent of the holders of debt issued under the Indentures regarding certain proposed amendments to the applicable Indenture (the "Consent Solicitations" and, together with the Offers to Purchase and Offers to Exchange, if any, the "Allergan Note Offers and Consent Solicitations"); provided that the closing of any such transaction shall not be consummated until the Completion and any such transaction shall be funded using consideration provided by AbbVie. Any Allergan Note Offers and Consent Solicitations shall be made on such terms and conditions (including price to be paid and conditionality) as are proposed by AbbVie and which are permitted by the terms of the applicable Indenture and applicable Laws, including SEC rules and regulations. AbbVie shall consult with Allergan regarding the material terms and conditions of any Allergan Note Offers and Consent Solicitations, including the timing and commencement of any Allergan Note Offers and Consent Solicitations and any tender deadlines. AbbVie shall have provided Allergan with the necessary offer to purchase, offer to exchange, consent solicitation statement, letter of transmittal, press release, if any, in connection therewith, and each other document relevant to the transaction that will be distributed by AbbVie in the applicable Allergan Note Offers and Consent Solicitations (collectively, the "Debt Offer Documents") a reasonable period of time in advance of commencing the applicable Allergan Note Offers and Consent Solicitations to allow Allergan and its counsel to review and comment on such Debt Offer Documents, and AbbVie shall give reasonable and good faith consideration to any comments made or input provided by Allergan and its legal counsel. Subject to the receipt of the requisite holder consents, in connection with any or all of the Consent Solicitations, Allergan shall execute a supplemental indenture to the applicable Indenture in accordance with the terms thereof amending the terms and provisions of such Indenture as described in the applicable Debt Offer Documents in a form as reasonably requested by AbbVie (each, an "Allergan Supplemental Indenture"); provided that the amendments effected by such supplemental indenture shall not become operative until the Completion. Subject to the second paragraph of Section 7.9(a) above, until the earlier of the Completion and the valid termination of this Agreement pursuant to and in accordance with Article 9 Allergan shall use its reasonable best efforts, and shall cause each of its Subsidiaries to use its reasonable best efforts, and shall use its reasonable best efforts to cause its and their respective Representatives to use their reasonable best efforts, to provide all reasonable and customary cooperation as may be reasonably requested by AbbVie in writing to assist AbbVie in connection with any Allergan Note Offers and Consent Solicitations (including upon AbbVie's written request, using reasonable best efforts to cause Allergan's independent accountants to provide customary consents for use of their reports to the extent required in connection with any Allergan Note Offers and Consent Solicitations). The dealer manager, solicitation agent, information agent, depositary or other agent retained in connection with any Allergan Note Offers and Consent Solicitations will be selected and retained by AbbVie, and their fees and out-of-pocket expenses will be paid directly by AbbVie. If, at any time prior to the completion of the Allergan Note Offers and Consent Solicitations, Allergan or any of its Subsidiaries, on the one hand, or AbbVie or any of its Subsidiaries, on the other hand, discovers any information that should be set forth in an amendment or supplement to the Debt Offer Documents, so that the Debt Offer Documents shall not contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary in order to make the statements therein, in light of circumstances under which they are made, not misleading, such party that discovers such information shall use reasonable best efforts to promptly notify the other Party, and an appropriate amendment or supplement prepared by AbbVie describing such information shall be disseminated to the holders of the applicable notes, debentures or other debt securities of Allergan or its Subsidiaries outstanding under the applicable Indenture. The consummation of any or all of the Allergan Note Offers and Consent Solicitations shall not be a condition to Completion.
(c) AbbVie shall, promptly upon request by Allergan, reimburse Allergan for all reasonable and documented third-party out-of-pocket costs and expenses (including attorneys' fees) incurred by Allergan or its Subsidiaries in connection with the cooperation, and shall indemnify and hold harmless Allergan, its Subsidiaries and their respective Representatives from and against any and all liabilities, losses, damages, claims, expenses (including attorneys' fees), interest, judgments and penalties suffered or incurred by them, in connection with this Section 7.9 (other than to the extent resulting from (x) information provided by Allergan or its Subsidiaries in writing in accordance with the terms hereof to the extent such information, as provided, is inaccurate or misleading or (y) Allergan's or its Subsidiaries' or Representatives' willful misconduct or gross negligence, as determined by a final non-appealable judgment of a court of competent jurisdiction), in each case whether or not the Completion is consummated or this Agreement is terminated.
Section 7.10 Transaction Litigation. Subject to the last sentence of this Section 7.10, each of Allergan and AbbVie shall promptly notify the other of any stockholder Actions (including derivative claims) commenced against it, its Subsidiaries and/or its or its Subsidiaries' respective directors or officers relating to this Agreement or any of the transactions contemplated hereby or any matters relating thereto (collectively, "Transaction Litigation") and shall keep the other Party informed regarding any Transaction Litigation. Other than with respect to any Transaction Litigation where the Parties are adverse to each other, each of Allergan and AbbVie shall reasonably cooperate with the other in the defense or settlement of any Transaction Litigation, and shall give the other Party the opportunity to consult with it regarding the defense and settlement of such Transaction Litigation and shall consider in good faith the other Party's advice with respect to such Transaction Litigation, and Allergan shall give AbbVie the opportunity to participate in (but not control), at AbbVie's expense, the defense and settlement of such Transaction Litigation. Prior to the Effective Time, other than with respect to Transaction Litigation where the Parties are adverse to each other, neither Allergan nor any of its Subsidiaries shall settle or offer to settle any Transaction Litigation without the prior written consent of AbbVie (which consent shall not be unreasonably withheld, conditioned or delayed). Notwithstanding anything to the contrary in this Section 7.10, in the event of any conflict with any other covenant or agreement contained in Section 7.2 that expressly addresses the subject matter of this Section 7.10, Section 7.2 shall govern and control.
Section 7.11 Dividends. Each of Allergan and AbbVie shall coordinate with the other on the payment of dividends with respect to Allergan Shares and AbbVie Shares, and the declaration and setting of record dates and payment dates relating thereto, in respect of any calendar quarter so that Allergan Shareholders do not receive dividends on both the Allergan Shares and AbbVie Shares received in the Acquisition in respect of the same calendar quarter or fail to receive a dividend on either Allergan Shares or AbbVie Shares received in the Acquisition in respect of any calendar quarter.
Section 7.12 State Takeover Statutes. Each of AbbVie and Allergan shall (a) take all action necessary so that no "moratorium," "control share acquisition," "fair price," "supermajority," "affiliate transaction" or "business combination" statute or regulation or other similar state anti-takeover Law, or any similar provision of the Organizational Documents of Allergan or the Organizational Documents of AbbVie, as applicable, is or becomes applicable to the Scheme, the Acquisition or any of the other transactions contemplated hereby, and (b) if any such Law or provision is or becomes applicable to the Scheme, the Acquisition or any other transactions contemplated hereby, cooperate and grant such approvals and take such actions as are reasonably necessary so that the transactions contemplated hereby may be consummated as promptly as practicable on the terms contemplated hereby and otherwise act to eliminate or minimize the effects of such Law on the Scheme, the Acquisition or the other transactions contemplated hereby.
Section 7.13 Acquirer Sub. Until the Effective Time, AbbVie shall at all times be the direct or indirect owner of all of the outstanding shares of capital stock of Acquirer Sub. AbbVie shall take all action necessary to cause Acquirer Sub to perform its obligations under this Agreement and to consummate the Acquisition on the terms and subject to the conditions set forth in this Agreement.
ARTICLE 8
COMPLETION OF ACQUISITION AND MERGER
Section 8.1 Completion.
(a) Completion Date. Completion shall take place at 9:00 a.m., New York City time, on a date to be selected by AbbVie in consultation with Allergan as promptly as reasonably practicable following, but not later than the third Business Day (or such shorter period of time as remains before 5:00 p.m., New York City time, on the End Date) after, the satisfaction or, in the sole discretion of the applicable Party, waiver (where applicable) of all of the Conditions ("Completion Date") (other than those Conditions that by their nature are to be satisfied at the Completion Date, but subject to the satisfaction or waiver of such Conditions at the Completion Date) with the exception of Condition 2(iv) (but subject (where applicable) to the satisfaction or waiver (where applicable) of such Condition) or at such other date and/or time as may be mutually agreed to by AbbVie and Allergan in writing, it being agreed that, only if reasonably practicable, Completion shall take place on the date that Condition 2(iii) is satisfied. Completion shall take place at the offices of Kirkland & Ellis LLP, 601 Lexington Avenue, New York, New York 10022, or at such other place as may be mutually agreed to by AbbVie and Allergan in writing.
(b) On or prior to Completion:
(i) Allergan shall cause a meeting of the Allergan Board (or a duly authorized committee thereof) to be held at which resolutions are passed (conditional on registration of the Court Order with the Registrar of Companies occurring and effective as of the Effective Time) approving:
(A) the allotment and issue to Acquirer Sub (and/or its respective nominee) in accordance with the Scheme of the number of new shares in the capital of Allergan provided for in the Scheme;
(B) the removal of the directors of Allergan as AbbVie shall determine; and
(C) the appointment of such persons as AbbVie may nominate as the directors of Allergan.
(ii) Allergan shall deliver to AbbVie statements of Allergan Finco Inc., a Delaware corporation, and Allergan Pharma Inc., a Delaware corporation, which meet the requirements of Treasury Regulation Section 1.897‑2(h)(1)(i), dated within 30 days prior to the Completion Date, in form and substance reasonably acceptable to AbbVie.
(c) On or substantially concurrently with the Completion and subject to and in accordance with the terms and conditions of the Scheme:
(i) in respect of each Allergan Share subject to the Scheme, AbbVie shall pay or cause to be paid the Cash Consideration to the applicable Allergan Shareholder (and/or their nominees);
(ii) AbbVie shall issue and deliver or cause to be delivered 0.8660 (as it may be adjusted pursuant to Section 8.1(c)(v), the "Exchange Ratio") of an AbbVie Share (the "Share Consideration" and, together with the Cash Consideration and any cash in lieu of Fractional Entitlements due to an Allergan Shareholder, the "Scheme Consideration") to the applicable Allergan Shareholder (and/or their nominees), which Share Consideration shall be duly authorized, validly issued, fully paid and non-assessable and free of Liens (other than any restrictions imposed by applicable Law) and pre-emptive rights; provided, however, that no fractions of AbbVie Shares ("Fractional Entitlements") shall be issued by AbbVie to the Allergan Shareholders under this Section 8.1(c)(ii), and all Fractional Entitlements that would otherwise have been due to any Allergan Shareholders shall be aggregated and sold in the market by the Exchange Agent with the net proceeds of any such sale distributed pro rata to such Allergan Shareholders in accordance with the Fractional Entitlements to which they would otherwise have been entitled;
(iii) Allergan shall deliver to AbbVie:
(A) a certified copy of the resolutions referred to in Section 8.1(b)(i);
(B) letters of resignation from the directors that are removed from Allergan in accordance with Section 8.1(b)(i)(B) (each such letter to contain an acknowledgement that such resignation is without any claim or right of action of any nature whatsoever outstanding against Allergan or the Allergan Group or any of their officers or employees for breach of contract, compensation for loss of office, redundancy or unfair dismissal or on any other grounds whatsoever in respect of the removal); and
(C) share certificates in respect of the aggregate number of shares in the capital of Allergan to be issued to AbbVie (and/or its nominee) in accordance with the Scheme;
(iv) Allergan shall cause an office copy of the Court Order and a copy of the minute required by Section 86 of the Act to be filed with the Companies Registration Office and obtain from the Registrar of Companies a Certificate of Registration in relation to the reduction of share capital involved in the Scheme, each of which (in the case of such Court Order, minute and Certificate of Registration) shall be provided by Allergan to AbbVie immediately following Allergan's receipt thereof; and
(v) if the Acquisition would otherwise result in the issuance of AbbVie Shares in excess of 19.99% of the AbbVie Shares outstanding immediately prior to the Completion (as reasonably determined by AbbVie) (the "Share Cap"), the Exchange Ratio shall be reduced by the smallest number (rounded to the nearest 0.0001) that causes the total number of AbbVie Shares issuable in the Acquisition to not exceed the Share Cap (the "Exchange Ratio Modification Number"), and the Cash Consideration shall be increased by an amount in cash equal to (x) the Exchange Ratio Modification Number multiplied by (y) the VWAP of the AbbVie Shares.
(d) Exchange of Allergan Shares.
(i) Exchange Agent. At or immediately following the Completion, AbbVie shall deposit, or cause to be deposited, with the Exchange Agent, for the benefit of the Allergan Shareholders, (A) certificates or, at AbbVie's option, evidence of shares in book-entry form representing the aggregate Share Consideration, (B) cash in an amount equal to the aggregate amount of Cash Consideration and (C) cash in an amount equal to the aggregate amount of cash in lieu of Fractional Entitlements due to the Allergan Shareholders. All shares and cash deposited with the Exchange Agent pursuant to the preceding sentence shall hereinafter be referred to as the "Allergan Exchange Fund".
(ii) Exchange Procedures. As promptly as reasonably practicable after the Effective Time, and in any event within five Business Days after the Effective Time, AbbVie shall cause the Exchange Agent to mail to each holder of record of a certificate or certificates which immediately prior to the Effective Time represented Allergan Shares and each holder of record of non-certificated Allergan Shares represented by book-entry shares that is entitled to receive the Scheme Consideration pursuant to Section 8.1(c)(i) a letter of transmittal and instructions for use in receiving payment of the Scheme Consideration. Each holder of record of such Allergan Shares shall be entitled to receive promptly following the Effective Time: (a) the amount of cash payable in respect of the Cash Consideration that such holder has the right to receive pursuant to Section 8.1(c)(i)plus the amount of any cash payable in lieu of any Fractional Entitlements that such holder has the right to receive pursuant to Section 8.1(c)(ii) and (b) that number of AbbVie Shares into which such holder's Allergan Shares were converted pursuant to Section 8.1(c)(ii). No interest shall be paid or shall accrue for the benefit of holders of the Allergan Shares on the Scheme Consideration payable in respect of the Allergan Shares.
(iii) Termination of Allergan Exchange Fund. Any portion of the Exchange Fund which has not been transferred to the holders of Allergan Shares within twelve months of the Completion Date shall be delivered to AbbVie or its designee(s) promptly upon demand by AbbVie, it being understood that no such delivery shall affect any legal right that an Allergan Shareholder may have to receive the Scheme Consideration.
(iv) No Liability. None of AbbVie, Acquirer Sub, Allergan or the Exchange Agent or any of their respective Affiliates, directors, officers, employees and agents shall be liable to any person in respect of any Scheme Consideration (or dividends or distributions with respect thereto) from the Allergan Exchange Fund delivered to a public official pursuant to any applicable abandoned property, escheat or similar Law.
(v) Withholding. Notwithstanding anything herein to the contrary, AbbVie, Allergan, the Exchange Agent and their respective Affiliates shall be entitled to deduct and withhold from any amount payable pursuant to this Agreement to any Person who was a holder of an Allergan Share subject to the Scheme such amounts as AbbVie, Allergan, the Exchange Agent or such Affiliate is required to deduct and withhold with respect to the making of such payment under the Code or any other provision of federal, state, local or non-U.S. Tax law. To the extent that amounts are so withheld and timely paid over to the appropriate Tax Authority, such withheld amounts shall be treated for all purposes of this Agreement as having been paid to the Person to whom such consideration would otherwise have been paid.
ARTICLE 9
TERMINATION
Section 9.1 Termination.
(a) This Agreement may be terminated and the Acquisition and the other transactions contemplated hereby may be abandoned at any time prior to the Effective Time, notwithstanding receipt of the Allergan Shareholder Approval (except in the case of Section 9.1(a)(ii)(B) or Section 9.1(a)(iii)(B)):
(i) by either Allergan or AbbVie:
(A) if the Court Meeting or the EGM shall have been completed and the Court Meeting Resolution or the Required EGM Resolutions, as applicable, shall not have been approved by the requisite majorities; or
(B) if the Effective Time shall not have occurred by 5:00 p.m., New York City time, on the End Date, provided that the right to terminate this Agreement pursuant to this Section 9.1(a)(i)(B) shall not be available to a Party whose breach of any provision of this Agreement shall have been the primary cause of the failure of the Effective Time to have occurred by such time;
(C) if the High Court shall decline or refuse to sanction the Scheme, unless both Parties agree in writing that the decision of the High Court shall be appealed (it being agreed that Allergan shall make such an appeal if requested to do so in writing by AbbVie and the counsel appointed by AbbVie and by Allergan agree that doing so is a reasonable course of action);
(D) if there shall be in effect any (x) Law other than an order, writ, decree, judgment or injunction described in clause (y) (whether or not final or appealable) (excluding any such Antitrust Law of any jurisdiction that is not a jurisdiction listed on Section 7.2(b) of the Allergan Disclosure Schedule) in any jurisdiction of competent authority or (y) final and non-appealable order, writ, decree, judgment, or injunction issued, promulgated, made, rendered or entered into by any court or other tribunal of competent jurisdiction, that, in the case of each of clauses (x) and (y), permanently restrains, enjoins, makes illegal or otherwise prohibits the consummation of the Acquisition; provided that the right to terminate this Agreement pursuant to this Section 9.1(a)(i)(D) shall not be available to any Party whose breach of any provision of this Agreement shall have been the primary cause of such Law, order, writ, decree, judgment, or injunction;
(ii) by Allergan:
(A) if any AbbVie Party shall have breached or failed to perform in any material respect any of its covenants or other agreements contained in this Agreement or if any of its representations or warranties set forth in this Agreement are inaccurate, which breach, failure to perform or inaccuracy (1) would result in a failure of Condition 5(ii) or 5(iii) and (2) is not reasonably capable of being cured by the End Date or, if curable, is not cured by the earlier of (x) the End Date and (y) 30 days following written notice by Allergan thereof;
(B) prior to obtaining the Allergan Shareholder Approval, if (1) in accordance with Section 5.3, the Allergan Board shall have authorized Allergan to terminate this Agreement under this Section 9.1(a)(ii)(B) in response to an Allergan Superior Proposal and (2) substantially concurrently with such termination, a definitive agreement providing for the consummation of such Allergan Superior Proposal is duly executed and delivered by all parties thereto and, prior to or substantially concurrently with such termination, Allergan pays AbbVie any amounts due under the Expenses Reimbursement Agreement (it being understood that, without limiting Allergan's obligations under the Expenses Reimbursement Agreement, only such costs and expenses for which AbbVie shall have submitted to Allergan in writing a request for such amounts and written invoices or written documentation supporting such request prior to such termination in accordance with the Expenses Reimbursement Agreement shall be due substantially concurrently with such termination);
(iii) by AbbVie:
(A) if Allergan shall have breached or failed to perform in any material respect any of its covenants or other agreements contained in this Agreement or if any of its representations or warranties set forth in this Agreement are inaccurate, which breach, failure to perform or inaccuracy (1) would result in a failure of Condition 4(ii) or 4(iii) and (2) is not reasonably capable of being cured by the End Date or, if curable, is not cured by the earlier of (x) the End Date and (y) 30 days following written notice by AbbVie thereof;
(B) if, prior to the receipt of the Allergan Shareholder Approval, an Allergan Change of Recommendation shall have occurred; and
(iv) by mutual written consent of Allergan and AbbVie.
(b) The valid termination of this Agreement pursuant to and in accordance with Section 9.1(a) shall not give rise to any liability of the Parties except as provided in the Expenses Reimbursement Agreement, in the proviso to Section 9.1(c) and in Section 9.2. Section 7.9(c) and Article 10 (other than Section 10.1 and 10.12) of this Agreement shall survive, and continue in full force and effect, notwithstanding its termination.
(c) Subject to the proviso in this Section 9.1(c), upon valid termination of this Agreement pursuant to and in accordance with this Article 9, neither Party nor any of its Affiliates or its and their Representatives or shareholders shall have any liability in connection with this Agreement or the Acquisition, other than the obligation of Allergan (if applicable) to pay the AbbVie Reimbursement Payments pursuant to the Expenses Reimbursement Agreement) and the obligation of AbbVie (if applicable) to pay Allergan the Reverse Termination Payment; provided, however, that nothing herein shall release any Party from liability (including any monetary damages or other appropriate remedy) for Willful Breach or for fraud or as provided for in the Confidentiality Agreement.
(d) For clarity, termination of this Agreement shall be without prejudice to the provisions of the Expenses Reimbursement Agreement.
Section 9.2 Certain Effects of Termination.
(a) In the event of a Specified Termination, then AbbVie shall pay to Allergan $1,250,000,000 (the "Reverse Termination Payment") in cleared, immediately available funds within three (3) Business Days thereafter; provided, that Allergan shall not be entitled to receive the Reverse Termination Payment if Allergan's breach of this Agreement shall have been the primary cause of such Specified Termination.
(b) "Specified Termination" means a valid termination of this Agreement pursuant to:
(i) Section 9.1(a)(i)(B) if, on the date of such termination, each of the Conditions has been satisfied (other than any of Conditions 3(ii), 3(iii), 3(iv), 3(v) or 3(vi)(d) (which failure to be satisfied, in the case of each of Conditions 3(v) and 3(vi)(d), results pursuant to or in connection with an Antitrust Law in any jurisdiction listed on Section 7.2(b) of the Allergan Disclosure Schedule), or any Condition that by its nature can only be satisfied on the Sanction Date); or
(ii) Section 9.1(a)(i)(D) pursuant to or in connection with an Antitrust Law in any jurisdiction listed on Section 7.2(b) of the Allergan Disclosure Schedule.
(c) Each of the Parties acknowledges that the agreements contained in this Section 9.2 are an integral part of the Acquisition and that the Reverse Termination Payment is not a penalty, but rather is a reasonable amount that will compensate Allergan in the circumstances in which such payment is payable for the efforts and resources expended and opportunities foregone while negotiating this Agreement and in reliance on this Agreement and on the expectation of the consummation of the Acquisition, which amount would otherwise be impossible to calculate with precision. In addition, if AbbVie fails to pay in a timely manner the Reverse Termination Payment, then AbbVie shall reimburse Allergan for its reasonable costs and expenses (including disbursements and fees of counsel) incurred in connection with any Action to obtain such payment, together with interest on the Reverse Termination Payment from and including the date payment of such amount was due to but excluding the date of actual payment at the prime rate set forth in The Wall Street Journal in effect on the date such payment was required to be made plus 2%.
ARTICLE 10
GENERAL
Section 10.1 Announcements. Subject to the requirements of applicable Law or the applicable rules of any securities exchange or Governmental Entity (including the Panel), the Parties shall consult with each other as to the terms of, the timing of and the manner of publication of any formal public announcement which either Party may make primarily regarding the Acquisition, the Scheme or this Agreement. AbbVie and Allergan shall each give the other a reasonable opportunity to review and comment upon any such public announcement and shall not issue any such public announcement prior to such consultation, except as may be required by applicable Law or the applicable rules of any securities exchange or Governmental Entity (including the Panel). For clarity, the provisions of this Section 10.1 do not apply to any announcement, document or publication in connection with an Allergan Alternative Proposal, Allergan Superior Proposal or an Allergan Change of Recommendation or any amendment to the terms of the Scheme proposed by AbbVie that would effect an increase in the Scheme Consideration whether before or after an Allergan Change of Recommendation.
Section 10.2 Notices.
(a) Any notice or other document to be served under this Agreement may be delivered by overnight delivery service (with proof of service) or hand delivery, or sent in writing (including facsimile or email transmission, the receipt of which is confirmed), to the Party to be served as follows:
(i) if to AbbVie, to:
AbbVie Inc.
1 North Waukegan Road
North Chicago, Illinois 60064-6400
Attention: Laura J. Schumacher, Vice Chairman, External Affairs and Chief Legal Officer
Facsimile: (847) 935-3294
with copy to:
Kirkland & Ellis LLP
601 Lexington Avenue
New York, NY 10022
Email: [email protected], [email protected]
Fax: (212) 446-4900
Attention: Eric Schiele, P.C., Jonathan L. Davis, P.C.
and
McCann FitzGerald
Riverside One, Sir John Rogerson's Quay
Dublin 2, D02 X576, Ireland
Email: [email protected], [email protected]
Fax: (+353) 1 829 0010
Attention: Stephen FitzSimons, David Byers
(ii) if to Allergan, to:
Allergan plc
Clonshaugh Business and Technology Park,
Coolock, Dublin, D17 E400, Ireland
Fax: (862) 261-8223
Attention: Executive Vice President, Chief Legal Officer and Corporate Secretary
with copy to:
Allergan plc
5 Giralda Farms
Madison, New Jersey 07940
Fax: (862) 261-8223
Attention: Executive Vice President, Chief Legal Officer and Corporate Secretary
and
Wachtell, Lipton, Rosen & Katz
51 West 52nd Street
New York, NY 10019
Fax: (212) 403-2000
Email: [email protected], [email protected], [email protected]
Attention: Andrew R. Brownstein, Esq., Igor Kirman, Esq., Elina Tetelbaum, Esq.
and
Arthur Cox
Ten Earlsfort Terrace
D02 T380, Dublin, Ireland
Fax: (+353) 1 920 1020
Email: [email protected], [email protected], [email protected]
Attention: Geoff Moore, Cian McCourt, John Barrett
or such other postal or email address or fax number as it may have notified to the other Party in writing in accordance with the provisions of this Section 10.2.
(iii) All such notices, requests and other communications shall be deemed received on the date of receipt by the recipient thereof if received prior to 5:00 p.m. (addressee's local time) on a Business Day. Otherwise, any such notice, request or communication shall be deemed to have been received on the next succeeding Business Day.
Section 10.3 Assignment. Neither Party shall assign all or any part of its rights or obligations under this Agreement without the prior written consent of the other Party; provided that AbbVie may assign any or all of its rights and obligations hereunder, in whole or from time to time in part, to one or more of its Subsidiaries and Acquirer Sub may assign its rights and obligations hereunder, in whole or from time to time in part, to any other wholly owned Subsidiary of AbbVie (provided, that the prior consent in writing has been obtained from the Panel in respect of each such assignment), but no such assignment shall relieve AbbVie or Acquirer Sub, as applicable, of its obligations hereunder.
Section 10.4 Counterparts. This Agreement may be executed in any number of counterparts, all of which, taken together, shall constitute one and the same agreement, and each Party may enter into this Agreement by executing a counterpart and delivering it to the other Party (by hand delivery, facsimile process, e-mail or otherwise).
Section 10.5 Amendment. No amendment of this Agreement shall be binding unless the same shall be evidenced in writing duly executed by each of the Parties, except that, following approval by the Allergan Shareholders, there shall be no amendment to the provisions hereof which by applicable Law would require further approval by the Allergan Shareholders without such further approval nor shall there be any amendment or change not permitted under applicable Law. Notwithstanding anything to the contrary herein, this Section 10.5, Sections 10.13(c) and 10.13(d), Section 10.14 and Section 10.15 may not be amended, supplemented, waived or otherwise modified in any manner adverse to the Financing Sources without the prior written consent of such Financing Sources party to any definitive agreement relating to the Financing (it being expressly agreed that the Financing Sources in their capacities as such shall be third party beneficiaries of this Section 10.5 and shall be entitled to the protections of the provisions contained in this Section 10.5 as if they were a party to this Agreement).
Section 10.6 Entire Agreement. This Agreement, together with the Confidentiality Agreement, the Expenses Reimbursement Agreement, the Rule 2.5 Announcement and any documents delivered by AbbVie and Allergan in connection herewith (including the AbbVie Disclosure Schedule and the Allergan Disclosure Schedule), constitutes the entire agreement and supersedes all prior agreements and understandings, both written and oral, between AbbVie and Allergan with respect to the subject matter hereof, it being understood that the Confidentiality Agreement shall survive the execution and delivery of this Agreement.
Section 10.7 Inadequacy of Damages. The Parties acknowledge and agree that irreparable harm would occur and that the Parties would not have any adequate remedy at Law (i) for any breach of any of the provisions of this Agreement or (ii) in the event that any of the provisions of this Agreement were not performed in accordance with their specific terms. It is accordingly agreed that, except where this Agreement is validly terminated in accordance with Section 9.1, the Parties shall be entitled to seek an injunction or injunctions to prevent breaches or threatened breaches of this Agreement and to specifically enforce the terms and provisions of this Agreement, without proof of actual damages, and each Party further agrees to waive any requirement for the securing or posting of any bond in connection with such remedy. Subject to Section 9.1(c), the Parties further agree that (x) by seeking the remedies provided for in this Section 10.7, a Party shall not in any respect waive its right to seek any other form of relief that may be available to a Party under this Agreement and (y) nothing contained in this Section 10.7 shall require any Party to institute any proceeding for (or limit any party's right to institute any proceeding for) specific performance under this Section 10.7 before exercising any termination right under Section 9.1 (and pursuing damages after such termination), nor shall the commencement of any action pursuant to this Section 10.7 or anything contained in this Section 10.7 restrict or limit any Party's right to terminate this Agreement in accordance with the terms of Section 9.1 or pursue any other remedies under this Agreement that may be available then or thereafter.
Section 10.8 Disclosure Schedule References and SEC Document References.
(a) The Parties agree that each section or subsection of the Allergan Disclosure Schedule or the AbbVie Disclosure Schedule, as applicable, shall be deemed to qualify the corresponding section or subsection of this Agreement, irrespective of whether or not any particular section or subsection of this Agreement specifically refers to the Allergan Disclosure Schedule or the AbbVie Disclosure Schedule, as applicable. The Parties further agree that (other than with respect to any items disclosed in Section 6.1(A)(k) of the Allergan Disclosure Schedule or Section 6.2(A)(h) of the AbbVie Disclosure Schedule, for which an explicit reference in any other section shall be required in order to apply to such other section) disclosure of any item, matter or event in any particular section or subsection of either the Allergan Disclosure Schedule or the AbbVie Disclosure Schedule shall be deemed disclosure with respect to any other section or subsection of the Allergan Disclosure Schedule or the AbbVie Disclosure Schedule, as applicable, to which the relevance of such disclosure would be reasonably apparent on its face, notwithstanding the omission of a cross-reference to such other section or subsections.
(b) The Parties agree that in no event shall any disclosure contained in any part of any Allergan SEC Document or AbbVie SEC Document entitled "Risk Factors", "Forward-Looking Statements", "Cautionary Statement Regarding Forward-Looking Statements", "Special Note Regarding Forward Looking Statements" or "Note Regarding Forward Looking Statements" or any other disclosures in any Allergan SEC Document or AbbVie SEC Document that are cautionary, predictive or forward-looking in nature be deemed to be an exception to (or a disclosure for purposes of or otherwise qualify) any representations and warranties of any Party contained in this Agreement.
Section 10.9 Remedies and Waivers. No delay or omission by either Party in exercising any right, power or remedy provided by Law or under this Agreement shall affect that right, power or remedy or operate as a waiver of it. The exercise or partial exercise of any right, power or remedy provided by Law or under this Agreement shall not preclude any other or further exercise of it or the exercise of any other right, power or remedy.
Section 10.10 Severability.
(a) If any term, provision, covenant or condition of this Agreement or the Acquisition is held by a court of competent jurisdiction or other Governmental Entity to be invalid, void or unenforceable, the Parties shall negotiate in good faith to modify this Agreement or, as appropriate, the terms and conditions of this Agreement and the Acquisition, so as to effect the original intent of the Parties as closely as possible in an equitable manner in order that the transactions contemplated hereby may be consummated as originally contemplated to the fullest extent possible in accordance with applicable Law.
(b) If at any time any provision of this Agreement is or becomes illegal, invalid or unenforceable in any respect under the Law of any jurisdiction, that shall not affect or impair (i) the legality, validity or enforceability in that jurisdiction of any other provision of this Agreement; or (ii) the legality, validity or enforceability under the Law of any other jurisdiction of that or any other provision of this Agreement.
Section 10.11 No Partnership and No Agency.
(a) Nothing in this Agreement and no action taken by the Parties pursuant to this Agreement shall constitute, or be deemed to constitute, a partnership, association, joint venture or other co-operative entity between any of the Parties.
(b) Nothing in this Agreement and no action taken by the Parties pursuant to this Agreement shall constitute, or be deemed to constitute, either Party the agent of the other Party for any purpose. No Party has, pursuant to this Agreement, any authority or power to bind or to contract in the name of the other Party to this Agreement.
Section 10.12 Costs and Expenses. Except as otherwise provided in this Agreement (including Section 7.9 hereof) and the Expenses Reimbursement Agreement, all costs and expenses incurred in connection with this Agreement shall be paid by the Party incurring such cost or expense, except that (a) the Panel's document review fees shall be borne by AbbVie, (b) the costs associated with the filing, printing, publication and proposing of the Rule 2.5 Announcement shall be borne one hundred percent (100%) by AbbVie, (c) the costs associated with the filing, printing, publication and proposing of the Scheme Document, Proxy Statement and any other materials required to be proposed to Allergan Shareholders pursuant SEC rules, the Act or the Takeover Rules shall be borne one hundred percent (100%) by Allergan, (d) the filing fees incurred in connection with notifications with any Governmental Entities under any Antitrust Laws, shall be borne one hundred percent (100%) by AbbVie and (e) the cost incurred in connection with soliciting proxies in connection with the Court Meeting and the EGM shall be borne one hundred percent (100%) by Allergan.
Section 10.13 Governing Law and Jurisdiction.
(a) This Agreement and all Actions based upon, arising out of or related to this Agreement or the transactions contemplated hereby shall be governed by, and construed in accordance with, the Laws of the State of Delaware; provided, however, that the Acquisition and the Scheme and matters related thereto (including matters related to the Takeover Rules) shall, to the extent required by the Laws of Ireland, and the interpretation of the duties of directors of Allergan shall, be governed by, and construed in accordance with, the Laws of Ireland.
(b) Each of the Parties irrevocably agrees that the state and federal courts sitting in the State of Delaware, and any appellate courts therefrom, are to have exclusive jurisdiction to settle any Action based upon, arising out of or related to this Agreement or the transactions contemplated hereby and, for such purposes, irrevocably submits to the exclusive jurisdiction of such courts and waives, to the fullest extent permitted by Law, any objection which any of them may now or hereafter have to the laying of venue of, and the defense of an inconvenient forum to the maintenance of, any such Action in any such court. Any Action based upon, arising out of or related to this Agreement or the transactions contemplated hereby shall therefore be brought in the state and federal courts sitting in the State of Delaware, and any appellate courts therefrom. Notwithstanding the forgoing, the Scheme and matters related to the sanction thereof shall be subject to the jurisdiction of the High Court and any appellate courts therefrom.
(c) Each of the Parties acknowledges and irrevocably agrees (i) that any Action (whether at Law, in equity, in contract, in tort or otherwise) arising out of, or in any way relating to, the Financing or the performance of services thereunder or related thereto against or by any Financing Source in its capacity as such shall be subject to the exclusive jurisdiction of any state or federal court sitting in the Borough of Manhattan, New York, New York, and any appellate court therefrom, and each Party hereto submits for itself and its property with respect to any such Action to the exclusive jurisdiction of such courts, (ii) not to bring or permit any of its Affiliates to bring or support anyone else in bringing any such Action in any other court, (iii) to waive and hereby waive, to the fullest extent permitted by Law, any objection which any of them may now or hereafter have to the laying of venue of, and the defense of an inconvenient forum to the maintenance of, any such Action in any such court, (iv) that a final judgment in any such Action shall be conclusive and may be enforced in other jurisdictions by suit on the judgment or in any other manner provided by Law and (v) that any such Action shall be governed by, and construed in accordance with, the Laws of the State of New York (it being expressly agreed that the Financing Sources in their capacities as such shall be third party beneficiaries of this Section 10.13(c) and shall be entitled to enforce the provisions contained in this Section 10.13(c) as if they were a party to this Agreement).
(d) EACH PARTY HERETO HEREBY WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY ACTION ARISING OUT OF THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT, THE FINANCING, OR THE PERFORMANCE OF SERVICES THEREUNDER OR RELATED THERETO (INCLUDING ANY ACTION, PROCEEDING OR COUNTERCLAIM), INCLUDING IN ANY ACTION AGAINST OR BY ANY FINANCING SOURCE IN ITS CAPACITY AS SUCH, INCLUDING ANY ACTION DESCRIBED IN SECTION 10.13(C)(I) IN ANY SUCH COURT DESCRIBED IN SECTION 10.13(C)(I) (IT BEING EXPRESSLY AGREED THAT THE FINANCING SOURCES IN THEIR CAPACITIES AS SUCH SHALL BE THIRD PARTY BENEFICIARIES OF THIS Section 10.13(d) AND SHALL BE ENTITLED TO ENFORCE THE PROVISIONS CONTAINED IN THIS Section 10.13(d) AS IF THEY WERE A PARTY TO THIS AGREEMENT).
Section 10.14 Third Party Beneficiaries.
Except:
(a) as provided in Section 7.3;
(b) as provided in Section 7.9(c);
(c) as provided in Section 10.5;
(d) as provided in Section 10.13(c);
(e) as provided in Section 10.13(d);
(f) as provided in this Section 10.14; and
(g) as provided in Section 10.15
this Agreement is not intended to confer upon any person other than Allergan and the AbbVie Parties any rights or remedies under or by reason of this Agreement.
Section 10.15 Waiver of Claims Against Financing Sources. Without limiting in any respect the liabilities of the Financing Sources to AbbVie or its Affiliates, or the remedies of AbbVie or its Affiliates against the Financing Sources under any other agreement to which they are both parties, none of the Financing Sources shall have any liability to the Parties or their Affiliates relating to or arising out of this Agreement, whether at Law or equity, in contract, in tort or otherwise, and neither the Parties nor any of their Affiliates will have any rights or claims against the Financing Sources under this Agreement. Notwithstanding anything herein to the contrary, in no event shall Allergan or its Affiliates be entitled to seek the remedy of specific performance of this Agreement against any of the Financing Sources (it being expressly agreed that the Financing Sources in their capacities as such shall be third party beneficiaries of this Section 10.15 and shall be entitled to enforce the provisions contained in this Section 10.15 as if they were a party to this Agreement).
Section 10.16 Non Survival of Representations and Warranties. The representations, warranties, covenants and agreements contained in this Agreement and in any certificate or other writing delivered pursuant hereto shall not survive the Effective Time or the valid termination of this Agreement pursuant to and in accordance with Article 9, except that (i) Section 7.3 and Article 8 shall survive the Effective Time, and (ii) Section 7.9(c), Sections 9.1(b)-(d) and this Article 10 shall survive the valid termination of this Agreement pursuant to and in accordance with Article 9.
IN WITNESS
whereof the Parties have entered into this Agreement on the date specified above.
GIVEN under the common seal
of ALLERGAN PLC
/s/ A. Robert D. Bailey
Name: A. Robert D. Bailey
Title: EVP and Chief Legal Officer and Corporate Secretary
IN WITNESS
whereof the Parties have entered into this Agreement on the date specified above.
SIGNED for and on behalf of
ABBVIE INC. by its authorized signatory:
/s/ Robert A. Michael
Name: Robert A. Michael
Title: Senior Vice President, Chief Financial Officer
IN WITNESS whereof the Parties have entered into this Agreement on the date specified above.
SIGNED for and on behalf of
VENICE SUBSIDIARY, LLC by its authorized signatory:
/s/ Scott T. Reents
Name: Scott T. Reents
Title: Vice President
SOURCE AbbVie
Share this article | ABBV | 137.3 |
https://jp.reuters.com/article/abbvie-allergan-idJPKCN1TQ28M | 米アッヴィ、「ボトックス」のアラガン買収 630億ドル | ［２５日 ロイター］ - 米製薬大手アッヴィABBV.Nは２５日、
しわ取り薬「ボトックス」で知られるアイルランドの製薬会社アラガンAGN.Nを約６３０億ドルで買収すると... | Jun 25, 2019 | ロイター | ［２５日 ロイター］ - 米製薬大手アッヴィABBV.Nは２５日、 しわ取り薬「ボトックス」で知られるアイルランドの製薬会社アラガンAGN.Nを約６３０億ドルで買収すると発表した。
アラガンの株主は１株当たりアッヴィ株０．８６６０株と現金１２０．３０ドルを受け取る。１株当たりの買収額は合計で１株１８８．２４ドルと、前日の終値に４５％上乗せした水準となる。
債務を含む買収総額は８３０億ドル。
買収のニュースを受け、アラガンの株価は約３０％急騰し、１６８．２５ドルに上昇。アッヴィ株は約１５％安で推移している。
買収後、アッヴィは本社をデラウェアに置き、リチャード・ゴンザレス氏が会長兼最高経営責任者（ＣＥＯ）を務める。
両社は買収により、手続き完了後の最初の１年の調整後１株利益が１０％押し上げられるとしている。
アッヴィは、主力の関節リウマチ治療薬「ヒュミラ」が欧州で安価の後発薬の競争にさらされ、主要市場の米国では２０２３年に特許が切れることから、ポートフォリオの多様化を迫られていた。
アラガンを巡っては、競合大手ファイザーPFE.Nが２０１６年に１６００億ドルの買収案を撤回。それ以降、アラガンの株価は約５０％値下がりしており、投資家の間から会社分割もしくは身売りを求める声が上がっていた。
私たちの行動規範：トムソン・ロイター「信頼の原則」 | ABBV | 137.3 |
https://seekingalpha.com/article/4273142-dividend-aristocrat-performance-june-2019 | Dividend Aristocrat Performance: June 2019 (BATS:NOBL) | Dividend Aristocrat Performance: June 2019. Jul. 02, 2019 11:20 AM
ETProShares S&P 500 Dividend Aristocrats ETF (NOBL)ABBV... | Jul 2, 2019 | Seeking Alpha | Dividend Aristocrat Performance: June 2019
Summary
- Components of the S&P 500 that have paid steadily increasing dividends for at least 25 years have outperformed the broader market over time.
- This article demonstrates that historic outperformance and lists the current Dividend Aristocrat constituents and their recent returns.
- The Dividend Aristocrats posted a +7.17% return in June, outperforming the broad market in a bounce back month for equity returns.
- By showing the recent performance of the Dividend Aristocrats, some active dividend growth investors may be able to suss out relative bargains.
In June 2019, the Dividend Aristocrat Index (BATS:NOBL) produced a 7.17% total return, outpacing the 7.05% total return for the broad S&P 500 Index (SP500). Last month's disappointing -5.52% return for the Dividend Aristocrats was the 15th worst monthly return in data dating to 1990; this month's 7.17% return was the 15th best monthly return (out of 354 observations) in the same dataset. The bounce back month for the Dividend Aristocrat Index produced its best return since October 2015.
The table below lists the 57 constituents sorted descending by indicated dividend yield and lists returns over trailing 1-, 3-, 6-, and 12-month periods. Performance data is through the end of June.
Although the Dividend Aristocrats outperformed the broad market during May's trade-related sell-off, the strategy's Industrial overweight led to some performance drag. A.O. Smith (AOS) - 24.5%, Emerson Electric (EMR) -14.6%, Stanley Black & Decker (SWK) -16.5%, and Caterpillar (CAT) -13.8% all faced varying degrees of concern regarding their Chinese businesses or the potential impact of escalating tariffs on their businesses. These companies helped lead the bounce back in June as AOS, EMR, SWK, and CAT posted returns of 16.4%, 10.8%, 14.3%, and 13.8% respectively. That two-month round trip is still negative for these Industrial companies, but that might give value-based dividend investors companies to watch for if episodic trade-related tensions once again pressure the share prices of these historical dividend growth plays. Other companies with strong gains on the month included steel recycler Nucor (NUE), aerospace firm General Dynamics (GD), and diversified global manufacturer Dover (DOV). The industrial gas companies - Air Products (APD) and Linde (LIN) - also posted low double-digit returns.
Of the 57 constituents, 54 posted positive returns in June. The only company down more than 1% was AbbVie (ABBV), which fell 16.3% on June 25th after announcing the planned allocation of Botox-maker Allergan. Through the first half of 2019, AbbVie is now the worst performing Dividend Aristocrat. AbbVie, the global pharma company, was spun out in 2013 from Abbott Laboratories (ABT). Both have continued to pay steadily rising dividends, maintaining status as Dividend Aristocrats. Since the 2013 spin, AbbVie's dividend has grown by roughly 170%, and CEO Richard Gonzalez reiterated a commitment to dividend growth in his comments about the recent transformative acquisition.
The 16.3% one-day drop for AbbVie was one of the largest of any Dividend Aristocrat since the market bottomed in 2009 as seen in the table below.
As I outlined in "A Brief History of Dividend Crashes", Dividend Aristocrats have tended to bounce back from these one day corrections. Of the 9 companies that have had 10% daily drops where we have forward return data for a full year, the arithmetic average return has been a very strong 28% over the next one year.
Whether AbbVie's current share price is viewed prospectively as a good value will depend on the company's ability to service the debt it will take on for this acquisition. From my work in Dividend Aristocrats and Credit Ratings, of the 52 companies with public debt outstanding only 3 companies - Becton Dickinson (BDX), Pentair (PNR), and Roper Technologies (ROP) - have median credit ratings from the major rating agencies lower than the targeted mid-BBB ratings of AbbVie. After acquiring Allergan, the company projects to use its strong operating cash flow to reduce debt by $15-$18B by 2021. If this stock is to continue to be a solid dividend growth story, the companies will have to integrate while successfully meeting the trio of competing demands on cash - business investment, debt reduction, and rising shareholder payouts.
We have seen increased volatility in the performance of the Dividend Aristocrats in the last two months. On average, the constituents have delivered on their long-run history of outperforming in down markets and keeping pace with the broader market in up markets. A little volatility could create opportunities for long-term focused Seeking Alpha dividend growth investors. I hope this screen of the Dividend Aristocrats proved useful to Seeking Alpha readers trying to determine which dividend growers to build their portfolio around. I continue to prefer owning all of them through the ProShares S&P 500 Dividend Aristocrats ETF.
Additional disclosure: Disclaimer: My articles may contain statements and projections that are forward-looking in nature, and therefore inherently subject to numerous risks, uncertainties, and assumptions. While my articles focus on generating long-term risk-adjusted returns, investment decisions necessarily involve the risk of loss of principal. Individual investor circumstances vary significantly, and information gleaned from my articles should be applied to your own unique investment situation, objectives, risk tolerance, and investment horizon.
This article was written by
Analyst’s Disclosure: I am/we are long NOBL, SPY. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.
Seeking Alpha's Disclosure: Past performance is no guarantee of future results. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. Any views or opinions expressed above may not reflect those of Seeking Alpha as a whole. Seeking Alpha is not a licensed securities dealer, broker or US investment adviser or investment bank. Our analysts are third party authors that include both professional investors and individual investors who may not be licensed or certified by any institute or regulatory body.
Comments (10) | ABBV | 137.3 |
https://finance.yahoo.com/news/britney-spears-photoshop-fail-spotted-by-fans-095325546.html | Fans tease Britney Spears for 'photoshop fail' | Today's Research Daily features new research reports on 16 major stocks,
including PepsiCo, Inc. (PEP), AbbVie Inc. (ABBV) and Honeywell
International Inc. | Jul 2, 2019 | Yahoo Finance | Fans tease Britney Spears for 'photoshop fail'
Britney Spears’ fans have spotted what they believe to be a photoshop fail in one of the singer’s recent selfies - and they’re not letting her get away with it.
The pop princess recently shared a snap of herself wearing a cute, ‘Baby One More Time’-inspired outfit - complete with a check mini-skirt and midriff-baring white shirt.
But eagle-eyed social media followers spotted that the drawers in the background of the shot are distorted - a tell-tale sign that the 37-year-old likely edited the pic to cinch in her waist.
“The counter said: 〰️” wrote one fan.
“When you edit your pics to make your hips look slimmer you need to work on fixing the background,” another advised.
The draws do not appear distorted in another video she later posted from the same angle.
Others saw the funny side, joking that the hit-maker was “so skinny she bent the drawers.”
“It’s not facetune sweeties it’s gravitational waves because she’s so skinny, go back to school kids,” quipped another.
“She is so skinny that she actually affects the furniture around her to make it look skinny as well.”
One fan had a solution to Brit’s social media faux pas - hire a Millennial!
“I think u should get a young assistant who would take Instagram pics of you!!!!” they suggested.
Get your applications in now, kids.
By Gillian Wolski, Lifestyle & Entertainment Producer | ABBV | 137.3 |
https://jp.wsj.com/articles/SB11841944534654974904704585398082021104698 | 【バロンズ】アラガン買収、アッヴィの株価には愚策 | バイオ医薬品大手のアッヴィ（ABBV）が医薬品・医療器具大手のアボット・ラボラトリーズ（ABT）から分社して6年、アッヴィには有力製品「ヒュミラ」の特許切れという... | Jul 2, 2019 | ウォール・ストリート・ジャーナル | バロンズ 【バロンズ】アラガン買収、アッヴィの株価には愚策 By Josh Nathan-Kazis 2019 年 7 月 2 日 07:30 JST • 買収はヒュミラの特許切れ対策 ウォール・ストリート・ジャーナル日本版 WSJ の会員になってこの記事の続きを読みましょう 今すぐ申し込む 購読済みの方はこちらから? サインイン 広告 SPECIAL ADVERTISING SECTION アクセスランキング 潜水艇ツアー、スリリングな体験語る過去の乗客 タイタニック号観光潜水艇の圧壊、米海軍は数日前に検知 ドローンに命乞い、ロシア兵投降の一部始終 3割が年収1400万円 米大手企業の給与事情 ビットコイン現物ETF、承認なら「金の卵」 | ABBV | 137.3 |
https://seekingalpha.com/article/4282337-abbvie-will-be-formidable-after-acquiring-allergan | AbbVie Will Be Formidable After Acquiring Allergan (NYSE ... | ABBV is a large biopharmaceutical corporation whose success is primarily
driven by the blockbuster drug Humira, which makes up about 60% of the
company's... | Aug 6, 2019 | Seeking Alpha | AbbVie Will Be Formidable After Acquiring Allergan
Summary
- ABBV is a large biopharmaceutical corporation whose success is primarily driven by the blockbuster drug Humira, which makes up about 60% of the company's revenue.
- ABBV needs to diversify its revenue stream and pipeline and find a use for the current torrent of cash Humira produces.
- After combining AGN, Humira will likely be less than 40% of total revenue.
- ABBV will likely be able to finance this transaction and possibly refinance some existing debt at very low rates, where the lower interest expense will fund research and dividend increases.
AbbVie (NYSE:ABBV) is undervalued, and the company's plan to acquire Allergan (AGN) will provide both needed diversification and a focused use for the current torrent of free cash flow that AbbVie earns. More than half of AbbVie's sales come from Humira, a blockbuster immunosuppressive medication, and it needs to diversify away from Humira. This is a sensible plan that will bring needed diversification in multiple forms.
Pharmaceuticals and biotech companies are suffering due to political rhetoric that fuels uncertainty about pricing and many other key issues. AbbVie and Allergan are both profitable companies whose combined drug portfolios will achieve scale and diversification that neither company had before. AbbVie is likely to appreciate after the companies merge, and the market recognizes the probable ease with which AbbVie pays for Allergan. Moreover, AbbVie's financing of this transaction will likely occur at much lower than anticipated interest rates. For these reasons, AbbVie is likely to appreciate after it completes this transaction.
AbbVie needs to diversify and Allergan does it
AbbVie had hoped to diversify into neurology, but its phase 3 trial for Depatux-M phase 3 trial for Depatux-M failed and effectively destroyed the company's most hopeful path to organic diversification. As a result, the company is wise to otherwise obtain that needed diversification from Humira. Acquiring Allergan is a way to do that which provides a profitable portfolio of drugs that includes AbbVie's desired neurological diversification, as well as Allergan's highly differentiated core aesthetic drugs.
(Source: AbbVie's The Combination of AbbVie and Allergan presentation)
AbbVie recently updated its GAAP diluted EPS guidance and raised its previously announced adjusted 2019 EPS guidance range from $8.73 to $8.83 to $8.82 to $8.92. The company is performing reasonably well, but Humira will lose patent protection and is already facing biosimilar competition. The company's decision to use the considerable cash flow Humira currently generates to acquire diversification while Humira is still likely to perform well enough to finance the acquisition for at least a few years.
Allergan also brings with it some diversification from insurance risks. The company generates a significant amount of revenue from aesthetic or cosmetic treatments such as Botox, Juvederm and CoolSculpting, among others. These differentiated revenue streams should be a significant benefit for AbbVie over the long term.
Moreover, Allergan has a promising neuroscience division, including Vraylar, which is the fastest growing atypical antipsychotic in the U.S. and a possible future blockbuster, as well as some late-stage development drugs. Allergan also brings over $2 billion in revenue from eye care, nearly $2 billion in gastrointestinal revenue and a women's health division that is likely to bring in over $1 billion annually in the next decade.
AbbVie will finance this deal at great rates
AbbVie will be financing this transaction, but it is a good time for a large company to issue debt. It is likely that AbbVie will find reasonably strong demand for their debt and that it will be issued at rates lower than contemplated when formulating the deal due to the significant decline in interest rates. The annualized expense of paying for Allergan is likely to be much lower than AbbVie considered.
There is likely to be an extreme demand for U.S. dollar paying fixed income paper, which should be highly supportive of AbbVie's financing and probable refinancing endeavors. Moody's already indicated that the Allergan acquisition will provide "needed diversity, with a credible deleveraging plan."
AbbVie indicated it intends to pay down at least $15 billion in debt by the end of 2021. The company should be able to do that with its free cash flow, while still paying out the current dividend. Moreover, rapid uptake of any existing drugs could provide the ability to both earn more and pay down more debt.
Moody's indicated that an upgrade would be warranted if AbbVie could get its debt to EBITDA below 3.0, which is unlikely in the next two years but possible in three. In any case, it is incredibly likely that AbbVie's credit rating will remain relatively stable over the next several quarters and that there will be sufficient demand for its financing of the deal.
It is likely that AbbVie will remain under pressure until the deal is completed and financed, and largely due to the effects of that financing as well as the merger arbitrage of the deal, but the company should have the resources to meet expected obligations. Moreover, probable free cash flow should be enough to support AbbVie's dividend during deleveraging, and increases may be possible without adding new drugs, though they would likely help.
Conclusion
AbbVie is a relatively undervalued biopharmaceutical company that is likely to become a better diversified Pharma. Beyond adding diversification, this deal will give AbbVie scale and size. AbbVie's debt is likely to be in high demand, given that the global market is currently devouring U.S. denominated fixed income. For these reasons, AbbVie's debt should perform well in the near term. Moreover, after establishing that financing, AbbVie's equity is likely to receive a much better market valuation, as it will be a larger market participant that is no longer mostly reliant on a single drug.
This article was written by
Analyst’s Disclosure: I/we have no positions in any stocks mentioned, but may initiate a long position in ABBV, AGN over the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.
Seeking Alpha's Disclosure: Past performance is no guarantee of future results. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. Any views or opinions expressed above may not reflect those of Seeking Alpha as a whole. Seeking Alpha is not a licensed securities dealer, broker or US investment adviser or investment bank. Our analysts are third party authors that include both professional investors and individual investors who may not be licensed or certified by any institute or regulatory body.
Comments (67)
a Price based system for reimbursing drugs. They use Biosimilars, not to get the best patient outcomes , but for financial reasons.
The CEO is smart?
What is your explanation for Stemcentrx? Shire Pharmaceuticals? AngroGel?
Failed tender offer at $103 buyback?
Overpaying for failing AGN?Please tell be about the smart things CEO Gonzales has done. What I just cited amounted to over $15 billion in losses.
The stock is having trouble breaking $65 / share today on a very “up” day.
Remember this: “HOPE” is not a strategy.
The dividend is a TRAP to hold the stock LONG TERM as it retreats towards the 40’S.THIS IS AN OLD MAN, PENSIONER STOCK.
Are you pinning your hopes on Botox?
abbv to diversify. i csn diversify myself without paying premium. a stupid move.
Your article fails to mention the higher debt ratio of ABBV following the AGN acquisition.
You also failed to recognize the loss of revenue from HUMIRA as it approaches 2023. HUMIRA is still close to 65% of the total ABBV revenues.
You also fail to mention the poor deal making , extreme money losing deal record of Mr. Gonzales and ABBV (Stemcentrx, SHire Pharma., AndroGel, failed tender offer, AGN overpayment)Your analysis soft peddles these important failures.Also you did not mention that the dividends as a quarterly expense for ABBV are much too high and are a drag on the balance sheet. The dividends are not guaranteed.
Otherwise ABBV is plagued by debt. Humira revenues are under assault from biosimilars.
ABBV’s HUMIRA will have much lower revenues when it goes off patent. HUMIRA revenues are continuously decreasing.High debt with AGN and ABBV dividends are injeapardy to the balance sheet.Why does ABBV go down every day?
I question your waiting to add more. Firstly, in your opinion where's the "bottom"? And why would you want to lose more money than you are already?
It is worth $40's so what's magical of $50?
Excellent well written article that is informative, and makes a great point of the combined entity only having Humira as 40% of gross revenues . The pipeline is quite good and with label expansions for Imbruvica, , Upa has better efficacy than Humira and is safer . Skyrizi is already cannabilizing 5.9% of Humira revenues in Placque Psoriasis. Vrayler is the fastest growing Anti Psychotic at 70%. One item you didn’t mention is AGN CGRP for Migraine which will split the market with Amgen. What’s not to like. Perhaps the Bears will be taken back by your fine article. Even though it broke $65 today, I view it as the most undervalued name in BioPharm. Just maybe we’ll get lucky and see a short squeeze. Good job. | ABBV | 137.3 |
https://www.zacks.com/stock/news/459812/allergan-agn-q2-earnings-sales-top-19-sales-view-up | Allergan (AGN) Q2 Earnings & Sales Top, '19 Sales View Up | ABBV Quick Quote ABBV. Better trading starts here. Follow. Share on
StockTwits. You follow Analyst Blog - edit. You follow Zacks Equity
Research - edit... | Aug 6, 2019 | Zacks | Allergan plc’s second-quarter adjusted earnings came in at $4.38 per share, which beat the Zacks Consensus Estimate of $4.34 and came within the guided range of $4.20 and $4.40. Earnings however declined 0.9% year over year due to lower operating profits.
Revenues came in at $4.09 billion, which exceeded the Zacks Consensus Estimate of $3.94 billion as well as the guidance of $3.88 billion to $4.03 billion. Revenues fell 0.8% from the year-ago period primarily due to currency headwinds. Excluding the impact of currency, total revenues rose 1.2% as higher sales of key products like Botox (cosmetic and therapeutics), Juvéderm collection of fillers, Vraylar, Ozurdex, and Lo Loestrin made up for the loss of exclusivity on some brands and divestitures of some others in 2018.
Moreover, sales of Allergan’s blockbuster eye drug, Restasis also declined in the quarter ahead of anticipated generic competition. Also, decline in textured breast implants due to a global recall hurt sales.
Segment Discussion
Allergan reports revenues under three segments – U.S. General Medicine, U.S. Specialized Therapeutics and International.
U.S. Specialized net revenues declined 2.3% to $1.79 billion. Strong sales growth of its facial aesthetics products, Botox and Juvéderm and Botox Therapeutic was offset by decline in sales of Restasis and divestiture of Medical Dermatology business in September 2018. Sales of CoolSculpting and breast implants also declined in the quarter.
In Facial Aesthetics, Botox (cosmetic) raked in sales of $252.4 million, up 6.7% year over year. Juvéderm collection of fillers rose 12% to $156.6 million
Alloderm sales, however, fell 5.5% to $101.2 million while CoolSculpting sales of $78.9 million declined 27.1% year over year.
In Eye Care, while Ozurdex sales rose 8.3% to $29.9 million, Restasis sales fell 2.3% to $310.9 million.
Botox Therapeutic revenues were $447.0 million, up 5.9% year over year.
There have been concerns regarding possible new competitors to blockbuster product Botox. The entry of CGRP antibodies may have a negative impact on sales of Botox Therapeutics, mainly for the chronic migraine indication. Amgen (
AMGN Quick Quote AMGN - Free Report) , Eli Lilly ( LLY Quick Quote LLY - Free Report) and Teva Pharma’s CGRP migraine treatments, Aimovig, Emgality and Ajovy, respectively were all launched in 2018.
Meanwhile, in February, Evolus’ Jeuveau injection indicated to improve the appearance of glabellar or frown lines was approved by the FDA, which can pose competition to Botox. In the fall of 2019, Revance Therapeutics will file for approval of DaxibotulinumtoxinA for Injection (DAXI), a rival treatment to Botox for the frown lines indication. It has demonstrated longer duration of efficacy compared to Botox in late-stage studies.
U.S. General Medicine net revenues were up 10.3% year over year to $1.46 billion in the reported quarter as strong growth of Vraylar, Viibryd, Linzess and Lo Loestrin was offset by lower sales of drugs that lost exclusivity.
Linzess sales rose 2.2% to $196.0 million. Lo Loestrin sales grew 13.8% to $145.5 million while Bystolic sales rose 1.6% to $150.5 million. Vraylar sales were $196.1 million in the second quarter, 71.7% higher than the year-ago quarter, while Viibryd sales were $107.8 million, up 24.3% from the year-ago quarter. In May, Vraylar was approved for the new indication of bipolar depression, which may have contributed to higher sales of the drug in the quarter.
The
International segment recorded net revenues of $847.7 million, down 4.3% from the year-ago period, excluding the impact of foreign exchange as growth in Facial Aesthetics and Ozurdex implant was partially offset by regulatory changes for textured breast implants and lower glaucoma and eye drop revenues. Profits Decline
Adjusted operating income decreased 6.3% to $1.85 billion in the second quarter due to lower revenues and higher costs.
Selling, general and administrative expenses increased 2.5% to $1.16 billion in the second quarter, owing to higher marketing spending in Medical Aesthetics and for product launches.
Research and development (R&D) expenses rose 14.9% to $447.0 million due to pipeline progress.
2019 Guidance
Allergan slightly raised its sales guidance for 2019 while maintaining the previously issued earnings view.
Allergan expects sales to be in the range of $15.43-$15.63 billion, up from the previous guidance of $15.13-$15.43 billion. The company still estimates its adjusted earnings to be more than $16.55 per share.
Adjusted tax rate is expected to be approximately 13% in 2019 versus 13-13.5% expected previously. Adjusted R&D expense guidance was maintained in the range of approximately $1.6 - $1.7 billion while the SG&A range was increased from approximately $4.1 - $4.3 billion to approximately $4.4 - $4.5 billion. Adjusted gross margin is expected to be approximately 85%-85.5% (maintained).
Our Take
Allergan beat estimates for both earnings and sales in the second quarter and raised its sales guidance for the year. As expected, Allergan delivered a sequentially stronger top line performance in the second quarter. Shares were up less than 1% in pre-market trading on Tuesday. So far this year, Allergan’s share price has risen 20.2% against the
industry’s decrease of 5.9%.
Allergan’s key products like Botox and new products such as Viberzi and Vraylar are supporting sales. Allergan also continues to deliver on its R&D pipeline with some major product launches expected over the next couple of years. Biosimilars also represent significant opportunity. Allergan is also consistently paying down debt and cutting costs. However, in 2019, sales are expected to be hurt by loss of exclusivity of key drugs including Restasis.
Meanwhile, Allergan refrained from holding a conference call due to its proposed acquisition by AbbVie (
ABBV Quick Quote ABBV - Free Report) for a total transaction value of nearly $63 billion. The companies had announced the buyout deal in June. The deal is expected to close in early 2020. The acquisition by AbbVie could prove to be rewarding for Allergan’s shareholders. Moreover, with Restasis expected to face generic competition, fears of new competition to Botox and recent pipeline setbacks, the merger with AbbVie could prove to be the best way out for Allergan.
Allergan currently carries a Zacks Rank #3 (Hold). You can see
the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here .
Image: Bigstock
Allergan (AGN) Q2 Earnings & Sales Top, '19 Sales View Up
Allergan plc’s second-quarter adjusted earnings came in at $4.38 per share, which beat the Zacks Consensus Estimate of $4.34 and came within the guided range of $4.20 and $4.40. Earnings however declined 0.9% year over year due to lower operating profits.
Revenues came in at $4.09 billion, which exceeded the Zacks Consensus Estimate of $3.94 billion as well as the guidance of $3.88 billion to $4.03 billion. Revenues fell 0.8% from the year-ago period primarily due to currency headwinds. Excluding the impact of currency, total revenues rose 1.2% as higher sales of key products like Botox (cosmetic and therapeutics), Juvéderm collection of fillers, Vraylar, Ozurdex, and Lo Loestrin made up for the loss of exclusivity on some brands and divestitures of some others in 2018.
Moreover, sales of Allergan’s blockbuster eye drug, Restasis also declined in the quarter ahead of anticipated generic competition. Also, decline in textured breast implants due to a global recall hurt sales.
Segment Discussion
Allergan reports revenues under three segments – U.S. General Medicine, U.S. Specialized Therapeutics and International.
U.S. Specialized net revenues declined 2.3% to $1.79 billion. Strong sales growth of its facial aesthetics products, Botox and Juvéderm and Botox Therapeutic was offset by decline in sales of Restasis and divestiture of Medical Dermatology business in September 2018. Sales of CoolSculpting and breast implants also declined in the quarter.
In Facial Aesthetics, Botox (cosmetic) raked in sales of $252.4 million, up 6.7% year over year. Juvéderm collection of fillers rose 12% to $156.6 million
Alloderm sales, however, fell 5.5% to $101.2 million while CoolSculpting sales of $78.9 million declined 27.1% year over year.
In Eye Care, while Ozurdex sales rose 8.3% to $29.9 million, Restasis sales fell 2.3% to $310.9 million.
Botox Therapeutic revenues were $447.0 million, up 5.9% year over year.
There have been concerns regarding possible new competitors to blockbuster product Botox. The entry of CGRP antibodies may have a negative impact on sales of Botox Therapeutics, mainly for the chronic migraine indication. Amgen (AMGN - Free Report) , Eli Lilly (LLY - Free Report) and Teva Pharma’s CGRP migraine treatments, Aimovig, Emgality and Ajovy, respectively were all launched in 2018.
Meanwhile, in February, Evolus’ Jeuveau injection indicated to improve the appearance of glabellar or frown lines was approved by the FDA, which can pose competition to Botox. In the fall of 2019, Revance Therapeutics will file for approval of DaxibotulinumtoxinA for Injection (DAXI), a rival treatment to Botox for the frown lines indication. It has demonstrated longer duration of efficacy compared to Botox in late-stage studies.
U.S. General Medicine net revenues were up 10.3% year over year to $1.46 billion in the reported quarter as strong growth of Vraylar, Viibryd, Linzess and Lo Loestrin was offset by lower sales of drugs that lost exclusivity.
Linzess sales rose 2.2% to $196.0 million. Lo Loestrin sales grew 13.8% to $145.5 million while Bystolic sales rose 1.6% to $150.5 million. Vraylar sales were $196.1 million in the second quarter, 71.7% higher than the year-ago quarter, while Viibryd sales were $107.8 million, up 24.3% from the year-ago quarter. In May, Vraylar was approved for the new indication of bipolar depression, which may have contributed to higher sales of the drug in the quarter.
The International segment recorded net revenues of $847.7 million, down 4.3% from the year-ago period, excluding the impact of foreign exchange as growth in Facial Aesthetics and Ozurdex implant was partially offset by regulatory changes for textured breast implants and lower glaucoma and eye drop revenues.
Profits Decline
Adjusted operating income decreased 6.3% to $1.85 billion in the second quarter due to lower revenues and higher costs.
Selling, general and administrative expenses increased 2.5% to $1.16 billion in the second quarter, owing to higher marketing spending in Medical Aesthetics and for product launches.
Research and development (R&D) expenses rose 14.9% to $447.0 million due to pipeline progress.
2019 Guidance
Allergan slightly raised its sales guidance for 2019 while maintaining the previously issued earnings view.
Allergan expects sales to be in the range of $15.43-$15.63 billion, up from the previous guidance of $15.13-$15.43 billion. The company still estimates its adjusted earnings to be more than $16.55 per share.
Adjusted tax rate is expected to be approximately 13% in 2019 versus 13-13.5% expected previously. Adjusted R&D expense guidance was maintained in the range of approximately $1.6 - $1.7 billion while the SG&A range was increased from approximately $4.1 - $4.3 billion to approximately $4.4 - $4.5 billion. Adjusted gross margin is expected to be approximately 85%-85.5% (maintained).
Our Take
Allergan beat estimates for both earnings and sales in the second quarter and raised its sales guidance for the year. As expected, Allergan delivered a sequentially stronger top line performance in the second quarter. Shares were up less than 1% in pre-market trading on Tuesday. So far this year, Allergan’s share price has risen 20.2% against the industry’s decrease of 5.9%.
Allergan’s key products like Botox and new products such as Viberzi and Vraylar are supporting sales. Allergan also continues to deliver on its R&D pipeline with some major product launches expected over the next couple of years. Biosimilars also represent significant opportunity. Allergan is also consistently paying down debt and cutting costs. However, in 2019, sales are expected to be hurt by loss of exclusivity of key drugs including Restasis.
Meanwhile, Allergan refrained from holding a conference call due to its proposed acquisition by AbbVie (ABBV - Free Report) for a total transaction value of nearly $63 billion. The companies had announced the buyout deal in June. The deal is expected to close in early 2020. The acquisition by AbbVie could prove to be rewarding for Allergan’s shareholders. Moreover, with Restasis expected to face generic competition, fears of new competition to Botox and recent pipeline setbacks, the merger with AbbVie could prove to be the best way out for Allergan.
Allergan currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Allergan plc Price, Consensus and EPS Surprise
Allergan plc price-consensus-eps-surprise-chart | Allergan plc Quote
The Hottest Tech Mega-Trend of All
Last year, it generated $8 billion in global revenues. By 2020, it's predicted to blast through the roof to $47 billion. Famed investor Mark Cuban says it will produce ""the world's first trillionaires,"" but that should still leave plenty of money for regular investors who make the right trades early.
See Zacks' 3 Best Stocks to Play This Trend >> | ABBV | 137.3 |
https://www.reuters.com/article/us-allergan-results-idUSKCN1UW1KB | Allergan beats profit, raises revenue forecast on Restasis ... | (Reuters) - Allergan Plc AGN.N, which is being bought by AbbVie Inc ABBV.N
for $63 billion, beat quarterly profit estimates and raised its 2019
revenue... | Aug 6, 2019 | Reuters | (Reuters) - Allergan Plc AGN.N, which is being bought by AbbVie Inc ABBV.N for $63 billion, beat quarterly profit estimates and raised its 2019 revenue forecast on Tuesday, helped by demand for its dry eye drug Restasis and aesthetics product Juvederm.
The deal, announced in June, gives AbbVie access to Allergan’s lucrative drug Botox as it looks to diversify to counter looming competition for its blockbuster arthritis treatment Humira.
Botox sales rose 4.2% to $974 million in the second quarter, but missed consensus estimates of $992.3 million, according to six analysts polled by Refinitiv.
Total sales of Juvederm, a dermal filler used to restore facial contours, rose 11.3% to $329.3 million, beating estimates of $261.1 million.
Restasis reported a 3.4% drop in sales to $322.8 million, but trounced estimates of $211.75 million.
The drug faces impending competition from cheaper generic versions but delays in launch of copycat drugs have helped sales in the past few quarters.
Allergan said it now expects 2019 adjusted revenue of between $15.4 billion and $15.6 billion, from a prior range of $15.1 billion to $15.4 billion.
Net loss widened to $1.76 billion, or $5.37 per share, in the second quarter ended June 30, from $472.5 million, or $1.39 per share, a year ago.
The bigger loss related to a write-down in the value of its General Medicine unit by $1.09 billion, due to delays in clinical studies and a reduction in the expected value of some R&D projects.
Excluding items, Allergan earned $4.38 per share, beating analysts’ consensus of $4.35, according to IBES data from Refinitiv.
Revenue fell slightly to $4.09 billion in the quarter, hit by the global recall of the company’s Biocell textured breast implants. However, revenue still beat estimates of $3.94 billion.
Reporting by Aishwarya Venugopal, Tamara Mathias and Manas Mishra in Bengaluru; Editing by Sriraj Kalluvila
Our Standards: The Thomson Reuters Trust Principles. | ABBV | 137.3 |
https://finance.yahoo.com/news/john-travolta-is-the-surprise-secret-star-of-pitbulls-new-video-103244304.html | John Travolta is the surprise secret star of Pitbull's new music video | AbbVie (ABBV) has been one of the stocks most watched by Zacks.com users
lately. So, it is worth exploring what lies ahead for the stock. 4h ago. | Aug 6, 2019 | Yahoo Finance | John Travolta is the surprise secret star of Pitbull's new music video
One would assume that the bald fella in the new Pitbull video is, well, Pitbull.
But fans of 'Mr Worldwide' are being played all along, as a suited gentleman with a bald head and loafers with no socks ogles a series of gyrating women.
Read more: Pitbull persuaded John Travolta to go bald
As the clip for Pitbull's new single 3 To Tango enters its climactic final act, the suited gent in the seat stands up, and we discover that it was none other than... John Travolta all along.
He then joins three ladies to show off his tango skills.
It's not all as random as it seems – Travolta and the Miami-born rapper are, for some reason, pals.
The Pulp Fiction star said back in February: “A good friend, Armando Perez, Pitbull, he lives his life like this.
“He would send pictures of me, I have all my hair, and he'd superimpose no hair and say, 'I prefer this,' so I thought... Maybe it's time to do it.”
Pictures of Travolta from a New Year party with his daughter, in which he revealed his new look, soon went viral.
Read more: Grease star Olivia Newton-John on cancer battle
“The only other time I was a leading story was when I mispronounced at the Oscars,” he added (as no one can forget, he introduced the Frozen star Idina Menzel as 'Adele Dazeem').
Pitbull backs up the story too.
He told Jimmy Fallon: “He gave me an award at the Chinese Theater in Hollywood, so when I was there, he said 'Hey man, I like the look with the shaved head and the beard. Is it cool if I do that?'”
And the rest is history. | ABBV | 137.3 |
https://immuno-oncologynews.com/2019/08/06/icart-off-the-shelf-car-t-cell-therapy-moving-toward-clinical-trial-with-takeda/ | Off-the-shelf CAR T-Cell Therapy Moving Toward 1st Clinical ... | ABBV-181 · ABBV-428 · ABP798 · Actimmune · Adagloxad Simolenin · ADU-741
(JNJ-64041809 ) · ADXS-HER2 · ADXS-PSA · AE37 · AFM11 · AFM13... | Aug 6, 2019 | Immuno-Oncology News | A new chimeric antigen receptor (CAR) T-cell therapy derived from induced pluripotent stem cells (iPSCs) has been transferred to Takeda from the Center for iPS Cell Research and Application (CiRA) at Kyoto University to prepare for clinical testing.
Under the terms of the collaboration, Takeda shall retain the rights to develop and commercialize the product worldwide, while CiRA will be eligible to receive royalties for each development and approval milestone achieved. Both parties have agreed to continue working together while preparing for the 2021 launch of the first iCART clinical trial.
Autologous CAR T-cell therapy is a type of immunotherapy in which researchers collect a patient’s T-cells — immune cells with anti-cancer activity — and engineer them to recognize and eliminate cancer cells. The treated cells are then returned to the patient to fight the tumor.
But first-generation autologous CAR T-cell therapies required researchers to collect blood samples from patients to isolate their own T-cells, making the process extremely slow and expensive.
The iPSC-derived CAR T-cell product (iCART) is a new type of CAR T-cell therapy based on the use of a cell bank of identical master IPS cells — fully matured cells that can be reprogrammed back to a stem cell state, where they are able to grow into any type of cell.
Unlike a patient’s own T-cells, IPS cells can be an immediate and renewable source for the large-scale and cost-effective production of off-the-shelf CAR-T therapies that can be adapted to suit each patient’s needs. So far, preclinical studies with iCART in animal models have shown these engineered cells have a strong anti-tumor activity.
The iCART program was originally developed by Shin Kaneko, MD, PhD, a researcher at CiRA and a Takeda advisor.
“The iCART program demonstrates the value of our T-CiRA collaboration — applying iPSC technology to develop new approaches to drug discovery and creating a bridge to transfer promising programs to Takeda to accelerate them toward clinical development and therapeutic use,” Shinya Yamanaka, MD, PhD, director of CiRA and T-CiRA, who received a Nobel Prize in 2012 for his groundbreaking iPSC research, said in a press release.
T-CiRA started in 2015 as a 10-year research collaboration program between Takeda and CiRA. Under the direction of Yamanaka Takeda, the program is supporting several projects led by researchers at CiRA and other facilities focused on developing cutting-edge clinical applications of IPS cells in immuno-oncology, heart disease, diabetes, neuro-psychiatric disorders, and incurable muscle diseases.
“The iCART program demonstrates our commitment to bringing transformational, next-generation CAR-T therapies to patients by applying our translational cell therapy engine. Of Takeda’s 12 CAR-T programs in development, iCART is one of five with planned first-in-human studies by 2021,” said Andy Plump, MD, PhD, president of Research and Development at Takeda.
Takeda’s translational cell therapy engine is designed to transfer experimental cell therapies to the clinic. | ABBV | 137.3 |
https://www.trefis.com/stock/bac/articles/477902/which-u-s-bank-is-the-largest-holder-of-mortgage-backed-securities/2019-12-13 | Which U.S. Bank Is The Largest Holder Of Mortgage-Backed ... | Is Merck Stock A Better Pick Over ABBV? American Eagle Stock Has Upside
Potential To Its Pre-Inflation Peak · Alibaba Stock Looks Undervalued At
$80 Per... | Dec 13, 2019 | Trefis | Which U.S. Bank Is The Largest Holder Of Mortgage-Backed Securities?
Trefis highlights How Mortgage-Backed Securities Held By Major U.S. Banks Have Changed Since The Recession and finds that Bank of America holds the largest portfolio of mortgage-backed securities (MBS) among all commercial banks in the country. While there is sizable difference in how the portfolio of these once-reviled securities have changed for individual banks, the proportion of total MBS held by the 5 largest U.S. banks has steadily declined since the downturn.
What is a Mortgage-Backed Security and why it is important?
- A mortgage-backed security (MBS) is a type of asset-backed security similar to a bond that is made up of a bundle of home loans bought from the banks/agencies that issued them.
- Investors in MBS receive periodic payments similar to bond coupon payments.
- Government-backed agencies, federal banks, and private issuers can issue and guarantee MBSs.
- However, mortgage-backed security is only as good as the underlying mortgages.
Understanding How The Mortgage-Backed Securities Market Has Evolved After The Crisis:
#1. Total Mortgage-Backed Securities (MBS) In The U.S. Have Been On The Rise Since 2013
- Total MBSs issued across all markets in the US shrank for 5 consecutive years after the economic downturn of 2008 but has been seeing steady growth over the last 5 years.
- This metric stood at $9.4 trillion in 2007 and now stands at $9.7 trillion-an increase of just around 4%.
- However, we believe stricter regulations and keen oversight by the government has kept the growth of MBSs in check.
#2. Notably, the Share Of 5 Major US Commercial Banks Has Seen A Steady Decline Since 2009
- Total MBSs held by the 5 major commercial banks have gone up from $393 billion in 2007 to around $688 billion.
- Despite an increase in the dollar value, the share of these banks in MBS held by commercial banks has gone down from almost 63% in 2009 to less than 37% in 2018.
Below we take a look at how the contribution of each US bank has changed since the crisis:
Bank Of America Remains The Largest Holder Of MBSs, With Almost $350 Billion In These Securities On Its Balance Sheet
- Bank of America’s MBS portfolio shot up in 2008, increasing from around $163 billion to more than $230 billion thanks to its acquisition of Merrill Lynch.
- This metric has gradually increased since then, increasing from $234 billion in 2009 to more than $340 billion in 2018.
- BAC holds around 18% of the total MBS across U.S. commercial banks.
Wells Fargo’s MBS Portfolio Has Grew Steadily For Years Since The Recession, But Has Shrunk Over The Last Couple Of Years
- Wells Fargo’s MBSs value shot up in 2008, increasing from just around $55 billion to almost $100 billion due to the bank’s acquisition of Wachovia.
- This figure reached a peak level of $178 billion in 2016 before shrinking over the last couple of years to settle at $160 billion in 2018 – something that can be attributed to the Fed’s enforcement order restricting the bank’s ability to grow its balance sheet
JPMorgan’s Mortgage-Backed-Securities Balance Has Steadily Declined After Crisis
- JP Morgan’s MBS’s value was at a peak level of$187 billion in 2009 but since then it has declined steadily.
- Moreover, JPMorgan’s share of Commercial Banks’ MBS has fallen from 19% in 2009 to just 6% now.
Additional details regarding how MBSs held by Goldman Sachs and Citigroup have trended over the years are available are in our interactive dashboard.
Conclusion: Stake of major banks has steadily declined after the crisis
- MBSs held by 3 of the 5 largest U.S. commercial banks has declined steadily since the crisis.
- As of 2018, Bank of American accounted for half of the total mortgage-backed securities held by the 5 major banks.
- Notably, though, the share of each bank in the MBS portfolio of Commercial Banks has declined.
- Although the largest commercial banks have reduced their stake in the MBS market, other banks and private issuers are more than making up for the decline in MBSs held by the major banks as the housing market is growing at a steady pace in the U.S.
What’s behind Trefis? See How it’s Powering New Collaboration and What-Ifs
For CFOs and Finance Teams | Product, R&D, and Marketing Teams
Like our charts? Explore example interactive dashboards and create your own. | ABBV | 137.3 |
https://seekingalpha.com/article/4312599-mercks-strong-pipeline-projects-high-growth-potential | Merck's Strong Pipeline Projects High Growth Potential (NYSE ... | ... S&P 500 Index and the following peer group companies: AbbVie Inc.
(ABBV), Amgen Inc. (AMGN), AstraZeneca Plc (OTCMKTS: AZNCF), Bristol-Myers
Squibb... | Dec 15, 2019 | Seeking Alpha | Merck's Strong Pipeline Projects High Growth Potential
Summary
- The stock represents good value with an estimated upside of 15.15% with a target price of $102.44, backed by strong fundamentals.
- Merck & Co is expected to experience a double digit EPS growth, primarily driven by Keytruda, with sales to project at a CAGR of ~20% the next 5 years.
- Gardasil (HPV) will be the main growth driver for the Vaccine Portfolio, with sales to project at a CAGR of ~7% the next 5 years.
- Merck is committed to HIV research, as Anti-HIV Agent MK 8591 recently entered Phase 3 trials.
- Recent acquisition of ArQule looks favorable as Merck continues to expand its oncology pipeline.
Investment Thesis
We recommend a BUY rating for Merck & Co. (NYSE:MRK). The stock represents good value with an estimated upside of 15.15% with a target price of $102.44. The upside potential is driven by 1) Double digit EPS growth driven by Keytruda, primarily from first-line indications, 2) Gardasil (HPV) as the growth driver for the Vaccine Portfolio and 3) Commitment to HIV research, as Anti-HIV Agent MK 8591 recently entered Phase 3 trials. The risk to our recommendation and target price include setbacks from Keytruda franchise, loss of exclusivity on patent rights and new drug pricing rules. Through 2027, Merck & Co. is expected to experience growth from 6%-11% and double digit EPS growth of about 10%. Margin upside opportunities exist through operating margin upside with a high capital deployment optionality. With a flawless balance sheet, Merck & Co. continues to grow at above-market rates with a positive outlook and undervalued shares.
Analyst Research
Based on analysts offering 12 month price targets for Merck & Co. as of October 29-30, 2019. Based off of 10 analysts, the average price target is $98.40 with a high estimate of $105 and a low estimate of $90.
Source: Image created by author with data from Bloomberg Intelligence
Merck & Company Sales by Segment 2018A-2025E (in MM)
Source: Image created by author with data from JP Morgan and Merck & Co.
Merck & Co Composite Peer Group And S&P 500 Index
Source: Image created by author with data from Company 10K
The performance graph showcases an assumption of a $100 investment into Merck & Co, Inc., S&P 500 Index and the following peer group companies: AbbVie Inc. (ABBV), Amgen Inc. (AMGN), AstraZeneca Plc (OTCMKTS: AZNCF), Bristol-Myers Squibb Company (BMY), Johnson&Johnson (JNJ), Eli Lilly and Company (LLY), GlaxoSmithKline Plc. (GSK), Novartis AG (NVS), Pfizer Inc (PFE), Roche Holding AG (OTCMKTS:OTCQX:RHHBY) and Sanofi SA (SNY).
Catalysts
Keytruda's Robust Top-Line And Earnings Growth With Strong Positions in 1st Line Indications Also Addresses Cancer Types with the Highest Incidence
For 2019Q3, Keytruda’s sales increased 63% YoY to $3.1BN. By 2025, Merck will experience a 70% growth in Keytruda revenues globally. Driven by new indication approvals, increasing categories and expansion in international sales, Keytruda sales will rise from $7.2BN in 2018 to ~$23BN by 2025. In particular, NSCLC (non-small cell lung cancer), RCC (renal cell carcinoma aka kidney cancer) and other non-lung indications will contribute to Keytruda’s growth.
What is Keytruda? Keytruda (Pembrolizumab) is a humanized antibody used in cancer immunotherapy. Treatments for cancer include: melanoma, lung cancer, head and neck cancer, stomach cancer, liver cancer and much more indicators. The strategy of Keytruda in expanding its indications is to target the 1st line treatment setting (more prescriptions written) and into cancers with the largest patient populations. Merck is also investing in ongoing phase 3 clinical trials for other cancers including breast, prostate and colorectal cancers – which are among the top 5 common types of cancer (Merck 10K).
Source: Image created by author with data from JP Morgan
Growth In Non-Small Cell Lung Cancer Market - Merck & Co.’s Keytruda treats about 80% of NSCLC patient population. It has a $15BN market opportunity, due to its current market position and advantage as a first mover. Additionally, awaiting approvals in EU may lay ground for new market. China also has a potential for about $1BN in revenue with the recent product launch. This will treat about 600-700k lung patients in China.
Source: Image created by author with data from JP Morgan
Growth In Non-Lung Tumors Market - Melanoma unit is the largest indication, right behind NSCLC. Others include kidney, gastric, head and neck, liver and triple negative breast cancer. Sales are expected to increase from $2.4BN in 2018 to over $6BN in 2024.
Keytruda's Focus On The Most Common Types of Cancer With The Largest Population
Additional growth drivers for the upside potential is Merck & Co.’s broad oncology strategy that continues to execute more than 1,000 ongoing clinical trials including more than 25 cancer types.
- The breast cancer market is expected to grow to $38BN by 2028 (US, EU, Japan).
- The prostate cancer market is expected to grow to $15BN by 2028 (US, EU, Japan)
In conclusion, Merck & Co.’s oncology pipeline covers all aspects of the tumor environment. The company’s oncology program based on types will address different stages of disease and lines of therapy (Data from Merck 10K + Astra Zeneca 10K -merger)
Gardasil (HPV) Sales is a Driver For Vaccine Portfolio Growth
Gardasilis expected to grow at a CAGR of ~7% in the next 5 years, as the Vaccine Portfolio is expected to perform at a CAGR of ~8%. Gardasil/Gardasil 9 helps prevent certain cancers and other diseases caused by certain types of HPV. In 2018, sales amounted to $3.2BN, a 37% growth from 2017. Sales are expected to reach $5.4BN in 2023 (Source: Bloomberg). This was mainly due to a higher demand in the APAC region (particularly China), higher demand in Europe (increased vaccination rates for boys and girls) and higher pricing and demand in the US. However, due to a cyber-attack that caused a shut-down in 2017 and higher demand than expected, Merck & Co. borrowed Gardasil 9 from the US CDC. This will reduce Gardasil 9 sales short-term in 20194Q by $120MN. Nevertheless, the doses will be allocated internationally, including regions where the most vulnerable populations reside.
- October 2018: FDA approved Gardasil 9 for an expanded age indication for use in women and men ages 27 to 45 for the prevention of certain cancers and disease caused by the nine HPV types (Merck 10K).
- April 2018: China Food and Drug Administration approved Gardasil 9 for use in girls and women ages 16 to 26 (Merck 10K).
Source: Image created by author with data from JP Morgan and Merck & Co.
Vulnerability in China
About 3.8 million people in China are diagnosed with cancer and about 2.3 million people die from it. According to the World Health Organization, two HPV types cause about 70% of cervical cancers and pre-cancerous cervical lesions. China’s HPV vaccination has been historically low with inadequate supply of vaccine products. However, China released a statement in September 2019 with a plan for cancer prevention by the joint collaboration of 10 government departments.
Merck & Co. will be distributing $790MNM worth of Gardasil vaccine products in 2019 and is set to distribute more than $1.2BN worth (provided in disclosures from Merck’s China distribution partner)
Commitment to HIV Research - MK-8591's High Potential
Merck & Co.’s investment in a pipeline targeting areas of significant unmet need may create high demand as it gets approved by the FDA. MK-8591 is a unique pharmacology enabling potential long duration therapy for HIV. It is being evaluated in clinical trials for the treatment of HIV-1 infection addition with other antiretrovirals, as well as for pre-exposure prophylaxis of HIV-1 infection as a single investigational agent. As of the company’s July 2019 the drug displayed successful Phase 2B results and have entered the Phase 3 trials. Today, HIV still poses as a worldwide health threat, especially in underdeveloped countries:
- 36.9 million people are living with HIV
- 1.8 million people were newly infected with HIV in 2017
- 940,000 deaths occurred related to AIDS in 2017
(Source: UNAIDS)
Recent ArQule Acquisition Allows Merck to Advance Leadership in Oncology
As of December 09, 2019, Merck executed a cash acquisition of ArQule for $2.7BN and will be gaining the next generation BTK inhibitor ARQ-531. Bruton tyrosine kinase inhibitors essentially target B-cell malignancies and is considered an advancement in precision oncology. This deal will build Merck’s pipeline and will be competing with Eli Lilly’s Loxo-305. The ARQ-531 has high potential in tackling the resistance issue found in may first-generation drugs and is expected to have an edge on safety (News Link).
DCF Valuation
I used DCF valuation to arrive at our target price of $102.44, a 15.15% upside from the market’s closing price of $88.72 on December 09, 2019. Revenue Growth Rate: I accounted for both Bloomberg’s and JP Morgan’s estimate growth rates. Cost of Debt + Equity: I utilized Bloomberg’s cost of debt of 1.67% and cost of equity of 7.35%. WACC: Although Bloomberg showcases a WACC of 6.6%, I incorporated a higher equity risk premium due to litany of issues facing the sector over the next few years -increasing the WACC to 8.0%.
Relative Valuation
Source: Image created by author with data from Bloomberg Intelligence
Merck & Co.’s EV/EBITDA is 65.78% under the industry average of 38.86. This confirms that Merck & Co. is undervalued and supports our DCF analysis within the 20-60% range in the market. The company’s P/S ratio displays a slightly higher value compared to its peers. We believe that the P/S ratio is not a good value indicator due to the likelihood of massive individual/institutional investors purchasing Merck & Co.’s stock at amplified price hikes. P/E ratio of 22.83 is slower than the industry average of 27.07 with a slight discount of about 16%.
Peer Analysis
Source: Image created by author with data from Bloomberg Intelligence
Risks
Risks to our BUY recommendation and target price include 1) Setbacks from Keytruda franchise, 2) Loss on patent rights, and 3) Potential for new drug pricing rules.
Setbacks from Keytruda Franchise
Setbacks from the Keytruda franchise is a major risk to the company’s profits and cash flows. Merck & Co.’s ability to generate bottom line and operating cash flow depends largely on the profitability of the company’s key products. Although the pharma company has a broad drug portfolio, Keytruda possesses the largest number of treatments and therapies due to its broad activity in more than 25 different tumor types.
Source: Image created by author with data from Merck & Co.Events of setbacks can include loss of patent protection, increased manufacturing costs, increased generic/OTC product availability, discovery of previously unknown side effects, unfavorable results of post-approval trials and discontinuation/removal from the product for any other reasons.
Dependency on Patent Rights
The loss patent rights impose a serious threat on the company’s market exclusivity which also translates into the results of operations of the business. Patents provide successful marketing and sales of specific products in various markets. If the company’s products experience a loss patent protection in highly profitable markets, sales would rapidly decline as a result of generic versions of those products becoming available. In addition, even if Merck & Co. succeeds in obtaining patent protections, the company inherits a risk in the challenges of third parties or government authorities. For this reason, the company is often involved in patent disputes. In 2016, Merck & Co. was required to pay $625MM due to a previously disclosed settlement of the international Keytruda patent litigation. Patent litigation and other challenges are costly and unpredictable and may cause the deprivation of market exclusivity (Merck 10K).
New Drug Pricing Rules
The US pharma industry faces new drug pricing rules from the congress. According to a Wall Street Journal study, developed countries such as United Kingdom, Norway and Canada pay 40%-70% less for major drugs than US government health systems (ie. Medicare). In addition, 79% of Americans feel drug costs are unreasonable, according to Kaiser Family Foundation. There is an increasing pressure on pharmaceutical companies to cut down on price hikes and from politicians who propose bills to lower drug prices. New proposals for lower drug prices have been brought up by both political parties.
- Trump Administration: Top 2020 campaign priority, potentially basing Medicare drug prices on an international index (Merck 10K)
- House Democrats: introduced a bill that gives Medicare the upper-hand to negotiate prices with pharma companies (Merck 10K)
- Senate Grassley (R) and Wyden (D): introduced the Prescription Drug Pricing Reduction Act, which has support from White House (Source Link)
The proposals have not been realized to become law, but there is an increased focus on both sides to mitigate high drug prices which can be a risk to the industry and the company’s top and bottom line.
Swot Analysis
Strengths
- Broad Activity in more than 25 different cancer types
- Active in acquiring and marketing products through external alliances
- Global research hubs
Weaknesses
- 2017: Keytruda patent litigation
- Product’s loss of sales due to loss of market exclusivity
Opportunities
- ~1BN (risk adjusted) revenue opportunity with pneumococcal vaccine
- Animal Health Segment benefitting from positive market dynamics
Threats
- Generic makers in India for developed nations
- Highly competitive
Conclusion
In conclusion, I recommend a strong buy for Merck & Company. The company has a solid pipeline portfolio with Keytruda's patent cliff stretching out for almost a decade. Merck & Co.'s upside drivers include top-line, bottom-line, and double digit EPS growth from Keytruda, Vaccine portfolio growth from Gardasil (HPV), and the advancement of Anti-HIV Agent MK 8591 to Phase 3 trials. However, Merck & Co. is subject to company and industry-specific risks such as setbacks from Keytruda franchise, loss of patent protection, and new drug pricing rules. With margin upside opportunities, Merck & Co. has a positive outlook with a strong balance sheet and undervalued shares. In addition, the acquisition of ArQule will expand Merck's oncology pipeline and allow the company to stand its position as a leader in the oncology market.
This article was written by
Analyst’s Disclosure: I/we have no positions in any stocks mentioned, but may initiate a long position in MRK over the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.
Seeking Alpha's Disclosure: Past performance is no guarantee of future results. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. Any views or opinions expressed above may not reflect those of Seeking Alpha as a whole. Seeking Alpha is not a licensed securities dealer, broker or US investment adviser or investment bank. Our analysts are third party authors that include both professional investors and individual investors who may not be licensed or certified by any institute or regulatory body.
Comments (21)
By the way, I would like to know your opinion regarding the future of Pfiizer(PFE) compared to Merck(MRK).
Frankly I do not understand why PFE stock does not perform well when other pharma stocks goes up.
My only point is the title does not match the article or the reality.
The most exciting new drug in their pipeline is a "Cough Syrup".
Merck has one of the weakest pipeline in the Industry in my opinion.
They gained Bridion and Keytruda through acquisation of Schering Plough. Originally these 2 products are research of Organon.
Merck will have to acquire another Co. the size of LLY or AMGN.. . post patent expiry of Januvia -2022.
- Cost of Debt 1.67% does not seem to be correct: from what I found, the effective interest rate is ~2.95%. Then, the synthetic interest rate for an A / Baa1 rating would be ~3.25% (risk free rate) + 0.8% (spread) = ~4.05%. By doing an average between the 2 (2.95% and 4.05%), we get the Cost of Debt = 3.5%
- Cost of Equity from Bloomberg of 6.6% is also too low (from what I found they have a beta of 0.66), but here I think you adjusted very well your final WACC with +1.4 % due to the possible risks.
So, if you adjust your 8% WACC for a Cost of Debt of 3.5% instead of 1.67% (10 - 15 Debt% of Capital), you'll get a WACC of 8.75 - 9%
Best regards, from you follower #70.
-- Based on CFRA's proprietary quantitative model, stocks are ranked from most overvalued (1) to most undervalued (5). CFRA assigns MRK a "1": most overvalued.
-- Stock seems to be under accumulation, which is a bullish condition, however, because of what seems to be overvaluation, I'm not buying.
-- Also, div is under 3%, too low for my goals.
It would have been a good buy a month or so ago at a lower price.
Good and interesting article.
understandable. As a Buotech Analyst for over two decades I must take issue with a few of your comments. MRK is one of the best old line BioPharma Co’s. I highly doubt HIV will ever play a major role in MRK revenues and Earnings. That belongs to the Maestro of Virology, Gilead Sciences . They turned a fatal disease into the chronically managed condition it is today. Their expertise in Virology is formidable .A look at Anti PD1 drugs shows a dominant Keytruda. That said , there is so much competition in IO that one has to acknowledge BMY’s Opdivo, AZN’s Imfinzi and Roches Tecentriq to name a few. The new combos with the above will take market share from Keytruda . As an Oncologist I must say that my former colleagues prefer to use Opdivo over Keytruda where indications are similar. MRK is still a Large Pharma Co and most innovation of new Biologics is from the exquisitely fine tuned Biotechnology Companies. Genentech , bought by Roche Holdings has the best overall Oncology track record. All in all I again compliment you on your arrival in a New Order of the Universe. With experience you’re going to be one Stirling Contributor. Good luck .
Thank you for your insightful response. Being the most “Information Intense Sector” in the equity markets translates into intellectual gratification. When your Universe is Biotechnology, you either make money for being right about a pipeline drug being a potential Blockbuster or not. This intensity creates great passion, which is what innovation is all about. Being able to buy or sell publicly traded stocks , and indirectly support or bet against a company you’ve done extensive diligence on creates a strong conviction about a drug you love/ hate in development. Being right is enormously gratifying. This is what your new sector of interest is all about.
keytruda, its probably already accounted for in share price. Do you think growth will exceed that level? | ABBV | 137.3 |
https://seekingalpha.com/article/4317971-abbvie-undervalued-and-poised-for-2020-breakout | AbbVie: Undervalued And Poised For A 2020 Breakout (NYSE ... | AbbVie: Undervalued And Poised For A 2020 Breakout. Jan. 21, 2020 8:45 AM
ETAbbVie Inc. (ABBV)88 Comments 52 Likes. Stefan Redlich profile picture. | Jan 21, 2020 | Seeking Alpha | AbbVie: Undervalued And Poised For A 2020 Breakout
Summary
- With many stocks at all-time highs, the bar for 2020 is extremely high and it gets more and more difficult to find stocks at attractive valuations.
- One of these very few stocks left which offer such a profile is healthcare large-cap AbbVie, a stock which had a disastrous 2019.
- After a 2-year hiatus from capital appreciation, 2020 provides ample opportunity to reward investors.
- It is now time to look forward and see how the new AbbVie will be performing. The upcoming earnings report will set the stage for 2020, but with markets at all-time highs, AbbVie's depressed stock price presents one of my top picks for 2020.
With the Dow hitting 29k for the first time ever and many stocks at all-time highs, the bar for 2020 is extremely high and it gets more and more difficult to find stocks at attractive valuations. Many stocks like Apple (AAPL) or AMD (AMD), for instance, have been racing away, and in the case of Apple, the stock is more than 100% higher compared to where it was a year ago. As such, it becomes very difficult to find good value out there with a meaningful margin of safety level.
One of the very few stocks left which offer such a profile is healthcare large-cap AbbVie (NYSE:ABBV), a stock which had a disastrous 2019, underperforming the market by more than 30pp, and an even worse 2018. Despite a late 2019 rally, the stock is still trading 25% away from its all-time high set in January 2018.
Source: AbbVie Investor Relations
Back in early 2018, AbbVie was soaring to record levels driven by a blowout quarterly earnings release that featured 14% Y/Y growth in Humira sales and skyrocketing sales of Imbruvica. Due to this rally, the stock was only yielding around 2.3%. Now, two years later, sales of Humira and Imbruvica have grown at an impressive pace, and the dividend yield soared to 5.3% driven by excessive dividend growth of 66% ($1.18 vs. $0.71) and a disappointing stock price performance.
After a 2-year hiatus from capital appreciation, 2020 provides ample opportunity to reward investors.
What's going on at AbbVie?
AbbVie's latest earnings for Q3/2019 have come in much better than expected, with a double beat as revenues rose almost 3% Y/Y and EPS surpassing expectations by $0.03. With investors having been obsessed about the announced $60 billion+ merger with Allergan and the 2023 patent expiry of Humira in the U.S., this earnings print provided much-needed and surprising relief and helped lift the stock from "back up the truck at all cost prices" in the mid-$60s to a more reasonable yet still cheap mid- to high-$80s range.
Since leaving plain bargain territory, the stock hovered at that new level and is waiting for an impulse to edge higher. The broad market rally, which has seen the Dow Jones crossing another 1,000-point level in the meantime, has not spilled over to AbbVie, but the upcoming earnings release could certainly provide that boost.
The latest quarterly earnings release has seen the company's Hematologic Oncology segment with its star performer Imbruvica explode by a massive 38% operational sales growth, while total sales of bellwether drug Humira dropped 3.7%. Newly launched drug Skyrizi enjoyed one of the best starts, with sales hitting $91 million out of the gates. While that figure does not move the needle at all for a company with quarterly sales of around $8.5 billion, it reflects great potential once sales start to ramp up.
The launch is going extremely well with prescription trends that continue to remain well above recent launch analogs in the psoriasis category.
Source: AbbVie Q32019 Earnings Call
Sales of Humira, meanwhile, have continued to grow at impressive pace in the U.S., clocking in 9.5% growth, while continuing to collapse internationally (-32%). With biosimilar competition heating up across Europe and other international markets, the erosion curve of Humira is steep, quick and vicious. That decline of around 1/3rd is in line with performance in Q2 and, more importantly, in line with management's expectations.
The international biosimilar trends and dynamics remain consistent with our expectations.
Source: AbbVie Q32019 Earnings Call
The key to understand here is that the company is no longer dependent on how Humira sales will develop post 2023, assuming they won't drop to zero, obviously. Humira will stabilize at a certain level, and while nobody knows how low or how high that will be and at what price point, obviously, it does not matter anymore today given AbbVie's currently low valuation of only 8 times earnings and the $30 billion platform it aspires to be following the deal with Allergan and ex-Humira.
Moving into 2020, the new AbbVie with Allergan will start to begin shape. The merger has been OK'd in Europe in early January and is expected to be closed within the first quarter. In a very recent 38th Annual JP Morgan Healthcare Conference, AbbVie's CEO Rick Gonzalez was very upbeat about the prospects with Allergan and is surely excited about 2020 and beyond.
We're excited about advancing the transaction with Allergan. We continue to make good progress, and we continue to expect that transaction to close in the first quarter.
And I think that will allow us to be able to reposition the business in a way that's even stronger than the historical success that we've been able to deliver, which has been pretty impressive over the past six year
Source: J.P. Morgan Healthcare Conference AbbVie Transcript
Some very key takeaways which provide a glimpse into the upcoming earnings report and AbbVie's expectations for 2020 include the following:
- Recently launched drug SKYRIZI has become the market leader with an in-play share of around 25%, bringing AbbVie's total share in the $7 billion psoriasis market to 50%.
- Humira is continuing to track better in the U.S. compared to expectations, while the erosion curve in Europe remains consistent with management's projections. Once the LOE event starting 2023 presents itself, Humira sales will plummet in the U.S., but given the different drivers in the U.S. market compared to AbbVie's international markets, the dynamics could be worse or better and follow a pattern of a steep initial decline before flattening out quickly on a new baseline level.
- Margins are expected to decrease by around 2pp from 47% down to 45%, but compared to two years ago, where operating profit margin stood at 42.6%, AbbVie is positioned much better and right at the top end of the sector. Consider this, some pessimist analysts are expecting margins to plummet into the $30s, which, according to Rick Gonzalez, is "not realistic," and as such, once the analysts start to realize this and adjust their targets, this can provide another catalyst for AbbVie stock price.
- AbbVie remains very committed to a "strong, growing dividend," and while historic double-digit growth with the payout ratio sitting just below 50% is expected to slow down and decouple from earnings growth, this should be seen as a measure towards financial health given the expected decline in earnings in 2023. Once Allergan is fully integrated, synergies are realized, new drugs are ramped up and the initial steep decline in Humira sales is in the books, AbbVie is expecting to "return to growth rapidly."
What's in it for Dividend Investors?
AbbVie's current dividend yield stands at a juicy 5.4%, and its dividend growth has been in the double digits for years, although the stock price has tanked from $125 to the high $80s now. The last dividend raise announced in November 2019 came in at a strong 10.3%.
And still, despite such stellar dividend growth amid revenue headwinds, the company's cash dividend payout ratio still remains around 50% and thus leaves room for future growth, although that is expected to temporarily decouple itself from AbbVie's earnings growth as the Humira LOE event is looming on the horizon and edging closer.
(Source: Seeking Alpha - AbbVie Dividend Scorecard)
The company's next dividend has already been declared, and the stock went ex-dividend on January 14 with payment scheduled for Valentine's Day.
To keep track of dividend payment and ex-dividend dates, I use the newly released Dividend Calendar & Dashboard Tool (make sure to follow instructions), which shows my expected dividend payments, in this case for February 2020. Here we can see that I am expecting a sizable payment on February 14 from AbbVie.
Investor Takeaway
Investment site simplywall.st claims that AbbVie is undervalued by 61.8% and assigns a fair value of $230, almost three times the current price.
(Source: simplywall.st)
While that may be way too optimistic for now, I conclude that there is no valid reason why AbbVie should not reach its all-time high of around $125 in 2020. Despite all the concerns, Humira has continued its exceptional growth and should return to overall top line growth this year, as the initial steep decline in international markets will be offset by ongoing expansion in the U.S. AbbVie's oncology segment is performing much better than expected, and with new and recent drug launches ramping up quickly, it should give investors enough reason to finally look past the company's past R&D blunders where it, for instance, sank around $5 billion in the Rova-T failure.
Now is the time to look forward and see how the new AbbVie will be performing. The upcoming earnings report in early February will set the stage for 2020, but with markets at all-time highs, AbbVie's depressed stock price presents one of my top picks for 2020.
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This article was written by
Analyst’s Disclosure: I am/we are long ABBV. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.
I am not offering financial advice but only my personal opinion. Investors may take further aspects and their own due diligence into consideration before making a decision.
Seeking Alpha's Disclosure: Past performance is no guarantee of future results. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. Any views or opinions expressed above may not reflect those of Seeking Alpha as a whole. Seeking Alpha is not a licensed securities dealer, broker or US investment adviser or investment bank. Our analysts are third party authors that include both professional investors and individual investors who may not be licensed or certified by any institute or regulatory body.
Comments (88)
where do you think the floor is?
Because of this situation the company looked for a solution to preserve the unattainable position it was getting in and bought Allergan. Buy doing this it has bought a profitable turnover that will help for a while but it does not much to strengthen the development pipeline and it will have to spend energy and effort to integrate and streamline a big and different kind of organisation.
The other monkey on the shoulder is the big amount of debt that is now going to be on the books that is around 105%! In this situation the risk profile is becoming uncomfortable for me as a shareholder and I do not understand all these optimistic articles like this one that almost sounds religious!
https://www.venclexta.com/
news.abbvie.com/...
https://imbruvica.com/
news.abbvie.com/...
www.pharmacyclics.com/...
www.pharmacyclics.com/...
www.abbvie.com/...
www.allergan.com/...
best to you
GLTA - long ($ABBV) ($JNJ) ($RHHBY)
Dan
I invest in all companies with successful cancer meds=
seekingbiotechalpha.com/... | ABBV | 137.3 |
https://finance.yahoo.com/news/top-stock-research-reports-abbvie-180906144.html | Top Stock Research Reports for AbbVie, Accenture, TOTAL & Others | Today's Research Daily features new research reports on 16 major stocks,
including AbbVie (ABBV), Accenture (ACN) and TOTAL (TOT). | Feb 11, 2020 | Yahoo Finance | Top Stock Research Reports for AbbVie, Accenture, TOTAL & Others
Tuesday, February 11, 2020
The Zacks Research Daily presents the best research output of our analyst team. Today's Research Daily features new research reports on 16 major stocks, including AbbVie (ABBV), Accenture (ACN) and TOTAL (TOT). These research reports have been hand-picked from the roughly 70 reports published by our analyst team today.
You can see all of today’s research reports here >>>
AbbVie’s shares have outperformed the Zacks Large-Cap Pharmaceuticals industry in the past six months (+46.8% vs. +15.9%). The Zacks analyst believes that AbbVie’s key drug, Humira is performing well based on strong demand trends despite new competition.
AbbVie has been successful in expanding approvals for its cancer drugs, Imbruvica and Venclexta. Moreover, it has an impressive late-stage pipeline. It gained approvals for two new drugs with significant potential, Skyrizi (risankizumab) and Rinvoq, in 2019. Both are off to a strong start.
The acquisition of Allergan, if successful, should diversify AbbVie’s revenue base and accelerate its non-Humira business. However, sales erosion due to direct biosimilar competition to Humira in international markets is a big headwind. Also, the decline in HCV sales is a concern.
(You can read the full research report on AbbVie here >>>)
Shares of Accenture have gained +35.7% over the past year against the Zacks Consulting industry's rise of +27.1%. The Zacks analyst believes that Accenture has been steadily gaining traction in its outsourcing and consulting businesses.
The company has been strategically enhancing its cloud and digital marketing suite through acquisitions and partnerships. The company’s strong operating cash flow has helped it reward its shareholders in the form of dividends and share repurchases, and pursue opportunities in areas that show true potential. Accenture is currently a global leader in the Salesforce implementation service space.
However, Accenture continues to face pricing pressure due to significant competition from strong companies like Genpact, Cognizant and Infosys. Global presence exposes Accenture to foreign currency exchange rate fluctuations. Buyout-related integration risks is a concern.
(You can read the full research report on Accenture here >>>)
TOTAL’s shares have lost -9.7% over the past three months against the Zacks Integrated International Oil industry's fall of -11.7%. The Zacks analyst believes that company has been benefiting from startups, renewable projects, its LNG portfolio and expanding upstream portfolio that has above industry-average exposure to faster-growing hydrocarbon producing regions.
Streamlining the asset portfolio and syncing the same with long-term objectives are going to boost its performance and strengthen operations. Cost-saving initiatives are also aiding it to boost margins.
However, TOTAL's operations in some politically-troubled regions and increasing competition might affect profitability. Due to its global presence, the company is exposed to risks associated with pursuing business abroad.
(You can read the full research report on TOTAL here >>>)
Other noteworthy reports we are featuring today include Amazon.com (AMZN), Enbridge (ENB) and Intuit (INTU).
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Today's Must Read
AbbVie (ABBV) Ex-U.S. Humira Sales Erode, New Drugs Impress
Accenture (ACN) Continues to Benefit From Acquisitions
Production Boost from Startups, Cost Savings Aid TOTAL (TOT)
Featured Reports
Amazon (AMZN) Banks on Prime Momentum & Growing AWS Adoption
Per the Zacks analyst, Amazon is riding on expanding quick delivery services via Prime which are aiding its retail position. Also, strengthening cloud offerings are bolstering AWS adoption rate.
Enbridge (ENB) Banks on $11B Project Backlog, Debt High
The Zacks analyst expects Enbridge to generate stable cash flow from multi-billion-dollar worth of natural gas and oil transportation project backlog. However, its debt burden is concerning.
Intuit (INTU) Rides on Product Refresh, Higher Subscriptions
Per the Zacks analyst, Intuit is benefiting from frequent product refreshes, which help it to gain customers.
Canadian National (CNI) Rides on Dividends & Buybacks
The Zacks analyst is impressed by the company's measures to reward shareholders through dividends and repurchases.
Strength in Categories Drive Ross Stores (ROST) Sturdy Comps
Per the Zacks analysts, Ross Stores witnesses robust comps driven by strength across categories, except ladies apparel.
Long-Term Investments, Renewable Focus Aid Xcel Energy (XEL)
Per the Zacks analyst disciplined investments in infrastructure projects and focus on renewable expansion will strengthen Xcel Energy's existing operations.
IHS Markit (INFO) Benefits From Ipreo Buyout Amid High Costs
The Zacks analyst believes that the Ipreo acquisition boosts IHS Markit's financial services segment. However, high acquisition related costs remain a headwind.
New Upgrades
Commercial Lines Segment Aids Cincinnati Financial (CINF)
Per the Zacks analyst, its Commercial Lines Insurance segment has been consistently performing well on the back of several strategic initiatives and price increases, contributing to overall growth.
Increased Contract Wins, Cash Flow Growth Aids Leidos (LDOS)
Per the Zacks Analyst, Increased contract wins for its cost-effective defense solutions from the Pentagon drives the company's growth and bolster its backlog.
FormFactor (FORM) Benefits from Growing Probe Card Demand
Per the Zacks analyst, FormFactor benefits from strength in both Foundry & Logic probe cards, new design releases and solid execution. Also, DRAM demand is likely to remain solid in the long term.
New Downgrades
Competition For HIV, Pipeline Setbacks Hurt Gilead (GILD)
Per the Zacks analyst, stiff competition for HIV franchise hurt Gilead. Additionally, the uptake of Yescarta hasn't been impressive and the treatment faces stiff competition from Kymriah.
Conservative Oil E&P Spending Hurts Baker Hughes (BKR)
Tight oil exploration and production (E&P) capital spending will hurt demand for Baker Hughes' oilfield services in North America, agrees the Zacks analyst.
Weak Demand for Handsets Dampens Knowles' (KN) Prospects
Per the Zacks analyst, soft trend in the Mobile market, with particular weakness in the premium portion of the Android ecosystem, is acting as a major headwind for Knowles' audio business.
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TOTAL S.A. (TOT) : Free Stock Analysis Report
Intuit Inc. (INTU) : Free Stock Analysis Report
Enbridge Inc (ENB) : Free Stock Analysis Report
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AbbVie Inc. (ABBV) : Free Stock Analysis Report
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Zacks Investment Research | ABBV | 137.3 |
https://www.fool.com/investing/2020/02/12/allergan-pins-hopes-on-millennials-with-juvederm-m.aspx | Allergan Pins Hopes on Millennials With Juvederm Marketing | Although Allergan is in the process of merging with pharmaceutical major
AbbVie (ABBV -1.65%), it seems that change won't affect the future of its
aesthetic... | Feb 12, 2020 | The Motley Fool | Allergan (AGN) is continuing its strategy of targeting millennials with its new advertising campaign. In what could be seen as a counterintuitive strategy, the campaign is the latest one for the company's popular Juvederm dermal filler, a product that older customers traditionally use for cosmetic alterations.
Allergan's new video ads for its "Juvederm It" campaign specifically address the millennial preference of using cosmetic filler either without, or before, injecting Botox. It's more typical for people to get Botox treatments to freeze targeted areas and slow the development of wrinkles, and then deploy filler to smooth out those areas.
Instead, some millennials are applying filler exclusively, in an effort to plump out or shape certain body parts. This latest Juvederm It ad in particular zeroes in on the lips, a target of choice for that demographic.
The Juvederm It lip spot features millennial reality-TV star Audrina Partridge and makeup artist to the stars Kelsey Deenihan. It will air on TV in addition to social media sites and other digital properties, and it centers on the Juvederm Ultra XC and Juvederm Volbella XC fillers.
Although Allergan is in the process of merging with pharmaceutical major AbbVie (ABBV -1.08%), it seems that change won't affect the future of its aesthetic products. Revenue from these products is still growing at healthy rates -- Juvederm's sales rose almost 5% year over year in the company's Q4 -- and contributing heavily to overall revenue. Allergan and AbbVie are planning to house these goods in a new Allergan Aesthetics business unit.
Both Allergan and AbbVie closed slightly higher in trading on Wednesday. | ABBV | 137.3 |
https://www.fool.com/investing/2020/02/11/is-takeda-pharmaceutical-company-stock-a-buy.aspx | Is Takeda Pharmaceutical Company Stock a Buy? | ABBV. $138.64 (2.02%) $2.75. *Average returns of all recommendations since
inception. Cost basis and return based on previous market day close. | Feb 11, 2020 | The Motley Fool | There probably aren't too many companies listed on the New York Stock Exchange with an operating history going back over 230 years that are virtually unknown to U.S. investors.
But that's true of Takeda Pharmaceutical Company (TAK -1.06%), Japan's largest pharmaceutical company, which was founded in 1781 and listed its American Depository Shares on the New York Stock Exchange just over a year ago.
Takeda has partnerships with a number of U.S. pharmaceutical companies, and made headlines in 2018 when it announced plans for a massive acquisition of Shire that was completed about a year ago. Is Takeda an overlooked gem that investors should wake up to, or should they avoid it?
Takeda's business
Takeda operates in five therapeutic areas that it considers its core businesses. The company's largest segment is gastrointestinal medicines, at 21% of sales in the first three quarters of fiscal 2019, and is delivering healthy sales growth, up 10%.
The big winner in the segment is Entyvio for Crohn's disease and ulcerative colitis (UC). Entyvio sales are growing at 35%, and beat AbbVie's mega-blockbuster Humira in a head-to-head trial in UC last year.
Unfortunately, Takeda's second largest business hasn't been faring so well recently.
The company's rare disease portfolio, 20% of total sales, has declined 11% in fiscal 2019. Takhzyro for hereditary angioedema is growing well, but not enough to overcome losses by older drugs for the same condition. Competition is hurting its drugs for blood diseases, and a recall of Natpara for hypoparathyroidism has the company assuming zero U.S. sales for that drug in 2020.
Takeda is getting about 5% sales growth from its immunoglobulin products and neuroscience portfolios, but one area that has the potential for accelerating growth is oncology, which is growing 7% year-over-year and makes up 13% of sales.
Ninlaro, an oral medication for multiple myeloma, is still in its early days, and is growing sales at 29% this year. A partnership with cancer specialist Seattle Genetics to co-develop and commercialize that company's lead drug, Adcetris, should be a potent growth driver for years.
Growth hopes are pinned on the Shire acquisition
Put those segments together, along with a large part of the company's business (21% of sales) that the company says is outside of its focus areas and is shrinking at a double-digit rate, and the growth picture at the moment looks anemic. Excluding the effect of the Shire acquisition, revenue year-to-date has declined 1.2% and operating profit is down 43%.
Takeda is banking on a reshaping of the company as it integrates Shire to get it on track for long term growth. It plans to take out $2 billion in costs, divest $10 billion in non-core assets that are pulling down its growth rate, and pay off much of the debt it took on to buy Shire.
That effort seems to be progressing faster than the company had expected. The plan has been for the Shire integration to complete by March 2024, but the company surprised the market this month when it said in its third quarter report that it expected to make a small operating profit for the full year after earlier forecasting a $1 billion operating loss.
A successful execution of its plan would help Takeda invest in research and development in its focus areas, where it already has a significant number of drug candidates in the clinic.
The company has six new drugs in trials that it expects to get approved in the next two years, and another eight that could win approvals in fiscal 2023 and 2024. Together, Takeda thinks these drugs have the potential to deliver more than $10 billion in aggregate peak sales, compared with the $30 billion in revenue the company expects to generate this year .
Steer clear for now
Takeda has a long and illustrious past, but it's the company's future that investors need to be wary of. Whereas it has the potential to get on the path for long term growth, most growth stock investors should take a pass for now and wait for the dust to settle.
The integration of Shire is a massive undertaking, and it's not clear what the growth picture will be when the effort completes four years from now. In the meantime, sales growth is flat, and any profit growth will be coming from cost cutting.
Takeda does pay a generous 4.3% dividend yield, but conservative investors can find nice payouts from companies that have more certain growth in their future. | ABBV | 137.3 |
https://www.defenseworld.net/2020/02/12/digital-drawing-of-latest-singaporean-endurance-class-ship-unveiled-at-airshow.html | Digital Drawing of Latest Singaporean Endurance-class Ship ... | (NYSE:CVX) · First PREMIER Bank Purchases 271 Shares of PepsiCo, Inc.
(NASDAQ:PEP) · First PREMIER Bank Boosts Holdings in AbbVie Inc.
(NYSE:ABBV)... | Feb 12, 2020 | Defense World | ST Engineering displayed a digital drawing of the Joint Multi Mission Ship, the Endurance 170, at the Singapore Air show 2020 (February 11-16).
The ship is intended to host helicopters as well as the F-35B jets that the city-state will be buying from the US.
According to company specifications, the Endurance 170 will have five spots on it deck to host helicopters, and a hangar deck below to house a couple more rotorcraft. The boat has a displacement of 19,000 tonnes, length of 170 meters, range of 7000 nautical miles (12,900km) and can reach a top speed of 20 knots. The F-35B Short Take-off and Vertical Landing (STOVL) jet requires 168 meter runway for take-off, so the new vessel could be just enough to double up as a light aircraft carrier.
An Endurance-class ship is capable of both vertical (helicopters) and surface (including ST Marine’s Brave class ship-to-shore connectors) lift operations. The vessel can provide a command and logistic hub capability besides being able to project both men and equipment including to areas stricken by natural disasters. | ABBV | 137.3 |
https://www.cnn.com/business/live-news/stock-market-news-today-031820/index.html | Coronavirus fears continue to grip stocks: Live updates | McDonalds (MCD), Cisco (CSCO), Microsoft (MSFT), AbbVie (ABBV) and
Starbucks (SBUX) are stocks in that category, according to Tengler. | Mar 19, 2020 | CNN | This blog is now closed. Click here for March 19, 2020 stock news.
Coronavirus fears continue to grip stocks: March 18, 2020
By CNN Business
Dow closes below 20,000
From CNN Business' Anneken Tappe
It was another ugly day for Wall Street.
US stocks erased the prior session's gains and closed lower.
The Dow closed below 20,000 total points for the first time since February 2017. It was down 6.3%, or 1,338 points, on the day. During the afternoon, the index fell so much that it erased all of the gains accumulated under the Trump administration -- though it closed slightly above that key level.
The S&P 500 is also edging closer to falling below its January 2017 level. The index finished down 5.2%.
The Nasdaq Composite closed down 4.7%.
Trading was briefly halted in the early afternoon after the S&P fell 7%, triggering the New York Stock Exchange's circuit breaker.
Up to 3 million jobs could be lost until the summer
From CNN Business' Anneken Tappe
The economic fallout from the coronavirus pandemic could claim up to three million jobs by the summer, according to the Economic Policy Institute.
"At this point, a coronavirus recession is inevitable. But the policy response can determine how deep it is, how long it lasts, and how rapidly the economy bounces back from it," wrote EPI Director of Research Josh Bivens.
A policy response with enough fiscal stimulus could help curtail the number of jobs lost, Bivens said. Moderate stimulus isn't enough, he warned, and could still allow for three million lost jobs.
Employment losses in the coronavirus recession, "much more laser-targeted at low-wage, low-productivity, and low-hours jobs in service industries," he added.
"Given that workers in these sectors are likely to have very little savings to tide them over the economy’s downturn, the ripple effect from the first round of job losses are likely to be far greater," Bivens said.
What stocks to buy right now
From CNN Business' Anneken Tappe
Markets are going wild again on Wednesday and assets are selling off across the board.
"I think everyone needs to take a deep breath," said Nancy Tengler, chief investment strategist at Laffer Tengler Investments on the CNN Business' digital live show Markets Now.
Diversification works in times of trouble, Tengler tells her clients.
But now would also be a good time to increase 401(k) contributions and add to equity portfolios.
High quality companies that will continue to be in business, be solvent and pay dividends look cheap right now.
McDonalds (MCD), Cisco (CSCO), Microsoft (MSFT), AbbVie (ABBV) and Starbucks (SBUX) are stocks in that category, according to Tengler.
"These are incremental buys," and it wouldn't be wise to jump in with both feet, she added.
That way investors will be prepared for the recession "we're inevitably entering into," Tengler said.
Crude oil collapses by another 24% to $20. It hasn't been this low since 2002
From CNN Business' Matt Egan
That escalated quickly.
Crude oil was facing another horrific day, with a loss of 9% during Wednesday morning trading. But selling intensified throughout the session, with US oil finishing down a stunning 24%, settling at just $20.37 a barrel.
That means oil is now at the weakest level since February 2002.
Late Tuesday Goldman Sachs predicted another round of selling in the oil patch that would eventually drive crude from $27 a barrel to just $20. But even the Wall Street bank must be stunned at how quickly that nightmare scenario played out.
The breathtaking speed of the oil crash reflects the enormous pain being inflicted by the combination of shrinking demand and swelling supply. And it underscores just how much worse the economic situation has become.
Did the Fed make a mistake?
From CNN Business' Anneken Tappe
The Federal Reserve slashed rates to zero on Sunday before Asian markets opened, but this hasn't helped calm financial markets.
Did the world's most powerful central bank make a mistake?
Not necessarily, said Danielle Dimartino Booth, CEO and chief strategist for Quill Intelligence on CNN Business' digital live show Markets Now.
Even though the timing may have been slightly surprising, investors had already priced in a Fed rate cut to zero. That might be why the market didn't react more positively to the central bank's action.
The drastic cut also highlighted that the economy might be in a much rougher state than previously thought.
"The service industry has come to a shrieking halt across America," said Dimartino Booth. That is worrying because consumer spending is the backbone of the US economy.
JCPenney reverses course, will close stores
From CNN Business' Nathaniel Meyersohn
JCPenney (JCP) said Wednesday that it will close its stores until April 2. The company initially resisted closing all of its stores and had planned to reduce hours.
In recent days, its department store rivals Nordstrom (JWN) and Macy's (M) said they will temporarily close stores. Kohl's (KSS) is the only major department store chain still operating stores. It is shortening hours at its locations.
"With the effects of the outbreak being felt more each day, our primary concern and area of focus is and has been on the health and safety of our associates, our customers, and our communities,” said Jill Soltau, chief executive officer of JCPenney. “We know this is a critical, unprecedented time and our thoughts are with those who have been impacted.”
The Dow has lost more than 10,000 points. It barely took a month
From CNN Business' Matt Egan
Just a month ago, the Dow looked destined to break through the 30,000 level for the first time ever.
Investors were confident (overly so, in retrospect) that the coronavirus outbreak in China would have just a fleeting impact on the American economy. Reflecting that optimism, the Dow hit a record closing high of 29,551.42 on February 12.
The world has completely changed since then. The coronavirus outbreak is now a pandemic. And it's shut down large parts of the world economy, including in the United States. Investors are bracing for a recession, perhaps a severe one.
Now, the Dow is struggling just to hold the 19,000 level. It plunged to as low as 19,056 on Wednesday following another 15-minute trading halt. That means the Dow has lost more than 10,400 points, or 35%, from its record high.
Investors are strapped for cash so they're selling Treasuries
From CNN Business' Anneken Tappe
As the coronavirus crisis keeps markets in a chokehold, liquidity has gotten tight.
US Treasury bonds are normally the most liquid asset in the world, meaning they can be converted into cash so quickly that they are cash-like. Under normal circumstances, Treasuries are "the gold standard for liquidity," said John Bellows, portfolio manager at Western Asset Management.
But things look quite a bit different in the new coronavirus normal: investors have now grown concerned about the liquidity in bond markets.
"The demand for cash is causing investors to sell their Treasuries," Bellows said.
In line with that, the 10-year Treasury bond headed lower on Wednesday, with its yield moving back above 1.1%. Bond prices and yields move in opposite directions to each other.
The sold Treasuries then pile up on the balance sheets of broker dealers, which is what is draining the liquidity from the market, Bellows said.
This is where the Federal Reserve's bond purchases to unclog the financial system comes in.
"The risks are to the upside here. The Fed can and will do more as the need for cash increases," Bellows added. | ABBV | 137.3 |
https://realmoney.thestreet.com/investing/stocks/the-charts-of-amazon-are-still-okay-14852944 | Relax, Amazon's (AMZN) Stock Charts Are Still OK - RealMoney | In the daily Japanese candlestick chart of Action Alerts PLUS holding AMZN,
below, we can see the early price action for this Friday. Prices have
opened with a... | Feb 1, 2019 | RealMoney | We reviewed Amazon.com Inc. (AMZN) just the other day, but it is our Real Money Stock of Day so another look at the charts is in order.
Prices reacted lower Thursday evening as weaker-than-expected guidance overshadowed a big earnings beat.
In the daily Japanese candlestick chart of Action Alerts PLUS holding AMZN, below, we can see the early price action for this Friday. Prices have opened with a gap to the downside but this is just a "common" gap as it appears in a sideways consolidation pattern. If the gap appeared in an up or down trend it would have more importance. So far Friday's decline has not broken the flat 50-day moving average line. We don't know where prices will close so the movement of the OBV line is unknown for now and so is the Moving Average Convergence Divergence (MACD) oscillator.
In this updated Point and Figure chart of AMZN, below, we can see Friday's decline with a column of "O's" starting with the number "2" to mark the first entry of February, the second month of the calendar year. Prices have not made a new low below $1595.62 and the software is still indicating an upside price target of $2,007.
Bottom-line strategy: We do not know what Friday afternoon will bring and we do not know what will happen on Monday, but for now the charts of AMZN are still OK. | AMZN | 129.11 |
https://www.marketwatch.com/story/whole-foods-isnt-priming-amazons-pump-2019-01-31 | Whole Foods isn’t priming Amazon’s pump | AMZN. +0.17%. Amazon.com Inc. has touted its big deal for Whole Foods
Market Inc. as a way to use physical retail to grow its business, but after
its first... | Feb 3, 2019 | MarketWatch | Amazon.com Inc. has touted its big deal for Whole Foods Market Inc. as a way to use physical retail to grow its business, but after its first full year owning the grocery chain, it’s not growing at typical Amazonian levels.
On Thursday, the e-commerce giant reported record-breaking results for the holiday season, but its stock sagged as its outlook disappointed, along with plans to increase investments in 2019 from 2018 levels. Shares were off nearly 5% in after-hours trading and were down roughly the same amount in premarket trade Friday.
The fourth quarter of 2017 provided the first legitimate year-over-year comparison for Whole Foods within Amazon
AMZN,
Read more aboutAmazon’s $13.7 billion deal to buy Whole Foods in June 2017.
Amazon’s Chief Financial Office Brian Olsavsky noted on the call that the year-ago period for Whole Foods had five extra days in the quarter, as its fiscal calendar was adjusted to match Amazon’s. He also noted that online Prime Go orders of Whole Foods groceries that are picked up at the store are counted as online sales instead of physical retail.
“The Whole Foods growth year-over-year on an apples-to-apples basis was approximately 6%,” Olsavsky said, though Amazon did not provide the actual numbers to support or check their math.
During the fourth quarter, total online sales at Amazon increased 13%. Amazon Web Services revenue grew 45%. Sales of advertising and other services increased 95%, which was actually lower than in previous quarters.
Read more aboutAmazon’s push into ecommerce ads.
No matter how Amazon tries to spin the numbers, its foray into the land of brick-and-mortar retail is not that impressive compared with its other businesses. Amazon has been gradually lowering some prices at Whole Foods, to help combat the higher-end grocery store’s reputation as “Whole Paycheck,” but according to recent research, notable price drops have not yet arrived.
“I was concerned that pricing actually hadn’t come down as much as promised and that competition was taking customer wallet share while employees seemed increasingly dissatisfied or disgruntled,” said Daniel Kurnos, an analyst at Benchmark. “I do, however, think physical retail makes sense, as does Whole Foods for data collection, Prime adoption and order frequency, but it may be a low-growth business for them rather than an arm they can accelerate.”
Before Amazon’s results, Kurnos said in a note he expects Amazon’s physical stores to grow at a rate of 5% to a total of $18.45 billion in 2019 and another 5% in 2020 to $19.37 billion. He estimated Amazon’s overall revenue growth rate for 2019 at roughly 20.6%.
Since Amazon took over the chain, Whole Foods co-founder John Mackey told employees in a video in November that sales have reversed course and grown, according to the Wall Street Journal. But sales growth at physical retail stores is paltry when compared with e-commerce growth, and Amazon only has itself to thank for that phenomenon.
Whole Foods is going to be a squishy growth contributor, at best, to the larger Amazon landscape, and at worst, a potential profit drag. Until Amazon is able to further cut prices to help generate more volume and add more actual stores, it may stay that way. | AMZN | 129.11 |
https://www.barrons.com/articles/why-amazon-will-never-buy-fedex-51549015201 | Why Amazon Will Never Buy FedEx | Amazon.com (AMZN) should buy FedEx (FDX) because its stock is cheap. It's a
provocative idea, and cross-industry mergers are interesting to think about. | Feb 1, 2019 | Barron's | - Trader Extra
Why Amazon Will Never Buy FedEx
- Order Reprints
- Print Article
Amazon.com (AMZN) should buy FedEx (FDX) because its stock is cheap. It’s a provocative idea, and cross-industry mergers are interesting to think about.
Already a subscriber? Sign In | AMZN | 129.11 |
https://www.cnbc.com/2019/02/01/amazon-falls-on-fears-of-regulation-in-india-and-increased-spending.html | Amazon falls into bear market territory | And we want AMZN to invest into long-term growth opportunities.” Deutsche
Bank's Lloyd Walmsley, on the other hand, raised his price target and said,
“We think... | Feb 1, 2019 | CNBC | - Amazon stock fell into bear market territory Friday after its fourth-quarter 2018 earnings report where the company provided light guidance, telling investors it would likely spend more in 2019.
- The company also expressed ambiguity around new regulations in India that could impact its business.
- Overall, analysts stood by the stock while adjusting their price targets.
Amazon fell into bear market territory on Friday and dropped below $800 billion in market value.
The stock ended the trading day at $1,626.23 per share, falling at least 20 percent below its 52-week/intraday all-time high of $2,050.50. The stock had previously entered bear market territory in December. At one point last year, the stock hit $1 trillion in market value during intraday trading.
Shares fell 5.4 percent Friday after the company announced on a call with investors Thursday that it would likely increase investment in 2019 and raised concerns about new regulation in India.
Amazon's stock initially popped in after-hours trading on its fourth-quarter 2018 earnings report Thursday. The stock took a steep turn during the company's call with analysts when Amazon CFO Brian Olsavsky said Amazon plans to increase investments this year after scaling back capital expenditures and hiring the year prior.
In notes following the report, analysts expressed concern about increased expenditures and a new law in India that will soon come into effect preventing foreign online retailers from selling products through affiliated companies. Amazon's roadblocks in India have contributed to slowing international sales growth and may have influenced the company's light guidance for the first quarter of 2019. Amazon expects revenue for Q1 between $56 billion and $60 billion, slightly below the $60.8 billion consensus estimated by FactSet.
"There is much uncertainty as to what the impact of the government rule change is going to have on the e-commerce sector there," Olsavsky said on the call. "Our main issue and our main concern is trying to minimize the impact to our customers and sellers in India."
Analysts largely seemed confident in the stock despite slightly lowering their price targets.
J.P. Morgan's Doug Anmuth reduced his price target, writing, "Uncertainty in India, along w/a higher 4Q base, takes early 2019 revenue acceleration off the table. ... But we still expect AMZN to grow revenue 18% FXN for the year and operating income by 30%. And we want AMZN to invest into long-term growth opportunities."
Deutsche Bank's Lloyd Walmsley, on the other hand, raised his price target and said, "We think Amazon is ultimately going to substantially expand its physical footprint and push further into healthcare and shipping/logistics, opening up its addressable markets further. Notwithstanding the volatility in the shares, we think valuations remain compelling.."
— CNBC's Eugene Kim contributed to this report. | AMZN | 129.11 |
https://seekingalpha.com/article/4237424-walt-disney-company-in-cards-in-2019 | The Walt Disney Company: What's In The Cards In 2019 ... | The Walt Disney Company: What's In The Cards In 2019? Feb. 01, 2019 9:15 AM
ETThe Walt Disney Company (DIS)AMZN, CMCSA, NFLX, T20 Comments 10 Likes. | Feb 1, 2019 | Seeking Alpha | The Walt Disney Company: What's In The Cards In 2019?
Summary
- The Walt Disney Company, the multinational corporation, has revenues obtained from various industries.
- The company has many “shots on goal” in 2019.
- Revenues aren’t estimated to grow robustly in 2019 with the launch of DTC service.
- Strong free cash flow is an attractive point to protect potential downside risk from the launch of Disney+.
The Walt Disney Company (NYSE:DIS) is one of the largest companies in the world by market value. It is no astonishment that the company is the market leader in many of the segments it operates in. In terms of the market share, Disney is the No. 1 in Cable networks segment, No. 1 in Parks & Resorts segment, No. 1 in Media Networks Affiliate Fees, and No. 1 in Media Networks Advertising segment.
To foresee a detailed standpoint for the company, I need to depth knowledge of company’s revenue drivers. I got that by dividing their revenue and operating income at key segments over the past years and investigated the tendency in the following data.
I divided their revenue into 4 main business segments: Media Networks, Parks and Resorts, Studio Entertainment, and Consumer Products & Interactive Media.
- Media Networks. This segment includes cable networks (The company has an enormous portfolio of 120 kid-driven, family and entertainment channels which broadcasting in more than 160 countries worldwide). Also, this section included broadcasting sales.
- Parks and Resorts. This segment was founded in 1971, over 140 million guests visit the company’s parks and it makes Disney the most visited park company worldwide.
- Studio Entertainment. The mainproduct is the all-around film and animation. Important to note that films produced by Walt Disney Animation Studios, Pixar Animation Studios, Marvel Studios, Lucasfilm, which makes the Studio division is one of Hollywood’s significant film studios.
- Consumer Products & Interactive Media. The segment with the broadest range of products. It includes retail, video games, digital application and content division. Disney also merchandising their brand and properties through licensing.
Revenue by Segments
Source: author's calculation based on 10-K fillings.
The chart shown above displays the revenue growth of different business segments. As calculated, Media Networks has been Disney’s greatest driver and this segment has increased by 26.05% since the Q1 of 2012. Nevertheless, Consumer Products & Interactive Media has decreased by 16.95% since 2016. All other company’s segments have declared green growth since 2012 with the largest growth in studio entertainment segment with 71.45%.
The gap in revenue between the two largest segments has reduced from 15% to 7% since 2012. Park and Resorts segment generated more revenue in 2018 through the increases of 6% from higher average guest spending and 2% from volume growth, while Media Networks added up only 4%. This growth was driven by increases in average ticket prices, food, and hotel room.
Disney’s media network business growth has boosted by demand from several industries. Disney has three particular business units within the media network segment: Affiliate fees ($13.279 billion), Advertising ($7.763 billion) and TV/SVOD ($3.458 billion). As mentioned above, Disney is a leader in both Affiliate fees and Media Advertising segments. Despite the fact that the company has the leading position in this segment with 11.92% market share, their revenue has decreased from fewer impressions, which caused by lower average viewership primarily due to face competition in the market. As a result, the company’s channels are losing subscribers and advertising revenue declined by 5% in 2018. By dividing the Media Networks into these three segments, I reveal also that Disney’s TV/SVOD is sharply growing segment with the growth rate of 27% due to higher program sales licensed to Hulu, the streaming service with over 23 million subscribers.
Additionally, the company’s second most meaningful segment, Park and Resorts, is sensitive to seasonality and needs regular capital inflows. From the revenue, it is not evidence of the company’s segment margin but this becomes clear when considering the distribution of the company’s operating income.
Operating Income by Segments
Source: author's calculation based on 10-K fillings.
As seen in the chart, the gap between media and parks segments is spreading to 13% which is almost exceeded the revenue gap by 2x. But since 2012, operating income from this business segment has stayed between the $6.6-7.7 billion while, Parks and Resorts segment has demonstrated the rapid growth in EBIT of 134% in the same period. Media networks operating profit for 2018 was down by 4.1% Y/Y, while Parks and Resorts operating profit increased by 18% Y/Y.
As of Q4FY18, Parks&Resorts and Media Networks operating income consists of 70% of Disney’s total EBIT. This certainly displays Disney’s driving segments, as well as the initial focus on evaluating their revenue growth. Overall, Disney outperforms their peers in the Media Conglomerates industry through using many other diversified operations. The industry average operating profit margin is 6.64%, while the Disney median operating margin is 22.31%.
Outlook by Business Segment
I investigated outlook for all company’s business segments based on management guidance, financial performance, and industry analysis.
- Media Networks: Disney plans to launch its own direct-to-consumer (DTC) service, Disney+, at the end of 2019. The acquisition of Twenty-First Century Fox, Inc (NASDAQ: FOX) and its channels, including ABC, ESPN, and Freeform will provide the company with the widest content distribution and encourage users to purchase their streaming DTC service Disney+ or ESPN+. The company has an exciting experience with ESPN+ which has grown to 1 million subscribers since April 2018, and Hulu with 25 million subscribers (After merger, Disney owns 60% of Hulu), but I believe they will not be able to gain market share from the level of competition from the side of the tech giants in the streaming space. I forecast DTC revenue remain flat in 2019 due to the launch of Disney+ and an increase in operating expenses, while the cable networks and TV/SVOD revenue and operating income will continue to increase in 2019.
- Parks and Resorts: The company stated that its welcome “Star Wars” land entitled “Galaxy’s Edge” will open in 2019, the new theme park will redefine guests experience. I expect both revenue and operating income will continue to increase indifferently.
- Studio Entertainment. Disney has many films and cartoons planned to show in 2019 such as Captain Marvel, Avengers: Endgame, Toy Story 4, Spider-Man: Far From Home, The Lion King, The New Mutants, Frozen 2. I expect that Disney will be able to generate at least $2 billion in movie revenue this year.
- Consumer Products & Interactive Media: I foresee revenue and earnings to increase in 2019 due to the higher revenues from sales of licensed merchandise.
Earnings outlook and Valuation
I estimated Disney’s revenue and margins based on their guidance, Wall Street expectations and financial analysis, so I used a moderate revenue growth rate assumption of 3% for 2019.
Source: author's calculation based on 10-K fillings.
Even if try to be ultra conservative and will use a revenue growth rate of 3%, net income is estimated to grow at 1.06% in 2019 to $13.5 billion. This is due to the fastest operating income growth in Studio Entertainment segment but potential revenue from Media Networks was risk-adjusted with Disney+ launch and in too conservative case we will see only 1.06% net income growth.
In confirmation of this, analysts expect modest EPS increases in the next years:
But on the other side, the company’s Revenue growth rate is currently around 7% and Disney trades at 13x P/E. Their P/E ratio of 13.17x also looks underestimated in comparison with its industry’s median P/E of 19.07. This keeps a high reserve of safety for the share price.
Risks
The main risk associated with DTC strategy is not guaranteed essential growth in this space. Especially If we consider that WarnerMedia (T) plans to start the same platform in 2019 in the line with NBC Universal (CMCSA) plans to launch its own streaming service in early 2020. NBC Universal stated that Comsat Cable and Sky (OTCPK: OTCPK:SKYAY) will provide the service to their 52 million audiences. Furthermore, the situation gets confused when counting the streaming platforms provided by tech giants such as Netflix (NFLX), Amazon (AMZN) and other. The Fox acquisition is another red flag for this standpoint, as well as other DTC offering added oxygen to the situation. The troubling part is whether Disney+ will burn a hefty amount of cash in order to compete in a very overflowing market. Furthermore, Disney reported a loss of $738 million in DTC segment last year as Hulu is continuing to burn cash.
Bottom Line
Disney is one of the famous brands in the entertainment world. The company has diversified portfolio of other businesses it operates in. The conductive outlook for Disney’s main income drivers, as well as robustly improving margins in Studio Entertainment segment, cover an engaging picture for future revenues. Furthermore, free cash flow from this portfolio will ensure downside umbrella while the DTC segment will expand the market share.
This article was written by
Analyst’s Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.
Seeking Alpha's Disclosure: Past performance is no guarantee of future results. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. Any views or opinions expressed above may not reflect those of Seeking Alpha as a whole. Seeking Alpha is not a licensed securities dealer, broker or US investment adviser or investment bank. Our analysts are third party authors that include both professional investors and individual investors who may not be licensed or certified by any institute or regulatory body.
Comments (20) | AMZN | 129.11 |
https://investorplace.com/2019/02/why-amazon-stock-and-google-stock-arent-getting-respect-nimg/ | Why Amazon (AMZN) Stock And Google (GOOG) Stock Don't ... | As of this morning, AMZN stock had rebounded to around $1,650. The Sweet
Smell of Success. The reaction of Google stock was similar. Google stock
dropped as low... | Feb 6, 2019 | InvestorPlace | The fact that Alphabet (NASDAQ:GOOGL) stock fell even though the company’s fourth-quarter results beat most earnings estimates should have surprised no one.
The same thing happened to Amazon.com (NASDAQ:AMZN) last week; its Q4 top and bottom lines decisively beat expectations, but Amazon stock tumbled nearly $100 per share in the wake of the results.
Investors believe that Amazon and Google are now mature. As a result, they think that Amazon stock and Google stock should be generating real returns, and investors plan to evaluate them based on their real returns.
Their future, it is believed, is similar to that of Apple (NASDAQ:AAPL) or Microsoft (NASDAQ:MSFT), which both now produce steady dividends. Eventually, these investors believe, Google stock and Amazon stock will be evaluated based on their “total returns” and compared to high-dividend, “low-tech” companies.
The $1 Trillion Question
In early August, Apple stock was (briefly) worth over $1 trillion. Amazon stock followed in its footsteps a month later, but the market caps of both stocks have since fallen to slightly above $800 billion, with Apple holding a $10 billion lead in early trading today.
A $1 trillion market cap is hard to get your head around. It’s equivalent to the gross domestic product of Indonesia , for instance, and four times that of Egypt.
But $1 trillion is a number that screams “maturity,” so Wall Street no longer wants to value the FANG stocks based on their futures.
Amazon stock, for instance, now has a price-earnings ratio of “just” 81. The main reason why Amazon stock retreated in the wake of the company’s Q4 results was that its product sales grew “only” 8%.
This ignores the fact that product sales are the lowest-margin piece of Amazon’s pie. The company’s big profits come from Amazon Web Services and third-party sales, which do not require Amazon to take inventory risks. Subscription revenue, including Prime memberships, brought in nearly $4 billion during the quarter.
Analysts were flabbergasted at the reaction of Amazon stock. Some 40 of 46 analysts who follow AMZN stock still have “buy” ratings or an equivalent rating on the shares.
But Amazon stock still dropped over $100 per share in one day, from $1,727 before its earnings were announced to Monday’s low of $1,616. As of this morning, AMZN stock had rebounded to around $1,650.
The Sweet Smell of Success
The reaction of Google stock was similar. Google stock dropped as low as $1,116, after it had reached $1,140 the day before its earnings were announced. That represented a drop of 2%, from peak to trough, for Google stock. As of this morning, Google stock was trading around $1,130. Google stock declined yesterday and today even though GOOG beat analysts’ consensus revenue estimate by $500 million, and reported earnings per share of $12.77 against the consensus outlook of $10.86.
Analysts assume that Google can’t possibly keep bringing 10c of every dollar to the net income line, as it continues to roll out its own branded hardware, phones, voice interfaces and attached-security hardware. The company’s capital spending doubled last year to $25 billion and should rise slightly this year.
As Google, Amazon, and the other FAANG stocks grow, they’re buying real estate, building physical data centers and warehouses, and generally hardening the silos that drive their ever-widening market niches. But (and this is the most important but) they’re not going into debt to do it. Alphabet’s debt is $4 billion, against assets of $197 billion. Amazon has no long-term debt at all, as it’s funding its expansion entirely with its cash flow.
The Bottom Line
Nothing has risen to challenge the FAANG stocks outside of China and even Alibaba Group Holding (NASDAQ:BABA) is a fraction of Amazon’s size. Still, the rise of such international rivals is great protection against antitrust problems, as is Walmart (NYSE:WMT), which is still twice as big as Amazon.
Most of what’s happening right now is a fear of big numbers. Such numbers are, indeed, harder to grow than small numbers. But so long as the absolute numbers keep rising, as they still are, it’s hard to see the present dip as anything but an opportunity.
Dana Blankenhorn is a financial and technology journalist. He is the author of a new mystery thriller, The Reluctant Detective Finds Her Family, available now at the Amazon Kindle store. Write him at [email protected] or follow him on Twitter at @danablankenhorn. As of this writing he owned shares in AAPL, BABA, MSFT and AMZN. | AMZN | 129.11 |
https://www.fool.com/investing/2019/02/06/snap-admits-its-cloud-commitment-was-too-much.aspx | Snap Admits Its Cloud Commitment Was Too Much | ... 0.39%) has stood behind its decision to rely on its cloud
infrastructure partners Google and Amazon (AMZN 3.19%) instead of building
its own servers. | Feb 6, 2019 | The Motley Fool | Snap (SNAP 1.69%) has stood behind its decision to rely on its cloud infrastructure partners Google and Amazon (AMZN -0.63%) instead of building its own servers. Snap argues the capital-light model will eventually lead to greater cash flow conversion. On the other hand, Snap can't realize as many benefits of scaling.
In order to reduce its infrastructure costs, Snap negotiated two massive long-term contracts with Google and Amazon in early 2017. The contracts were structured with the expectation that Snap's demands for cloud infrastructure would continue to grow rapidly. After several quarters of losing users, Snap admitted it couldn't keep up with its commitments and restructured its deal with Amazon in October last year.
Snap also amended its agreement with Google, but the details of those changes are not public.
Comparing the new contract
Snap's original contract committed it to paying Amazon Web Services $1 billion over five years. The new deal totals slightly more than $1.1 billion over six years.
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$50 million
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$125 million
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Importantly, both deals use the language: "If we fail to meet the minimum purchase commitment during any year, we are required to pay the difference. Any such payment may be applied to future use of AWS services during the addendum term, although it will not count toward meeting the future minimum purchase commitments under the addendum." In other words, Snap might have to prepay for its cloud-computing service, but it's not forfeiting the money outright.
It's unclear whether Snap faced any fees in its renegotiation with Amazon. Snap may have had to commit to higher overall spending in order to renegotiate without penalty.
In the short term, Snap will save itself from spending $35 million on cloud computing it likely won't need this year. It'll save even more in subsequent years. Additionally, the commitments ramp more slowly, which is important considering the significant slower growth outlook for Snap's user base going forward compared to two years ago.
Check out the latest Snap earnings call transcript.
Is Snap better off?
Snap has spent over $1 billion on cloud-computing servers over the last two years. That's more than 50% of its revenue during that period.
Snap interim CFO Lara Sweet points out the company's cost of revenue is growing much more slowly than its overall revenue growth. Indeed, the company actually saw a sequential decline in its infrastructure costs. Sweet says that's due to "engineering efficiency programs" the company put in place in 2018. But the lower commitment to Amazon may have played a more significant roll than Sweet lets on.
From a long-term operational-efficiency perspective, it doesn't make sense for Snap to spend hundreds of millions of dollars on cloud computing. It could achieve better margins by building out its own data centers and servers, considering the size of its user base. And if Snap is really making improvements in the efficiency of its infrastructure expenses, it could actually benefit from those improvements instead of practically passing on the savings to Amazon and Google due to its commitments.
While Google and Amazon were instrumental in enabling Snap to grow quickly from the start, Snap's now relying on long-term contracts to keep its infrastructure costs under control. That requires a good ability to predict the future, which, as it turns out, is really hard to do.
What's more, those long-term contracts make it hard for Snap to move away from its reliance on cloud infrastructure without facing penalties. Considering there's not much indication that Snap is going to need a significant increase in cloud-computing infrastructure over the next few years -- infrastructure expenses grew just 2% year over year in the fourth quarter -- the vicious cycle of lengthening out its contracts with higher overall spend requirements may continue indefinitely.
Ultimately, that's going to limit Snap's gross margin and its free cash flow -- which is only a fraction of gross profits after all. | AMZN | 129.11 |
https://www.foxbusiness.com/business-leaders/amazons-jeff-bezos-says-national-enquirer-threatened-to-expose-naked-selfies | Amazon's Jeff Bezos says National Enquirer threatened blackmail over naked
selfies | AMZN, AMAZON.COM INC. 125.49, -1.62, -1.27%. The blog post, 'No thank you,
Mr. Pecker,' titled after AMI CEO David Pecker, Bezos shares email
exchanges... | Feb 7, 2019 | Fox Business | Amazon's Jeff Bezos says National Enquirer threatened blackmail over naked selfies
Amazon CEO Jeff Bezos published a bombshell in a blog post Medium Thursday, where the world’s richest man claims the National Enquirer, owned by American Media, threatened to publish nude photos of him amounting to blackmail.
"I was made an offer I couldn't refuse," Bezos writes. "Rather than capitulate to extortion and blackmail, I've decided to publish exactly what they sent me, despite the personal cost and embarrassment they threaten."
Shares of Amazon were modestly lower in the extended trading session.
|Ticker||Security||Last||Change||Change %|
|AMZN||AMAZON.COM INC.||129.27||-0.88||-0.68%|
The blog post, ‘No thank you, Mr. Pecker,’ titled after AMI CEO David Pecker, Bezos shares email exchanges describing photos the tabloid publication uncovered while investigating his relationship with former television news anchor Lauren Sanchez.
Jon P. Fine, Deputy General Counsel, Media for AMI, questioned the Amazon CEO’s judgment over the salacious photos and texts saying in an email that the discovered content is of public interest.
After creating Amazon out of his garage 24 years ago, Bezos says the ecommerce giant currently employs more than 600,000 people and is ranked among the most valuable publicly traded U.S. companies alongside Microsoft and Apple.
"I will let those results speak for themselves," he writes.
The Amazon chief also mentions the immunity deal Pecker struck with the Justice Department related to the presidential campaign of Donald Trump.
I’ve written a post about developments with the National Enquirer and its parent company, AMI. You can find it here: https://t.co/G1ykJAPPwy— Jeff Bezos (@JeffBezos) February 7, 2019
Bezos announced via Twitter earlier this year that he and wife MacKenzie were divorcing after 25 years of marriage. More than $137 billion is on the line, much of which is tied up in Amazon stock as Bezos is the largest single shareholder.
CLICK HERE TO GET THE FOX BUSINESS APP
In the tweet, the former couple expressed how lucky they feel to have been partners for so many years and are "deeply grateful for every year of their marriage." | AMZN | 129.11 |
https://www.bloomberg.com/news/articles/2019-02-07/ibm-invests-2-billion-in-new-york-research-hub-for-ai | IBM Invests $2 Billion in New York Research Hub for AI | AMZN. AMAZON.COM INC. 125.49. USD. -1.62-1.27% · MSFT. MICROSOFT CORP.
342.33. USD. -5.77-1.66%. Open. IBM is plowing $2 billion into a new
artificial... | Feb 7, 2019 | Bloomberg.com | To continue, please click the box below to let us know you're not a robot.
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For inquiries related to this message please contact our support team and provide the reference ID below. | AMZN | 129.11 |
https://www.marketwatch.com/story/labor-union-raises-concern-over-amazons-move-to-one-day-shipping-2019-04-28 | Labor union raises concern over Amazon’s move to one-day shipping | AMZN. -1.27% · SPX. -0.37%. Amazon.com Inc.'s move toward one-day free
shipping may be good news for Prime subscribers, but not necessarily for
those who... | Apr 28, 2019 | MarketWatch | Amazon.com Inc.’s move toward one-day free shipping may be good news for Prime subscribers, but not necessarily for those who work in Amazon’s warehouses.
The Retail, Wholesale and Department Store Union, a longtime critic of Amazon’s workplace practices and a backer of unionization at Amazon warehouses, said in a statement Friday that it worries the increased workload could be bad for fulfillment-center employees.
“With two-day Prime shipping, Amazon fulfillment workers currently face speeds of 200-300 orders per hour in 12-hour shifts. They struggle already to maintain that pace,” RWDSU President Stuart Appelbaum said. “If Amazon plans to effectively double the speed, it must also address existing workforce needs and ensure its workers are safe. Increasing fulfillment speeds means they need to hire more workers, under more sustainable speeds that don’t put workers’ lives in jeopardy.”
Amazon dismissed the concerns in a statement of its own Friday, calling them “misguided and self-serving.” Dave Clark, senior vice president of Amazon Worldwide Operations, said the company has used 20 years of business experience to build “a positive, safe environment in our facilities.”
“This enables Amazon to deliver orders faster and more efficiently — not by working harder but by working smarter based on decades of process improvement and innovation,” he said in the statement.
Productivity at Amazon’s fulfillment centers were highlighted in a separate report last week, as The Verge reported Amazon workers are tracked by automated systems that rate each employee’s productivity, and the software reportedly recommends warnings or firings if they don’t handle enough packages. The Verge said between 2017 and 2018, about 300 workers were fired for inefficiency reasons from a Baltimore warehouse that employs about 2,500 people; extrapolating that rate suggests about 10% of Amazon’s 125,000 warehouse workers in the U.S. lose their jobs every year for not being productive enough, according to the report.
Amazon announced the shift toward free one-day shipping last week in its quarterly earnings report, in which is said operating profit doubled, for a fourth straight quarter of record earnings. The company said it expects to spend about $800 million this quarter to shorten the Prime delivery period.
Amazon stock
AMZN, | AMZN | 129.11 |
https://www.marketwatch.com/story/amazons-move-to-one-day-shipping-shows-the-competition-is-catching-up-2019-04-26 | Amazon’s move to one-day shipping shows the competition is catching up | AMZN. -1.27% · WMT. -1.39% · TGT. -2.92% · IBUY. -1.10% · SPX. -0.37%.
Amazon.com Inc. is transitioning to free one-day shipping, faster than the
previous... | Apr 29, 2019 | MarketWatch | Amazon.com Inc. is transitioning to free one-day shipping, faster than the previous two-day promise to Prime members, a move that analysts think indicates just how much the competition has accomplished in its efforts to catch up to the e-commerce giant.
Amazon’s
AMZN,
“[W]hile our 20-year head start in investments in logistics and fulfillment capacity and partner networks that we’ve built are helping us, we also do have a network that is tuned to two-day delivery right now,” Olsavsky said, according to a FactSet transcript. “So we do need to build out more one-day capacity along with our transportation partners.”
Read:Amazon to give Prime customers one-day shipping, cutting free delivery time in half
Analysts see the move as a good one despite the price tag as it maintains the convenience edge Amazon has over its competitors in e-commerce. But it’s also an indication that all of the investment and effort that competitors like Walmart Inc.
WMT,
“We believe the move is consistent with Amazon’s long-standing goal of convenience and selection, but also likely reflects the increasingly competitive retail environment,” wrote J.P. Morgan analysts, who rate Amazon shares overweight and raised their price target to $2,200 from $2,050.
John Zolidis, president of Quo Vadis, notes that Walmart and Target still have the benefit of same-day pickup, and Target has same-day delivery through Shipt. While one-day shipping will be even more enticing to existing Prime members, he says the other players shouldn’t be discounted.
“[I]t would be a mistake to sell large retailers on this announcement as they have anticipated this for some time and are already rolling-out corresponding services,” Zolidis said in a statement. “Further, we believe that a total offer that gives consumers the option to get product when and where they want it, either at home or in the store, is superior to a delivery-only option.”
Nevertheless, Walmart stock is down 2.2% in Friday trading, and Target shares have slumped 6%.
Amazon’s stock edged up 0.7% in morning trade, after the company reported late Thursday earnings that doubled, to well-above expectations, while revenue rose in line with forecasts.
GlobalData Retail data shows that both Walmart and Target have lifted their share of shoppers over the past three months, Neil Saunders, managing director, wrote in a note. Nearly three-quarters of those shoppers (72%) are also Amazon regulars.
“While this should not be taken to mean that Amazon is losing all their spending, it is clearly losing a share of wallet among some segments of the population,” Saunders said. “As much as this is offset by gains elsewhere, it is extremely unhelpful to growth. In our view, the trend is only likely to accelerate going forward and it will put Amazon under more competitive pressure than it has seen before.”
See:Amazon profit doubles to a record high, Prime customers to get free one-day shipping
By jumping out ahead with one-day standard shipping, Amazon is once again raising the competitive bar just when other retailers and brands thought they were on to Amazon’s logistical game.
“[T]he move will widen the convenience/logistical gap with competitors, which had narrowed in recent years as other retailers enhanced their shipping capabilities,” Stifel analysts led by Scott Devitt wrote. “Amazon is early in ramping up this initiative and the total cost to offer the service is difficult to estimate at this time. Relative to previous investment cycles, Amazon is in a more favorable position from a margin standpoint given the development of AWS and its emerging advertising business.”
Stifel rates Amazon stock buy with a $2,300 price target.
Don’t miss:This is what Amazon gets out of its relationship with Kohl’s
And:All 45 Amazon analysts are bullish on the stock – should that worry investors?
There were a few sour notes during the quarter that Benchmark’s Daniel Kurnos points out, among them a deceleration in international revenue growth and a miss in physical-store sales despite additional price cuts at Whole Foods Market as some purchases have moved online.
But even with those negatives, Amazon has the edge with one-day shipping.
“This move should only solidify Amazon’s dominance in the marketplace, forcing competitors to react with less supportive infrastructure backbones, and while likely to be expensive over the medium-term, Amazon has already shown increasing economies of scale even as delivery times shrink,” Benchmark wrote.
“After a year in which offline retailers were lauded for evening the playing field, Amazon once again will likely retake share, solidifying what should remain a high-teens/low-twenties percent revenue growth rate.”
Benchmark rates Amazon stock buy with a $2,300 price target.
In all, 13 analysts surveyed by FactSet raised their stock price targets, while one lowered, to lift the average target to $2,184.54, from $2,128.32 before the earnings report.
Amazon stock has rallied nearly 30% for 2019 so far while the Amplify Online Retail ETF
IBUY, | AMZN | 129.11 |
https://www.freightwaves.com/news/breaking-amazons-digital-freight-brokerage-platform-goes-live | Breaking: Amazon’s digital freight brokerage platform goes live | “We see AMZN's 1-day Prime shipping raising consumer expectations and
increasing the cost to compete in e-commerce. Over the long term, we also
see this as a... | Apr 26, 2019 | FreightWaves | ( Photo: Amazon )
Today, freight brokers’ and carriers’ worst nightmare has come true: Amazon has quietly taken its digital freight brokerage platform live at freight.amazon.com, and it is undercutting market prices from 26 to 33 percent.
Early this morning, in a client note responding to Amazon’s (NASDAQ: AMZN) announcement that it would begin offering free one-day shipping to Prime members, Morgan Stanley equities analyst Brian Nowak made a cryptic prediction.
“We see AMZN’s 1-day Prime shipping raising consumer expectations and increasing the cost to compete in e-commerce. Over the long term, we also see this as a Trojan horse for Amazon to grow its next disruptive business… a third party logistics network,” Nowak wrote.
Amazon already moves an enormous amount of freight through its distribution and sortation centers and has an extensive network of trucking carriers. For many industry observers, it was only a matter of time before Amazon leveraged the implicit network effect — the total number of shippers and carriers who do business with Amazon — and connected both sides of its business.
Part of this business may be to hedge against the volatile price of trucking capacity: by building a large freight brokerage business, AMZN is turning part of its cost into revenue. After all, Amazon is already a top ten international freight forwarder for Asian ocean freight inbound to North America.
A few weeks ago, a former Amazon executive reached out to FreightWaves to explain the e-commerce giant’s disintermediation strategy.
“The advantages that then come from disintermediation and the monetization of those capabilities are secondary to the immediate need of self-preservation, but then serve to feed very critical needs of Amazon’s ability to continue to succeed,” the Amazon veteran wrote. “This innovation and growth then manifests as continuously evolving towards the ability to sell everything and anything that is or can be sold. That’s the true Amazon flywheel: disintermediate to survive; monetize to fund innovation; innovate to grow; disintermediate to survive…”
The entry of Amazon into freight brokerage is the ‘disintermediate to survive’ phase of the flywheel. AMZN is under pressure to re-accelerate its top line revenue, which has slowed from upward of 30 percent annually three years ago to less than 15 percent projected for this year. Amazon cannot allow trucking capacity to constrain its growth and is entering freight brokerage to lock that capacity up.
Notice how ‘monetize’ comes after ‘disintermediate’. From a cursory review of four lanes in Amazon Freight’s current offering, it’s clear that Amazon is not trying to realize fat gross margins on its brokerage. Instead, it is massively undercutting market prices. Amazon’s new portal is intended for shippers who want Amazon’s rates for full truckload dry van freight in Connecticut, Maryland, New Jersey, New York, and Pennsylvania.
( Table: FreightWaves )
As this table makes clear, Amazon quotes rates to shippers that are below even DAT’s broker-to-carrier spot rates. In other words, in its current form, Amazon Freight is a free, marginless brokerage.
Monetization will come later, but this is the digital freight brokerage startup model on ‘Georgia overdrive’: massive capital deployed to rapidly scale a network on thin or negative margins and take share. There is no telling how big Amazon wants this business to grow, but at a certain point, prices will creep up as Amazon monetizes the brokerage service to fund further innovation.
That day may be some time away. In the first quarter of 2019, Amazon spent $7.3 billion on transportation, which it lumps together with sortation and delivery centers for the line item “shipping costs.” Approximately annualized, AMZN’s “shipping costs” are $28 billion per year, and, crucially, purchased transportation is not formally broken out on its P&L. Amazon could grow its brokerage into a $10 billion operation — effectively a shadow C.H. Robinson — selling capacity at cost, add it to ‘shipping costs’, and it could be years before investors begin asking about margins.
We think that building a third-party logistics network will allow Amazon to blow out retail peak season. By taking no margin during soft freight seasons and keeping trucks running, AMZN will have capacity locked up and ready to move truly staggering e-commerce volumes in November and December.
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https://www.reuters.com/article/us-retail-stocks-idUSKCN1S21PG | Retailers slip on Amazon's one-day delivery plan | “And even fewer can do it at the vast scale and reasonable cost that AMZN
would need for Prime delivery,” Nowak said in a note. | Apr 26, 2019 | Reuters | (Reuters) - Shares of Walmart, Target and other U.S. retailers fell on Friday as Amazon.com Inc unveiled a one-day delivery plan for its Prime members in a move to further disrupt the fiercely competitive retail landscape.
The e-commerce giant’s announcement on Thursday could cause other brands, manufacturers, retailers, and logistics companies to have to invest more aggressively to compete with Amazon and its delivery, analysts said.
Retailers in recent years have poured billions into ecommerce and faster shipping options and are trying to close the gap with Amazon.
“This is about making it more expensive to catch up and affirms our world view that only the largest and smartest will survive,” Bernstein analyst Brandon Fletcher said.
The move is expected to heighten consumer expectations on e-commerce delivery just like Amazon did with its two-day shipping option for members of its loyalty club Prime, noted analysts.
“The faster you ship, the more people buy,” RBC Capital Markets analyst Mark Mahaney said.
The challenge for non-Amazon players was that very few of the existing logistics and parcel delivery players now have the ability to do nationwide one-day delivery, Morgan Stanley analyst Brian Nowak said.
“And even fewer can do it at the vast scale and reasonable cost that AMZN would need for Prime delivery,” Nowak said in a note.
Walmart Inc’s shares fell about 3 percent, while Target Corp dropped about 5 percent in morning trade.
Shares of Kohl’s Corp, Macy’s Inc and Nordstrom Inc fell about 1 percent. Grocer Kroger Co was nearly 3 percent lower, while consumer electronics retailer Best Buy Inc dropped 2.1 percent.
Reporting by Soundarya J and Akanksha Rana in Bengaluru; Editing by Maju Samuel
Our Standards: The Thomson Reuters Trust Principles. | AMZN | 129.11 |
https://finance.yahoo.com/news/amazon-tries-entire-trucking-industry-152800497.html | Amazon Tries to Take on the Entire Trucking Industry | At roughly the same time Amazon (NASDAQ: AMZN) quietly let it be known that
it plans to move from free two-day shipping to one-day shipping for Prime... | Apr 28, 2019 | Yahoo Finance | Amazon Tries to Take on the Entire Trucking Industry
At roughly the same time Amazon (NASDAQ: AMZN) quietly let it be known that it plans to move from free two-day shipping to one-day shipping for Prime members, the company dropped another bombshell. The e-commerce giant took its freight brokerage platform live at freight.amazon.com.
That's not a move the company did much to promote. In fact, there's no press release on the company's website nor did it have a media event to trumpet its efforts.
Not playing up major news seems to be part of CEO Jeff Bezos's playbook. That does not make the beta launch of Amazon's freight service in Connecticut, Maryland, New Jersey, New York, and Pennsylvania any less epic, however.
Amazon has begun brokering trucking services. Image source: Getty Images.
What is Amazon doing?
The company is leveraging its own shipping brokerage capabilities to sell those services to other companies. It's going to do that through its online brokerage platform at prices that will undercut current market pricing by 26-33%, according to Freightwaves.com, which broke the news of the launch.
This isn't Amazon selling capacity on its own vehicles. Instead, it's brokering access to its trucking network. In its launch version, the online retailer is offering access to 53' dry van full truckload freight service without marking it up.
Basically, Amazon is locking up trucking capacity by brokering those services without making any money. It's not asking trucking companies to operate at a discount (at least beyond whatever discount they already give the online retailer) and that leaves Amazon lots of room to raise prices down the line (while still being much cheaper than what's currently being charged).
"Amazon already moves an enormous amount of freight through its distribution and sortation centers and has an extensive network of trucking carriers," wrote FreightWaves' JFor many industry observers, it was only a matter of time before Amazon leveraged the implicit network effect -- the total number of shippers and carriers who do business with Amazon -- and connected both sides of its business."
Why is this important?
Amazon can enter a business and take market share without any regard for making a profit. In this case, the company already moves so much of its own freight via third-party carriers that it largely already had the infrastructure necessary to become a broker for other companies that need to move freight.
That allows the online giant to offer much cheaper prices to attract companies to its brokerage platform. Rival brokerage firms, on the other hand, can't eliminate their markups -- that's how they make money.
To compete, both trucking companies and brokerages will likely have to cut their rates. That could allow Amazon to eventually realize a profit in this business without charging more. More importantly, lowering overall prices for freight will help the online leader reduce its own expenses in that important area.
No matter how this plays out, Amazon wins. The company can raise its brokerage prices during the peak holiday season and still be cheaper than its rivals. It should also be able to lower its own costs and have even more leverage by increasing its volume with its vendors.
This is Amazon flexing its muscles in a way no other company could. It can enter a new business with no pressure to make money because Bezos has taught its investors that short-term or even longer investments make sense if they pay off eventually, and this almost certainly will.
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John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool's board of directors. Daniel B. Kline has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends Amazon. The Motley Fool has a disclosure policy. | AMZN | 129.11 |
https://www.businesswire.com/news/home/20190528005712/en/Emirates-NBD-Building-Artificial-Intelligence-enabled-Bank-of-the-Future-with-AWS | Emirates NBD Building Artificial Intelligence-enabled Bank of ... | SEATTLE--(BUSINESS WIRE)--Today, Amazon Web Services (AWS), an Amazon.com
company (NASDAQ: AMZN), announced that Emirates NBD, a leading bank in the
Middle... | May 28, 2019 | Business Wire | SEATTLE--(BUSINESS WIRE)--Today, Amazon Web Services (AWS), an Amazon.com company (NASDAQ: AMZN), announced that Emirates NBD, a leading bank in the Middle East, is collaborating with AWS to create a culture of innovation within the bank and is using AWS machine learning (ML) services to build a personalized retail customer banking experience. Emirates NBD will also utilize AWS data analytics, Internet of Things (IoT), Natural Language Processing (NLP), and other advanced technologies as part of its ongoing efforts to better engage with customers and simplify banking.
A front-runner in retail banking innovation, Emirates NBD is working with AWS because of its broad and deep portfolio of cloud services and the increased security and control Emirates NBD can achieve in the cloud, and is continuing to invest in AWS as its preferred provider for machine learning workloads. With AWS, Emirates NBD will take further advantage of AWS artificial intelligence and machine learning services including Amazon SageMaker, a fully managed machine learning service for building, training, and deploying machine learning models to provide relevant real-time banking experiences.
To create a more rewarding and customer-centric banking experience, Emirates NBD is also leveraging Amazon Personalize, an AWS machine learning service that enables the development of individualized recommendations to launch new personalized retail banking applications. One of the first of these applications is a personal finance manager that uses an automated, self-learning system to deliver a highly personalized banking experience to customers in order to predict what each individual customer needs and match this with the most appropriate solution. The system also utilizes Natural Language Processing technology so customers can interact with call center automation in a more natural way. To support this work, Emirates NBD is using Amazon Polly, a cloud service that uses advanced deep learning technologies to convert written content into human-like speech, in its automated call center to further enhance customer interactions by delivering lifelike voice banking experiences. As part of Emirates NBD’s journey with AWS, it is also exploring how to better serve customers at bank branches with convenient and secure authentication, leveraging AWS’s image recognition and IoT solutions.
“Our vision is to be the Middle East’s most innovative financial services organization and to achieve this we have chosen to work with the world’s most innovative technology company, Amazon Web Services,” said Suvo Sarkar, Senior Executive Vice President and Group Head - Retail Banking & Wealth Management at Emirates NBD. “Emirates NBD and Amazon share common values of innovation and customer centricity and we look forward to leveraging AWS’s technologies and innovation practices to make banking more easy and intuitive for our customers.”
“Across every industry, companies are starting to meaningfully use machine learning in their businesses, and AWS offers the broadest and deepest portfolio of machine learning services to help them solve some of their biggest challenges. We are excited to see how these technologies are helping transform the financial services industry in the Middle East and around the world,” said Andy Isherwood, Managing Director, Amazon Web Services EMEA. “Emirates NBD is one of the most valued and innovative financial institutions in the Middle East, and we look forward to continuing to support them as they embark on a journey to transform how they serve their retail banking customers and build their organization into a bank of the future.”
About Amazon Web Services
For 13 years, Amazon Web Services has been the world’s most comprehensive and broadly adopted cloud platform. AWS offers over 165 fully featured services for compute, storage, databases, networking, analytics, robotics, machine learning and artificial intelligence (AI), Internet of Things (IoT), mobile, security, hybrid, virtual and augmented reality (VR and AR), media, and application development, deployment, and management from 66 Availability Zones (AZs) within 21 geographic regions, spanning the U.S., Australia, Brazil, Canada, China, France, Germany, Hong Kong Special Administrative Region, India, Ireland, Japan, Korea, Singapore, Sweden, and the UK. Millions of customers—including the fastest-growing startups, largest enterprises, and leading government agencies—trust AWS to power their infrastructure, become more agile, and lower costs. To learn more about AWS, visit aws.amazon.com.
About Amazon
Amazon is guided by four principles: customer obsession rather than competitor focus, passion for invention, commitment to operational excellence, and long-term thinking. Customer reviews, 1-Click shopping, personalized recommendations, Prime, Fulfillment by Amazon, AWS, Kindle Direct Publishing, Kindle, Fire tablets, Fire TV, Amazon Echo, and Alexa are some of the products and services pioneered by Amazon. For more information, visit amazon.com/about and follow @AmazonNews.
About Emirates NBD
Emirates NBD is a leading banking Group in the region. As at 31st March 2019, total assets were AED 525.8 Billion (equivalent to approx. USD 143 Billion). The Group has a significant retail banking franchise in the UAE and is a key participant in the global digital banking industry, with over 90 per cent of all financial transactions and requests conducted outside of its branches. The bank was declared the Most Innovative Financial Services Organization of the Year at the 2017 BAI Global Innovation Awards.
The bank currently has 234 branches and 1076 ATMs and SDMs in the UAE and overseas and a large social media following, being the only bank in the Middle East ranked among the top 20 in the ‘Power 100 Social Media Rankings’, compiled by The Financial Brand. It is a major player in the UAE corporate and retail banking arena and has strong Islamic Banking, Global Markets & Treasury, Investment Banking, Private Banking, Asset Management and Brokerage operations.
The Group has operations in the UAE, the Kingdom of Saudi Arabia, Egypt, India, Singapore, the United Kingdom and representative offices in China, Indonesia and Turkey.
The Group is an active participant and supporter of the UAE’s main development and community initiatives, in close alignment with the UAE government’s strategies, including financial literacy and advocacy for inclusion of People with Disabilities under its #TogetherLimitless platform. Emirates NBD Group is a Premier Partner and the Official Banking Partner for Expo 2020 Dubai. For more information, please visit: www.emiratesnbd.com | AMZN | 129.11 |
https://www.businesswire.com/news/home/20190528005049/en/Mindy-Kaling-to-Publish-New-Essay-Collection-with-Amazon-Available-Free-for-Prime-Members | Mindy Kaling to Publish New Essay Collection with Amazon ... | SEATTLE--(BUSINESS WIRE)--(NASDAQ: AMZN)—Amazon Original Stories, an
imprint of Amazon Publishing, announced today Mindy Kaling's forthcoming
essay... | May 28, 2019 | Business Wire | SEATTLE--(BUSINESS WIRE)--(NASDAQ: AMZN)—Amazon Original Stories, an imprint of Amazon Publishing, announced today Mindy Kaling’s forthcoming essay collection, coming in summer 2020. Kaling’s essays will be available for free to Prime and Kindle Unlimited customers. Readers and listeners can download the collection as a Kindle eBook or as an Audible audiobook, which Kaling will narrate herself. Kaling is represented by Richard Abate, 3 Arts Entertainment.
The beloved best-selling author, actor, and producer will share laugh-out-loud, heartwarming, and highly-relatable dispatches from the latest chapter of her life, like the ups and downs of being her own husband, friendship in the time of babies, watching The Handmaid’s Tale while pregnant, and hanging with fabulous and inspiring women like Reese, Sandy, and Oprah (OK, maybe that last one’s not as relatable). In her two best-selling memoirs, Why Not Me? and Is Everyone Hanging Out Without Me?, readers fell in love with Mindy’s awkward coming-of-age stories and rooted for her bold dreams. Now, Kaling shares her charming and intimate reflections on life changes—big and small—from the past few years.
“It’s so exciting for me to share the secrets of how I balance being a professional writer, actor, and single mom in a new collection of essays,” says Mindy Kaling. “I mean, it would be so exciting to share those secrets. I don’t have them. Like, not even close. This morning I bribed my baby with a remote control to get my car keys back. But I do have funny stories about my life and I can’t wait for you to read them.”
This summer, Kaling will star in the Amazon Studios film Late Night in theaters nationwide on June 7 alongside Emma Thompson, Hugh Dancy, Reid Scott, Denis O’Hare, Paul Walter Hauser, John Lithgow, and Amy Ryan. Kaling also co-wrote and produced the film, which was acquired by Amazon Studios at the Sundance Film Festival earlier this year.
“Working with Mindy Kaling is an absolute dream project for Amazon Publishing, where every day our guiding light is to strive for the best not only for our readers, but for our authors as well,” says Mikyla Bruder, Publisher of Amazon Publishing. “Whether she’s delighting fans on-screen or on-the-page—as The Office’s Kelly Kapoor, The Mindy Project’s Mindy Lahiri, Molly Patel in the upcoming film Late Night, or as a New York Times bestselling memoirist—Mindy is guaranteed to entertain. We’re privileged to be a part of bringing Mindy’s deeply personal essay collection to life, and can’t wait for readers to laugh, cry, and fall in love with her all over again.”
“Amazon Original Stories is focused on offering our readers and listeners binge-worthy narratives, and Mindy Kaling is the perfect author for this,” says Julia Sommerfeld, Editorial Director of Amazon Original Stories. “Mindy is a truly innovative storyteller and her hilarious and heartfelt essays are unputdownable. We’re certain that once you read one, you’ll have to finish the whole collection!”
“I’m excited to be doing this collection with AOS,” says Richard Abate, 3 Arts Entertainment. “It is an exciting format for writers who want to reach the widest audience possible and still deliver their work in a bingeable format.”
Launched in 2017, Amazon Original Stories brings unforgettable short fiction and nonfiction to Kindle. This September, Amazon Original Stories will launch Forward, a six-part science-fiction short story collection featuring stories from Blake Crouch, N. K. Jemisin, Veronica Roth, Amor Towles, Paul Tremblay, and Andy Weir. Past collections include the Amazon Original Stories and Amazon Studios joint acquisition The Fairer Sex by Michelle Miller, Warmer by Lauren Groff, Jane Smiley, Jess Walter, and more, and Dark Corners, which features Lisa Unger’s Edgar Award-nominated short The Sleep Tight Motel. Each story is available free to Prime members, as well as Kindle Unlimited subscribers, and is available for download for non-subscribers beginning at $1.99.
About Amazon Publishing
Amazon Publishing is a leading trade publisher of fiction, nonfiction, and children’s books with a mission to empower outstanding storytellers and connect them with readers worldwide. The Amazon Publishing teams based in Seattle, New York, Grand Haven, Luxembourg, London, Madrid, Milan, and Munich publish emerging, bestselling and critically-acclaimed authors in digital, print, and audio formats. For more information, visit apub.com.
About Amazon
Amazon is guided by four principles: customer obsession rather than competitor focus, passion for invention, commitment to operational excellence, and long-term thinking. Customer reviews, 1-Click shopping, personalized recommendations, Prime, Fulfillment by Amazon, AWS, Kindle Direct Publishing, Kindle, Fire tablets, Fire TV, Amazon Echo, and Alexa are some of the products and services pioneered by Amazon. For more information, visit www.amazon.com/about and follow @AmazonNews. | AMZN | 129.11 |
https://www.bizjournals.com/sanjose/news/2019/05/28/oracle-cloud-layoffs-orcl-amzn-msft.html | Report: Hundreds of engineers laid off at Oracle amid cloud ... | Oracle Corp. has spent months quietly cutting jobs across the U.S., with
some employees worrying that as much as 10 percent of the company's
138,000... | May 28, 2019 | The Business Journals | Request unsuccessful. Incapsula incident ID: 1340000840242495608-976087354542134541 | AMZN | 129.11 |
https://www.bizjournals.com/phoenix/news/2019/05/28/construction-completed-on-southwest-phoenix-amazon.html | Construction completed on southwest Phoenix Amazon ... | Wentworth Property Co. is the owner's representative on the project, while
Graycor will also complete the tenant improvements for Amazon (Nasdaq:
AMZN). | May 28, 2019 | The Business Journals | Request unsuccessful. Incapsula incident ID: 1340000840242495608-976087436146513165 | AMZN | 129.11 |
https://www.seroundtable.com/google-mobile-search-video-box-27637.html | Google Mobile Search Video Box Shows Large & Small Video Thumbnails | Yes, that that is the start of something bigger since EU understands how G,
AMZN, MS and others are taking control of everything. Even for greedy
reasons,... | May 28, 2019 | Search Engine Roundtable | Google is now showing a video box in the mobile search results that highlights a large video at the top with two smaller video thumbnails below that video. On desktop, you get just the three videos lined up and the same size but on mobile - Google is giving one more prominence.
Here is a screen shot:
Here it is in action by Mordy Oberstein who spotted this first and notified me on Twitter:
Seeing a large video atop of two smaller video results that also includes a "preview" - What's interesting is that Google knew to pull the "title" frame that appeared 9 secs in as the preview.— Mordy Oberstein (@MordyOberstein) May 26, 2019
You ever see this @VorticonCmdr?
cc: @rustybrick #video #serp pic.twitter.com/CTSidcLPjc
It doesn't seem that much different from what I've seen before but hey, it is nice to document these smaller changes.
Oh and the jumping to a specific section makes sense as Google has the suggested clip technology for some time now.
Forum discussion at Twitter. | AMZN | 129.11 |
https://finance.yahoo.com/news/antitrust-facebook-google-amazon-apple-190320218.html | Why the U.S. government is coming for Amazon, Google, Facebook, and Apple | Titans like Amazon (AMZN), Apple (AAPL), Google (GOOG, GOOGL), and Facebook
(FB) are dealing with existential threats on multiple fronts. | Jul 10, 2019 | Yahoo Finance | Why the U.S. government is coming for Amazon, Google, Facebook, and Apple
Big Tech is facing a reckoning the likes of which the industry has never seen. Titans like Amazon (AMZN), Apple (AAPL), Google (GOOG, GOOGL), and Facebook (FB) are dealing with existential threats on multiple fronts. Antitrust enforcement, election interference, free speech, hate speech, and a number of other important matters are all coming to a head at the same time, and that makes it challenging to comprehend the troubling landscape for the country's most prosperous industry.
To help make sense of it all, we're looking at the biggest names in tech, and examining the problems they'll soon have to confront.
Amazon
Amazon is one of the largest retailers in the world, but CEO Jeff Bezos's empire has a slew of detractors calling for, among other things, increased taxes on the business and, in the most extreme case, a full-blown breakup.
Presidential candidate Bernie Sanders (I-VT), who is waging an ongoing war with the company, is currently calling for Bezos to improve working conditions for Amazon's fulfillment center employees. Sanders fired off his most recent salvo against the company via Twitter, linking to a story by The Daily Beast detailing the plight of employees, including those who have threatened to commit suicide.
Sanders has also hit Amazon for not paying any federal income taxes for the second year in a row. The company does pay corporate taxes.
Presidential candidate Senator Elizabeth Warren (D-MA), meanwhile, has laid out a plan to dismantle tech giants including Amazon that starts with naming the company as a platform utility, and limiting its ability to sell its own Amazon Basics products through Amazon.com. What's more, Warren would seek to undo Amazon's acquisitions of organic grocery store chain Whole Foods and shoe e-tailer Zappos.
Then there are reports that the Federal Trade Commission is looking into Amazon's business practices to determine if the company is using anticompetitive practices to get ahead of other retailers.
The Retail Industry Leaders Association, a trade group representing some of the largest retailers in the world, is backing the FTC's efforts. It sent a letter to the commission asking it to look into potential anticompetitive practices by the e-commerce giant, as well as Google.
Amazon has also faced pressure from President Donald Trump, who claims the company has a sweetheart deal with the U.S. Postal Service that hurts the Post Office's bottomline. But some analysts have said that the Post Office's problem is that people have turned away from sending letters and postcards in favor of emails and text messages, and that Amazon's business actually helps the service.
Apple
While the FTC is looking into potential antitrust issues at Amazon, the Department of Justice is on Apple's case. The iPhone maker's biggest vulnerability looks to be what made the company's smartphone so indispensable in the first place: the App Store.
The problem is that Apple maintains complete control over its app marketplace, down to what apps can and can't appear in it. That could soon change, though. In May, the Supreme Court allowed a lawsuit to move forward claiming the 30% fee Apple charges app developers for the sale of their apps through the App Store is anticompetitive.
Spotify has also raised concerns about how much Apple charges for the sale of apps through the store. In March, the streaming music service company lodged a complaint against Apple with the European Union, claiming the tech giant's App Store policies were unfair and anticompetitive.
Apple's App Store fee structure allows the company to charge developers 30% of the price of the sale of an app. If the app is a subscription service, Apple charges 30% of the price for the first year, then 15% for each following year.
Apple has responded to criticism of its App Store structure by saying that without the store, companies like Spotify would never have reached the levels of success they now see. What's more, the company says that 84% of apps are free and their developers don't pay any fees to Apple.
Sen. Warren, however, isn't hearing any of that. Warren told The Verge, that she would also push Apple to stop selling its own apps in the App Store. If such a move went forward, that would be a huge blow to the company, which is banking on apps like Apple Music and Apple TV+ to boost Apple's bottom line amid a global slowdown in smartphone sales.
Facebook's problems are among the most striking in the tech space. Not only is the company being examined for potential anticompetitive business practices, but it's also facing scrutiny for how it handles hate speech, free speech, and election interference.
Facebook's own co-founder, Chris Hughes, wrote an op-ed in The New York Times in which he called for Facebook to be broken up, saying that it wields too much power over consumers. Hughes went as far as to call CEO Mark Zuckerberg's power as the head of Facebook unprecedented and un-American.
Facebook's reputation also hasn't recovered from the slew of self-inflicted scandals it faced in 2017. The Cambridge Analytica debacle revealed that a political consultancy firm was able to abuse Facebook user data to aid in the election of President Trump without input from those users.
The company was also slammed for its slow response to Russian's 2016 election interference campaign. Zuckerberg initially dismissed the idea that the Russian campaign could have impacted the election, before relenting to pressure and admitting that the company needed to do more to protect election integrity.
Earlier this year, Facebook faced heavy criticism when a shooting in Christchurch, New Zealand, was live-streamed on the site. According to Facebook, the video, which showed the shooting in a first-person view, was initially viewed just 200 times. But the video was still live for several minutes after it had concluded, and Facebook had to be told about it by the local police in New Zealand before taking it down.
By that time, the video had already spread across the internet. It's still out there, and is regularly reuploaded, though Facebook is fighting each upload.
More recently, the company has had to answer questions about why it allowed a video doctored to make House Speaker Nancy Pelosi look inebriated to remain online. Zuckerberg admitted that his company was too slow to act in labeling the video a fraud, but said he wouldn't take it down.
Zuckerberg has said that he doesn't want Facebook to serve as a free-speech moderator, and has called on the government to intervene. As with Amazon, the FTC is looking into Facebook's practices to determine if there's any need to investigate the firm for anticompetitive behavior. The commission, however, hasn't revealed exactly what it is looking at inside of Facebook.
Google is one of the most powerful firms on Earth. It's the largest internet search provider in the world, one of the largest digital ad sales companies, and the most visited website on the web. But that's also brought plenty of scrutiny to the business.
Elizabeth Warren has lumped Google in with Facebook, Apple, and Amazon as a company that needs to be broken up through antitrust measures. Specifically, she says the company's search engine and ad exchange businesses should be split apart.
She also states that Google should be forced to reverse its mergers with Waze, Nest, and DoubleClick, all of which have already been fully integrated into the company. The DOJ is also looking at Google for any potential antitrust matters.
Google has already been fined three times by the European Union for anticompetitive business practices. The most recent fine topped out at the equivalent of $1.69 billion and came after the E.U. said Google was prohibiting users of its AdSense platform from running advertisements for competing search engines. Google is challenging the fine.
Like Amazon, Google has also come under fire from Trump, who has made the unfounded claim that the company purposely promotes content that paints him in a bad light. That content though is pulled from websites across the internet, and only shows what popular news organizations are publishing on certain topics.
California cleaning up its backyard
California birthed many of the companies that dominate today's global tech market, and now it's working to bring them to heel. On Jan. 1, 2020, the state will enact one of the most stringent consumer privacy laws in the world.
Inspired by the E.U.'s General Data Protection Regulation, The California Consumer Privacy Act will force tech companies to inform consumers when their data is being collected, why it's being collected, how it's being used, and who it is being shared with.
Companies will also have to comply when consumers request that firms delete any information they have about them. What's more, the law will make websites include a conspicuously visible section that lets users opt out of having their data sold. In fact, the link will literally say "Do not sell my personal information."
Tech companies, naturally, aren't happy with the bill and are currently trying to water it down before it goes into effect. There's still plenty of back and forth wrangling going on between them and privacy advocates ahead of the law's implementation. When it goes into effect, though, it will immediately put a leash on the tech industry that has been missing since the inception of the consumer internet as we know it.
California's bill is important because it could end up serving as a model for a national consumer data privacy law, something that's currently missing. Lawmakers in Washington have already been working on similar data-privacy measures. One proposal from Senator Ron Wyden (D-OR) calls for companies to submit comprehensive reports on their privacy practices. If executives lie on those reports, they could face up to 20 years in prison.
Senator Josh Hawley (R-MO) has also pushed forward a proposed Do Not Track law that would force companies to abide by consumers' requests to not collect their data.
No matter how you look at it, change is coming to Silicon Valley, and it will impact how many of us use and interact with the sites and services we've come to rely on. How much it changes remains to be seen.
More from Dan:
Zuckerberg defends Facebook's decision to keep up Pelosi ‘deepfake’ video
Email Daniel Howley at [email protected]; follow him on Twitter at @DanielHowley.
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https://www.fool.com/investing/2019/07/09/better-buy-amazon-vs-netflix.aspx | Better Buy: Amazon vs. Netflix | Two of the best-performing tech market leaders in the past few years have
been Amazon (AMZN -1.27%) and Netflix (NFLX -2.99%). As you can see,... | Jul 9, 2019 | The Motley Fool | In the age of low interest rates and technological change, disruptive growth stocks have reigned supreme. Two of the best-performing tech market leaders in the past few years have been Amazon (AMZN -0.63%) and Netflix (NFLX 0.36%). As you can see, both stocks have absolutely trounced the broader market, nearly quadrupling over the past five years, versus just a 66% gain for the S&P 500.
If you're thinking of putting new investment dollars behind one of these two leaders, you might think that you've missed the boat. But remember, you could have also said that four years ago...or three years ago...or two years ago...or last year. In general, high-quality companies with excellent products and managements keep on winning, so let's investigate which of these two stocks is the better bet today.
The case for Netflix
Netflix is far and away the leader in over-the-top streaming television. In fact, Netflix pioneered the streaming revolution. Though it began as a mail-order DVD subscription service in 1997, CEO Reed Hastings saw the future of internet television early on -- certainly earlier than legacy network and cable television companies that were quite comfortable with the traditional cable model.
Netflix began its streaming service in 2007 -- the same year that the iPhone came out. At first, the offering was mostly second-rate films and television shows, but Netflix gradually improved the service every year as it gained more and more subscribers.
2013 marked a pivotal year, when Netflix released its first large-scale original series, House of Cards starring Kevin Spacey. After analyzing data showing that a large number of people who liked Kevin Spacey movies also enjoyed the original British House of Cards, Netflix put a big budget and major film director David Fincher behind the new venture.
The data-plus-hiring-top-talent recipe worked like a charm, and Netflix hasn't looked back since. Every year, Netflix ramped up its original content spending, piling up subscribers and attracting top talent. Netflix was also a visionary in terms of targeting international markets, which now make up a majority of its subscriber base. As of last quarter, Netflix had amassed 149 million global streaming subscribers -- good for a stunning 25.2% year-over-year growth, even though Netflix is already the largest global streaming service. Not only has Netflix been able to grow subscribers, but it has also raised prices several times in the past few years without very much in the way of churn. That shows tremendous pricing power.
Some reasons for caution
Though Netflix has a tremendous lead in subscribers, it has poured basically all of that subscriber revenue into more and more content and marketing. Though the company has been posting profits on a generally accepted accounting principles (GAAP) basis, Netflix has also spent far more on new self-funded original series. Last quarter, management revealed that it will now have negative $3.5 billion in free cash flow in 2019, revised upward from its negative $3 billion target at the start of the year. Just recently, The Information reported that Netflix content head Ted Sarandos told several company executives that Netflix will need to become more efficient with its content spending going forward.
Competition is also coming online soon. After a slew of industry mergers, large media companies have gotten their acts together on streaming and are just now beginning to launch their own services -- often taking content they previously sold to Netflix with them.
For instance, Netflix has been able to stream Disney (DIS -0.44%) movies over the past few years, but Disney didn't renew that deal, instead opting to launch its own Disney+ streaming service, coming in November for just $6.99 per month -- nearly half the price of Netflix. Disney is also now in control of Hulu and thus may be able to bundle both services to attract a broader streaming customer base.
Word on the street is that AT&T (T -0.83%), which bought Time Warner in 2018, will be launching its own WarnerMedia streaming service next year. NBC parent Comcast (CMCSA -1.21%) will also be launching its own streaming service soon and is taking important content with it, including The Office, which has been one of the most-binged shows on Netflix. Comcast will take back The Office in 2021, when its streaming offering should be up and running.
However, the market doesn't appear to be too worried about these competitive threats at the moment. Netflix is currently valued at $166 billion, and the stock trades for a lofty 135 PE ratio and a whopping 65 times next year's earnings.
The case for Amazon
Most people are very aware of Amazon, though you might not be aware of just how deep Amazon's reach is. Founded in 1994 by visionary leader Jeff Bezos, Amazon began as an online bookseller, one of the first businesses to sell goods via a new invention called "the internet." Since then, Amazon has expanded to selling just about everything under the sun via its website and leading end-to-end delivery network, which uses the USPS and private carriers, as well as Amazon's in-house planes, ships, and last-mile resources.
In 2005, the company unveiled Amazon Prime, a low-cost subscription that guaranteed two-day shipping on a number of items. Prime began at $79 per year, but Amazon kept adding more and more features to Prime, including Amazon's own streaming video service (to rival Netflix), discounts on Whole Foods, which Amazon acquired in 2017, music streaming, photo sharing, a Prime-only credit card with generous benefits, and one-day shipping on select items, among others. Just recently, Amazon announced it would be upgrading Prime to one-day shipping, once again keeping the Seattle juggernaut one step ahead of rivals. Since launch, Amazon Prime has surged to more than 100 million subscribers, even as the company raised the price of Prime several times to the current $119 per year.
But Amazon's single best business might be Amazon Web Services. Though the seeds of this business go back to 2000, Amazon eventually built out a massive and highly efficient computing and database platform to rent to outside developers for a low fee. After a few years quietly building out the platform, Amazon launched Amazon Elastic Compute Cloud in August 2006. With a clear first-mover advantage, Amazon has grown AWS into a massive $30 billion run-rate business, growing at 42% (FX-neutral), and with fat operating margins of 29%.
Finally, Amazon also has a few highly profitable newer businesses, such as its third-party fulfillment services and its fast-growing online advertising business. Most recently, Amazon unveiled Shipping by Amazon, opening up its logistics network to send and deliver packages, and bought online pharmacy PillPack in 2018, making a bigger entry into the online healthcare and pharmacy field.
While Amazon, like Netflix, spent many years being cash flow negative, Amazon's profitability has taken off recently, with free cash flow of $23 billion over the past 12 months, nearly triple the amount from a year prior.
In fact, Amazon's biggest risk may be its own success. Recently, the Federal Trade Commission launched an investigation into Amazon's potential status as a monopoly (along with several other large internet platforms, in partnership with the Department of Justice).
I'd still take Amazon
Of these two leading companies, I'd favor Amazon over Netflix today, mainly due to the lower risk of having a much more diversified business. Netflix may end up being a fine investment from here, but a lack of free cash flow, improving competition, and a higher valuation make Netflix's future success much more of a question mark than Amazon's. In fact, Netflix is not just a competitor but also a vendor of Amazon, as Netflix uses Amazon Web Services for its back-end IT infrastructure. That certainly tells investors something about Amazon's dominance in the cloud and beyond, and that's why I'm sticking with Amazon over Netflix. | AMZN | 129.11 |
https://www.twst.com/news/mitch-steves-rbc-capital-wants-warn-intel-portfolio/ | Mitch Steves of RBC Capital Wants to Warn You About Intel in ... | So instead of you buying something on Amazon (NASDAQ:AMZN) — let's say a
GPU, for example — and then getting 20 different recommendations for the
exact same... | Jul 10, 2019 | The Wall Street Transcript | Mitch Steves is an Analyst at RBC Capital Markets primarily focused on networking equipment and semiconductor companies. In 2016 and 2017, he was noted as a “Rising Star of Wall Street Research” according to Institutional Investor magazine in three categories: Telecom & Networking Equipment, Semiconductors and IT Hardware/EMS.
He started at RBC in 2011 and launched coverage in 2015. Earlier, he held positions at Gleacher and Company covering hardware and networking equipment and worked as an investment banker at Cowen and Company.
He holds an economics degree from the University of California Berkeley.
In his 4,885 word interview, exclusively in the Wall Street Transcript, Mr. Steves clearly picks winners for the long term in the semiconductor sector:
“…If you look out, I mean, five, 10 years, there’s no real debate that you’re going to see a lot more spending on AI because it’s kind of an arms race. So whoever wins is going to have all the information to continue expanding their lead. It’s kind of a self-fulfilling prophecy.
But I’d say that the most obvious ones, at least near term, are going to be using AI for self-driving vehicles, using AI for ads as well, being able to figure out what type of ads to show people.
It’s going to be used for consumer purchases as well. So instead of you buying something on Amazon (NASDAQ:AMZN) — let’s say a GPU, for example — and then getting 20 different recommendations for the exact same thing, they’ll have better information in terms of what to sell you in the future.
I think those are two of the most near-term ones, advertising and then secondly self-driving vehicles in the next couple of years.”
His specific recommendations include the bellwethers of the industry:
…I’ll agree and say, “OK, the performance is probably the same, but that doesn’t matter because if your performance is the same, but it cost me tens of millions of dollars more in power consumption because your chip is just consuming too much power, then it doesn’t matter what your performance is.”
You can quite literally give away the Intel chip for free and compare it to an AMD chip, and nobody’s going to take the Intel chip because it just loses that much money over a year. I think that’s where we’re going, and note that Intel could catch up, but as we stand today, we think AMD gains share due to that math.
We’re going to more of an efficient frontier as well in semiconductors. You can’t just be the high-performance, high-power-consumption company.
You have to be essentially high performance plus low power consumption. This favors GPUs, FPGAs and companies on the smallest nodes.”
Get the specific stock recommendations and more of his sector analysis in the complete 4,885 word interview, exclusively in the Wall Street Transcript.
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https://www.bloomberg.com/news/articles/2019-08-21/amazon-opens-india-campus-its-largest-in-the-world | Amazon (AMZN) Opens Hyderabad, India Campus, Its Largest ... | AMZN. AMAZON.COM INC. 130.15. USD. +5.32+4.26% · WMT. WALMART INC. 155.75.
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https://www.bizjournals.com/portland/news/2019/08/21/amazon-to-double-downtown-portland-office-with-400.html | Amazon (Nasdaq: AMZN) opens new Portland Tech Hub ... | The two offices make up the Portland Tech Hub and feature teams working on
products and services for Amazon Web Services, the company's lucrative
cloud... | Aug 21, 2019 | The Business Journals | Request unsuccessful. Incapsula incident ID: 1340000840242495608-326203870025618697 | AMZN | 129.11 |
https://finance.yahoo.com/news/fedex-drops-ground-delivery-amazon-021800773.html | FedEx Drops Ground Delivery for Amazon, Can UPS Be Far Behind? | The first shoe FedEx (NYSE: FDX) dropped over Amazon.com's (NASDAQ: AMZN)
ambition to become a full-fledged transportation and logistics carrier was
not... | Aug 21, 2019 | Yahoo Finance | FedEx Drops Ground Delivery for Amazon, Can UPS Be Far Behind?
The first shoe FedEx (NYSE: FDX) dropped over Amazon.com's (NASDAQ: AMZN) ambition to become a full-fledged transportation and logistics carrier was not renewing its Express contract with the e-commerce giant for package delivery. Now the next shoe has fallen: FedEx said it will not renew its contract for ground delivery for Amazon.
Image source: FedEx.
FedEx maintains the changing relationship "is consistent with our strategy to focus on the broader eCommerce market" and recently acknowledged in its annual Securities and Exchange Commission filing that it now considers Amazon to be a competitor. It's clear the last shoe to drop will be FedEx not renewing its contract for international package delivery. At that point, the two will have completely severed their relationship.
The real question is, what took FedEx so long to respond to the threat, and will UPS (NYSE: UPS) eventually follow suit?
A long time coming
Amazon has invested substantial sums of money in building out an air cargo fleet. It plans to open several airport hubs around the country to service its planes; it has launched a cargo van delivery network and is willing to work with individuals, including its employees, who want to start up their own delivery businesses; and it's gotten into first-mile shipping with transocean shipping from China.
It was costly for FedEx to maintain its relationship with Amazon as a result of the discounts the e-commerce giant negotiated because of its high volume of shipments it generated. But Moody's analyst Jonathan Root said Amazon was also one of FedEx's "least profitable customers on a margin basis" and severing ties with Amazon suggested the retailer "would not agree to financial terms that would meet FedEx' needs."
Continuing its relationship with Amazon was effectively providing support for a company that one day may try to supplant it. But FedEx will find it easier to sever ties with Amazon than UPS will.
No losers among the competition
FedEx said Amazon accounted for only 1.3% of its total annual revenue, or about $900 million based on last year's $70 billion total. Of course, it might have been more if Amazon hadn't been continuously developing its own capabilities. However, this is a smaller percentage than Amazon accounts for at UPS, though even then, the figure is undoubtedly less than 10% of UPS's $72 billion total revenues, else it would be required to disclose it.
Analysts estimate FedEx handled only about 4% of Amazon's volume, while UPS accounts for about 17% (the USPS bears the heaviest burden, with about one-third of deliveries handled by the post office).
Yet UPS suffers from the same issue of Amazon being a low-margin customer, though analysts say the retailer is not a no-profit one. And because Amazon still enables UPS to profit from their arrangement, they're not likely to drop it as a customer. At least not yet, though if Amazon builds out its own logistics and transportation network sufficiently, we're more likely to see Amazon leave UPS than the other way around. It's cheaper for Amazon to ship packages through its own network than through UPS or FedEx.
Still, there could be some upside for UPS, which could pick up at least some of the additional volume that FedEx is dropping. Big Brown reportedly saw a 30% uptick in next-day-air volume in the second quarter after FedEx stopped Express air delivery for Amazon.
Of course, Amazon also began doing one-day shipping for Prime customers, which could increase volumes while also further pressure margins.
Going their separate ways
FedEx decision to drop Amazon ground deliveries is likely more a decision to telegraph it's availability to service the e-commerce leader's rivals, like Walmart. The carrier anticipates e-commerce will only grow in the future (albeit led by Amazon), and it is clearing the decks now to prepare for it. Most of FedEx's business is of the B2B variety; shipping to consumers is much smaller, but it is the fastest-growing portion of delivery.
As Amazon.com heads into the important holiday season, the decision by FedEx to cut off ground shipments could pressure the e-commerce giant, especially since Amazon has stepped up its efforts to offer one-day shipping. And even if international shipments are only a tiny portion of the whole business, they will likely be the next segment to fall.
But UPS won't follow FedEx lead anytime soon as its position with Amazon likely improves near term. FedEx cancelling its contracts and the post office struggling financially puts UPS in a better spot. But whether it's UPS that makes the first move business or Amazon.com becoming a larger, more fully realized logistics and transportation company, those two parties will also one day likely part paths too.
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John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool's board of directors. Rich Duprey has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends Amazon and FedEx. The Motley Fool has a disclosure policy.
This article was originally published on Fool.com | AMZN | 129.11 |
https://finance.yahoo.com/news/why-target-is-shocking-everyone-and-putting-amazon-on-notice-152309884.html | Why Target is shocking everyone and putting Amazon on notice | Are you kidding us with that second quarter, Target (TGT)?. Isn't
traditional retail supposed to be dead thanks to digital beast Amazon
(AMZN)? Aren't we... | Aug 21, 2019 | Yahoo Finance | Why Target is shocking everyone and putting Amazon on notice
Are you kidding us with that second quarter, Target (TGT)?
Isn’t traditional retail supposed to be dead thanks to digital beast Amazon (AMZN)? Aren’t we nearing a bruising recession that hammers consumer spending and stock prices? Didn’t Macy’s (M) disastrous second quarter signal a new round of retail doom and gloom looms large? Tariffs are supposed to be obliterating retailer sales and profits right now, no?
With that entire dreary backdrop out in full force on Wall Street the past two months, it is no small surprise Target’s stock spiked 19% to a record on Wednesday following a blowout quarter. Target delivered and then some, crushing many of those dire narratives on retail.
Talk to top retail analysts and it becomes quickly evident why Target continues to defy conventional thinking. In many respects Target (and even rival Walmart) is starting to crack the code on delivering a seamless shopping experience between their physical stores and online — as many on the Street call “omni-channel shopping.”
That primarily boils down to Target offering more services to shoppers such as order online, pick up in-store the same-day and buy online, then have it delivered same-day via its Shipt business.
“Target has done a real good job building a strong omni-channel business model and engaging the customer,” veteran retail analyst Janet Kloppenburg of JJK Research said on Yahoo Finance’s The First Trade. “They are flexing their muscles in some key categories such as apparel and beauty, which are outpacing the average comparable store sales from the company. They have also done an excellent job in other omni-channel services and fulfillment.”
That’s for sure.
Wow, that Target quarter
Target reported second quarter adjusted earnings of $1.82 a share, trouncing forecasts for $1.62 a share. Same-store sales rose 3.4%, ahead of estimates for 3% growth.
The retailer cited a surge in same-day fulfillment as driving sales growth. Its order pick up, drive up and Shipt services accounted for nearly 1.5 percentage points of Target’s overall comparable sales growth during the quarter. Online sales jumped 34% during the quarter.
Target also hiked its estimates for the third quarter, seeing adjusted earnings of between $1.04 per share to $1.24 per share, better than current expectations of $1.16.
“We are really pleased with our second quarter performance, which demonstrates the strength of our strategy and the durable financial model we've built over the last several years,” CEO Brian Cornell said in a statement.
“Traffic and sales continue to grow while our EPS reached an all-time high, driven by the strength of our team's execution and their focus on delivering for our guests,” he added.
Target deserves the healthy market response Wednesday.
Whether Target’s stock continues to push higher into the all-important holiday shopping season is anyone’s guess. But when it comes to nailing what it can control, Target deserves high marks.
This writer can attest to Target’s vastly improved stores, significantly expanded food departments with a host of compelling emerging brands and upgraded offerings in the home department. Target is giving people real reasons to shop at its stores on weekends and order online during the week. Not many in retail could say that one.
Amazon — and all of retail — you have been put on notice by Target.
Yahoo Finance’s Heidi Chung contributed to this story.
Brian Sozzi is an editor-at-large and co-host of The First Trade at Yahoo Finance. Follow him on Twitter @BrianSozzi
Read the latest financial and business news from Yahoo Finance
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https://www.businesswire.com/news/home/20190821005780/en/AWS-Announces-General-Availability-of-Amazon-Forecast | AWS Announces General Availability of Amazon Forecast | (AWS), an Amazon.com company (NASDAQ: AMZN), announced the general
availability of Amazon Forecast, a fully managed service that uses machine
learning to... | Aug 21, 2019 | Business Wire | SEATTLE--(BUSINESS WIRE)--Today, Amazon Web Services, Inc. (AWS), an Amazon.com company (NASDAQ: AMZN), announced the general availability of Amazon Forecast, a fully managed service that uses machine learning to deliver highly accurate forecasts based on the same technology that powers Amazon.com. Amazon uses forecasting to make sure that the right product is in the right place at the right time by predicting demand for hundreds of millions of products every day. Amazon Forecast uses this same technology to build precise forecasts for virtually any business condition, including product demand and sales, infrastructure requirements, energy needs, and staffing levels – with predictions that are up to 50% more accurate than traditional methods. Amazon Forecast is easy to use and requires no machine learning experience. The service automatically provisions the necessary infrastructure, processes data, and builds custom, private machine learning models that are hosted on AWS and ready to make predictions. To get started with Amazon Forecast, visit https://aws.amazon.com/forecast/.
Forecasting is the science of predicting the future. By examining historical trends, organizations can make a call on what might happen and when, and build that into their future plans for everything from product demand to inventory to staffing. Given the consequences of forecasting, accuracy really matters. If a forecast is too high, customers will over-invest in products and staff, which ends up as wasted investment, and if the forecast is too low, they will under-invest, which leads to a shortfall in raw materials and inventory; creating a poor customer experience. Today, companies try to use everything from simple spreadsheets to complex financial planning software to generate forecasts, but high accuracy remains elusive for two reasons. First, traditional forecasts struggle to incorporate very large volumes of historical data, missing out on important signals from the past that are lost in the noise. Second, traditional forecasts rarely incorporate related but independent data, which can offer important context (such as sales, holidays, locations, marketing promotions, etc.). Without the full history and the broader context, most forecasts fail to predict the future accurately.
Amazon has a wealth of knowledge in building accurate forecasts using machine learning from over 20 years of experience operating the world’s largest ecommerce business. Delivering billions of packages per year, with a multitude of delivery options in more than ten thousand zip codes, Amazon has developed advanced forecasting capabilities that incorporate the full product history and overlay context from related business activities, such as promotions and pricing changes. Due to this diverse and large-scale forecasting experience at Amazon, customers have asked AWS to share this knowledge with them to help make their own forecasts more accurate.
Today’s general availability of Amazon Forecast provides a major step toward putting the power of Amazon’s deep experience in forecasting into the hands of everyday developers in virtually every industry. Amazon Forecast produces private, custom models that can help developers make predictions that are up to 50% more accurate than traditional methods. Using machine learning, Amazon Forecast automatically discovers how variables such as product features, seasonality, and store locations affect each other. These complex relationships can be difficult to spot using traditional forecasting methods, but Amazon Forecast uses the machine learning developed at Amazon to quickly recognize complex patterns to improve forecast accuracy. Amazon Forecast automatically sets up a data pipeline, ingests data, trains a model, provides accuracy metrics, and performs forecasts. Developers do not need to have any expertise in machine learning to start using Amazon Forecast, and can use the Amazon Forecast Application Programming Interface (API) or easy-to-use console to build custom machine learning models in less than five API calls or clicks. With Amazon Forecast, customers can achieve accuracy levels that used to take months of engineering in as little as a few hours.
“Amazon Forecast now offers the forecasting expertise from Amazon’s first 25 years of building the world’s largest ecommerce business in a managed service for any company to leverage,” said Swami Sivasubramanian, Vice President, Amazon Machine Learning. “We’ve built sophisticated, machine learning forecasting algorithms over many years that our customers can now use in Amazon Forecast without having to know anything about machine learning themselves. We can’t wait to see how our customers use the service to reduce operating expenses and inefficiencies, ensure higher resource and product availability, deliver products faster, and lower costs to delight their customers.”
Amazon Forecast is available today in US East (Ohio), US East (N. Virginia), US West (Oregon), Asia Pacific (Tokyo), Asia Pacific (Singapore), and EU (Ireland) with more availability zones coming soon.
Puget Sound Energy (PSE) is the state’s largest utility, supporting 1.1 million electric customers and 825,000 natural gas customers in communities in 10 Washington counties. “At PSE, we’ve used Amazon Forecast to forecast electric and gas consumption at a typical residence. We found that even with a very limited set of historical consumption and weather data, Amazon Forecast performed very well at forecasting 30 days out with virtually no manual effort. With the increased emphasis on environmentally-friendly energy solutions, the ability to produce more accurate energy usage projections at each of our customers’ homes and businesses will be essential for energy service providers like PSE. With these enhanced analytical capabilities, PSE will be able to identify custom energy saving programs and services, ultimately reducing customer bills,” said Paul Johnson, Sr. Cloud Architect at PSE.
Accenture is a leading global professional services company, providing a broad range of services and solutions in strategy, consulting, digital, technology, and operations. “We are relentlessly focused on driving innovation and bringing increased value to our key clients,” said Takuya Kudo, a managing director and global data science innovation lead at Accenture Applied Intelligence. “Amazon Forecast is simple to operationalize for production workloads, allowing us to experiment with multiple state-of-the-art deep learning models for forecasting across our business.”
OMOTOR helps businesses improve through AI by providing them with the best of machine learning algorithms, computer vision techniques and cognitive bots that can communicate via WhatsApp and others platforms. "At OMOTOR, we use AI to innovate on behalf of our customers, so access to the most cutting-edge deep learning technologies from AWS is imperative to our client's success. Using Amazon Forecast gives us the ability to create and refine various forecasts from time series data without having to build and train a model manually every time. We forecast real sales for the next 12 months, so we can adequately plan for inventory, estimate future profitability, track market share gain or loss, and other insights. This means we can use more contextual data, optimize more frequently, generate forecasts with upwards of 50% improvements in accuracy, and operate at a great speed. For example, we're helping customers in the automotive industry predict sales across 185 vehicles in Brazil,” said Marcio Rodrigues, CEO, OMOTOR.
CJ Logistics is a leading integrated transportation and logistics service provider for individuals and companies in Korea. “Amazon Forecast has been applied to CJ Logistics’ parcel volume forecasting process to optimize the amount of human resources, transportation, and warehouse space we provision to meet demand,” said YoungSoo Kim, Vice President of TES Strategy Unit for CJ Logistics. “Amazon Forecast allows us to use sophisticated machine learning-based forecasting techniques without building our own system. We have a clear method for increasing our operational efficiency by using Amazon Forecast.”
Daemon Solutions is a consultancy helping clients get the most out of technology in business. “One of the most common challenges facing our retail partners is the ability to accurately predict product demand across different SKUs and store locations. Given the ease with which we have been able to use Amazon Forecast to create advanced ML models that meet the accuracy bar when it comes to forecasting as well as account for variables such as promotions and price with our test data sets, we are excited to deploy the service on behalf of our clients and solve real-life problems,” said Akram Dweikat, Head of Machine Learning and Artificial Intelligence at Daemon Solutions.
About Amazon Web Services
For 13 years, Amazon Web Services has been the world’s most comprehensive and broadly adopted cloud platform. AWS offers over 165 fully featured services for compute, storage, databases, networking, analytics, robotics, machine learning and artificial intelligence (AI), Internet of Things (IoT), mobile, security, hybrid, virtual and augmented reality (VR and AR), media, and application development, deployment, and management from 69 Availability Zones (AZs) within 22 geographic regions, spanning the U.S., Australia, Brazil, Canada, China, France, Germany, Hong Kong Special Administrative Region, India, Ireland, Japan, Korea, Middle East, Singapore, Sweden, and the UK. Millions of customers—including the fastest-growing startups, largest enterprises, and leading government agencies—trust AWS to power their infrastructure, become more agile, and lower costs. To learn more about AWS, visit aws.amazon.com.
About Amazon
Amazon is guided by four principles: customer obsession rather than competitor focus, passion for invention, commitment to operational excellence, and long-term thinking. Customer reviews, 1-Click shopping, personalized recommendations, Prime, Fulfillment by Amazon, AWS, Kindle Direct Publishing, Kindle, Fire tablets, Fire TV, Amazon Echo, and Alexa are some of the products and services pioneered by Amazon. For more information, visit amazon.com/about and follow @AmazonNews. | AMZN | 129.11 |
https://www.fool.com/investing/2019/09/05/amazons-expanding-fire-tv-to-take-on-roku.aspx | Amazon's Expanding Fire TV to Take on Roku | A focus on Europe could stymie Roku's international expansion plans. Amazon
(AMZN -0.63%) already holds a small but widening lead over Roku (ROKU
-0.95%)... | Sep 5, 2019 | The Motley Fool | Amazon (AMZN -0.63%) already holds a small but widening lead over Roku (ROKU -0.95%) in the connected TV platform race. Amazon says it has over 37 million active Fire TV accounts compared to Roku's 30.5 million.
But Amazon isn't resting on its laurels. Its lead is due in large part to its broader global availability compared to Roku -- Roku is still more popular than Fire TV in the United States. So the e-commerce titan is introducing several new Fire TV products, including Fire TV Edition smart TVs, and it's also reportedly planning an expansion into several new European markets. The moves should help Amazon stay a step ahead of its much smaller rival, which owns the most popular smart TV platform in the U.S. and has international expansion plans of its own.
A big focus on smart TVs
Amazon is launching 15 new smart TV models with its manufacturing partners. Consumers in the U.K., Germany, and Austria will get first crack at several of the new models. Previously, Fire TV Edition smart TVs were only available in the U.S.
Owning the smart TV operating system provides a significant benefit to the platform owner. When viewers turn on their TV, they're greeted by the home screen for the platform, inviting them into the ecosystem of apps and content. Additionally, Amazon or Roku can gain better data about users' television viewing habits by capturing a more complete view of their consumption time.
As such, smart TVs offer better engagement and better data with which to monetize that engagement. Last fall, Amazon updated the Fire TV platform terms requiring ad-supported services to provide Amazon with 30% of their ad inventory. Roku takes the same cut. Amazon now has a lot more to gain from increased engagement and viewer data.
Amazon's ad sales continue to grow at a strong pace after skyrocketing over the previous two years. Other revenue, of which advertising is the main contributor, was up 37% year over year in the second quarter, surpassing $3 billion. While advertising on Fire TV still represents a small sliver of that amount -- Roku, for example, generated about $125 million in ad sales last quarter -- it has massive potential for growth.
Staying ahead of Roku's international expansion
Amazon's plans to expand to more European markets and sell more devices could curb Roku's results with its own international expansion. In its fourth-quarter letter to shareholders earlier this year, Roku management said it plans to invest significantly in international markets, with the expectation that those investments will produce returns in 2020. This year, it's merely laying the groundwork with manufacturer, content, and retail partnerships in order to get smart TVs and stand-alone devices in stores.
But Amazon may have beat it to the punch. Roku benefited greatly from its first-mover advantage in the United States, but management's note that results from its investments won't show up until 2020 means it could be as much as a year behind Amazon in some markets. The e-commerce giant will have the first-mover advantage and brand recognition in Europe and other international markets. Roku will need strong partnerships in order to overcome those advantages.
That said, Amazon still has to execute in order to capitalize on its advantages internationally. That means investments in Prime Video and other Prime benefits in order to make Fire TV as appealing as possible. Fire TV devices put a big focus on Prime Video content, which is great if you have a Prime membership, but not so great if you don't. Roku's content-agnostic platform may be more appealing to consumers that haven't bought into the Amazon ecosystem.
Investors in these rival tech companies will want to pay close attention to Amazon's efforts in Europe, as well as how Roku responds. It could be a big opportunity for Amazon and its burgeoning advertising business, but Roku has a lot more on the line as the battle heats up. | AMZN | 129.11 |
https://www.trefis.com/stock/amzn/articles/471327/how-ubers-losses-compare-with-amazons-losses-in-its-early-years/2019-09-04 | How Uber's Losses Compare With Amazon's Losses In Its ... | AMZN: Amazon logo. AMZN. Amazon ... AMZN YTD Stock Return Of 49%
Outperforms BABA by 45% and Outperforms MSFT by 6.3%. Better Bet Than AMZN
Stock: Pay Less... | Sep 4, 2019 | Trefis | How Uber’s Losses Compare With Amazon’s Losses In Its Early Years
Ride-hailing major Uber (NYSE:UBER) indicated that it wants to be the “Amazon of transportation,” targeting a wide range of transportation services. In this analysis, we take a look at how Uber’s financials and losses compared with Amazon’s in its early years. While Uber was founded in 2009, we have financials available from 2014, five years post inception. As Amazon was founded in 1994, we use financial data starting from 1999 for the purpose of this comparison.
View our interactive dashboard analysis How Do Uber’s Losses Compare With Amazon’s Losses In Its Early Years?
While Amazon And Uber Posted Operating Losses Of ~$600 Million 5 Years Post Founding, Uber’s Losses Widened To $3 Billion, While Amazon Turned Around Its Operations
- Amazon’s losses have been smaller in magnitude compared to Uber’s, and the company turned profitable, on an operating basis in 2002, about 8 years after it was founded.
- Uber has been posting over $3 billion in operating losses over the last 3 years, given its high costs and mounting competition.
Amazon Reported A Net Profit About 10 Years Into Its Founding (2004), While Uber Continues To Post Deep Losses
Uber Has Been Posting Higher Levels Of Revenue Growth Compared To Amazon’s In Its Early Years
Uber’s P/S Multiple Stood At Over 4x In 2018. At A Similar Stage, Amazon’s P/S Stood At About 3.8x
Conclusion
- While Amazon was able to achieve some level of profitability about a decade into its founding, profitability remains elusive for Uber, on account of its high costs and the intense competition in the ride-sharing market.
- Moreover, Amazon posted losses as it focused on building a moat by investing in technology, warehousing, and delivery infrastructure in its early years.
- On the other hand, Uber has been spending vast sums on courting and retaining drivers and riders leading to its heavy losses. It’s unclear whether these investments will translate into long-term loyalty/ an economic moat for the company.
What’s behind Trefis? See How it’s Powering New Collaboration and What-Ifs
For CFOs and Finance Teams | Product, R&D, and Marketing Teams
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https://finance.yahoo.com/news/exxonmobil-drops-top-10-p-140802880.html | ExxonMobil Drops Out of Top 10 in S&P 500, Tech Stocks Shine | AMZN. Overall, the tech stocks have come a long way in the last few years
supported by major breakthroughs. In the year-to-date period, the... | Sep 4, 2019 | Yahoo Finance | ExxonMobil Drops Out of Top 10 in S&P 500, Tech Stocks Shine
The hydrocarbon energy industry was recently dealt a major blow, with Exxon Mobil Corporation XOM dropping from the S&P 500 Index’s top 10 companies, ending a nine-decade-long streak. This August, energy stocks climbed down the ranking list, giving way to technology stocks. Currently, the top 10 places are occupied by companies from technology, communications, health care and financial services. This marks a major event for the energy industry as a whole, which can shape the future of the market.
Gradual Decline of Energy Stocks
In terms of company rankings, a decade ago, ExxonMobil — the largest publicly-traded energy company — stayed at the top spot of the list for six straight years. The Zacks Rank #3 (Hold) company is now in the 12th spot, with its peer Chevron Corporation CVX holding the 19th place. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Notably, energy stocks made up 25% of the index about four decades ago, which declined to 11.7% a decade ago. The sector now accounts for 4.4% of the index. If we look at the price performance, ExxonMobil gained only 0.6% year to date while the S&P 500 jumped 15.3%. The Oils-Energy sector fell 5.1% during this time period.
Factors Affecting Hydrocarbon Market
There are several factors that affected the energy sector, among which soft as well as volatile oil prices played spoilsports. With the shale-oil boom, the hydrocarbon market stayed oversupplied for a long time, partially offset by the Organization of the Petroleum Exporting Countries’ production-cut initiatives and Iranian sanctions from the Washington.
Moreover, concerns regarding future oil demand affected the sector to a significant extent. With developing countries like India, China and others expected to see a bleak economic growth rate in the coming years, demand for hydrocarbons is expected to decline further. This has put a lid on oil prices. Also, the trade war between Washington and Beijing has sparked concerns regarding oil demand.
Additionally, climate changes have triggered a drive toward renewable energy sources. Environmental campaigns have witnessed somewhat success with several major funds withdrawing from stocks in fossil fuels. Also, efficiency gain in wind, solar and other renewable and clean energy sources are working against the fossil-fuel industry. All these key factors compelled investors to dump oil stocks.
Tech Leads the Way
Currently, the top three spots are occupied by tech giants Microsoft Corporation MSFT, Apple Inc. AAPL and Amazon.com, Inc. AMZN. Overall, the tech stocks have come a long way in the last few years supported by major breakthroughs. In the year-to-date period, the Zacks Technology sector jumped 18.7%, with Microsoft, Apple and Amazon.com gaining 33.9%, 30.4% and 19.2%, respectively.
With the energy industry losing its position and the technology industry coming to the forefront, the dynamics of the market are set to change in the coming years. The newfound strength in technology will likely help renewable energy sources see efficiency gain and cost reduction. Over time, it can lead to a further decline in the hydrocarbon market, while boosting investments in renewable energy sources.
Biggest Tech Breakthrough in a Generation
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A select few stocks could skyrocket the most as rollout accelerates for this new tech. Early investors could see gains similar to buying Microsoft in the 1990s. Zacks’ just-released special report reveals 7 stocks to watch. The report is only available for a limited time.
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https://www.insideindianabusiness.com/articles/amazon-begins-operations-in-greenwood | Amazon Begins Operations in Greenwood – Inside INdiana ... | (Nasdaq: AMZN) has officially begun operations in Greenwood. The $80
million receive center in the Johnson County city is still filling jobs for
Amazon's... | Sep 5, 2019 | Inside INdiana Business | Amazon Begins Operations in Greenwood
Amazon.com Inc. (Nasdaq: AMZN) has officially begun operations in Greenwood. The $80 million receive center in the Johnson County city is still filling jobs for Amazon’s customer fulfillment operations, including receiving, picking and shipping and supporting network logistics.
The center opened officially Wednesday. Plans for the 615,000-square-foot facility were first announced in October. At the time, the company said the project would create more than 1,250 jobs.
Amazon says it offers a $15 per hour minimum wage and full-time employees are offered benefits including comprehensive healthcare, 401(k) with a 50% match and up to 20 weeks paid parental leave, in addition to the company’s Career Choice program, which pre-pays 95% of tuition for courses in high-demand fields.
Interested candidates must be at least 18-years-old and have a high school diploma or equivalent. Veterans and military spouses are being encouraged to apply. You can find more information on the jobs and how to apply by clicking here. | AMZN | 129.11 |
https://www.barrons.com/articles/amazon-one-day-shipping-fedex-ups-e-commerce-express-parcel-shipping-logistics-51567538794 | Amazon 1-Day Shipping Will Raise the Stakes. UPS and FedEx Stand to Win. | In April, Amazon.com (ticker: AMZN) said it would move to one-day shipping.
Coincidently, that was about the time FedEx stock hit its 52-week high. | Sep 4, 2019 | Barron's | Amazon 1-Day Shipping Will Raise the Stakes. UPS and FedEx Stand to Win.
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Amazon.com is investing heavily in its own logistics network to make one-day shipping a reality. The winners: United Parcel Service and FedEx
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https://finance.yahoo.com/news/amazon-buys-tech-firm-inlt-210434526.html | Amazon Buys Tech Firm INLT To Help Online Merchants With Cross-Border Trade | (NASDAQ: AMZN) recently acquired cloud-based startup INLT, a move designed
to simplify importing goods into the United States for Amazon's online
merchants,... | Sep 26, 2019 | Yahoo Finance | Amazon Buys Tech Firm INLT To Help Online Merchants With Cross-Border Trade
Amazon.com, Inc. (NASDAQ: AMZN) recently acquired cloud-based startup INLT, a move designed to simplify importing goods into the United States for Amazon's online merchants, according to Reuters.
INLT, which the company said stands for IN:LET, makes software for merchants to manage the costs of customs clearance on cross-border shipments. Terms of the acquisition, which was announced Sept. 24, were not disclosed.
"INLT is a smart, nimble team that is helping companies simplify and lower the cost of importing goods into the U.S.," an Amazon spokeswoman told Reuters. "We're excited to work with them to develop the next generation of solutions for their customers and Amazon selling partners."
With the recent acquisition Amazon aims has capabilities for sellers that include warehousing, delivery and now cross-border customs clearance.
"Amazon is getting serious about cross-border – acquires startup, INLT, which offers a platform for merchants to manage costs and customs clearance associated with importing goods into the U.S." tweeted Cathy Roberson, founder of Logistics Trends & Insights.
INLT, which was founded in 2017 in Los Angeles, announced on its website that Seattle-based Amazon had acquired the company.
"We have been acquired by Amazon and look forward to working with them to develop the next generation of solutions for our current customers and Amazon Selling Partners," according to a message on INLT's website.
In April, INLT became one of the first automated broker interface applications that was approved by the U.S. Department of Homeland Security as well as Customs and Border Protection. INLT is also Customs-Trade Partnership Against Terrorism (C-TPAT) certified.
The company raised $1 million from investors in 2017 to fund the expansion of its engineering and trade compliance teams.
"We watched as the market began to change while U.S. Customs and trade compliance was ignored," said Chris Reynolds, INLT co-founder and chief executive according to Promo Marketing Magazine. "Our role is to be the glue in the supply chain, from a communication and technology perspective, as well as a compliance one. If you import, we will save you money and make you more compliant.
Image Sourced from Pixabay
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Momentum Behind Carriers Despite Shippers Gaining Edge In This Week's Pricing Power Index
© 2019 Benzinga.com. Benzinga does not provide investment advice. All rights reserved. | AMZN | 129.11 |
https://banyanhill.com/amazons-alexa-goes-samuel-jackson-revealing-celebrity-voices/ | Amazon's Alexa Goes Full Samuel Jackson, Revealing ... | (Nasdaq: AMZN) held a major reveal yesterday. There were no spiffy
invitations like you get for Apple Inc. (Nasdaq: AAPL) events … so you
might have missed it. | Sep 26, 2019 | Banyan Hill | Say “Alexa” Again, I Dare You
No, it’s not 2001.
We’re way past that at this point. Alexa is taking over.
Amazon.com Inc. (Nasdaq: AMZN) held a major reveal yesterday. There were no spiffy invitations like you get for Apple Inc. (Nasdaq: AAPL) events … so you might have missed it.
At the event, Amazon unveiled eight new Alexa-themed products ranging from smart speakers to eyeglasses to a serious AirPods competitor.
You can find a complete rundown of the new products over at Business Insider, but I’m going to hit on a few of the weirder products … because I can:
- Echo Frames. These are Amazon’s nonanswer to Google Glass and Snap Spectacles. They have no display and no camera. They literally do nothing more than provide a built-in microphone and integrated Alexa interface. So, if you don’t like having Echo speakers in every room of your house, hate the idea of talking directly to your phone and like wearing glasses, I guess these are for you?
- Echo Loop. This is another oddity from Amazon’s product release. The Echo Loop is a smart ring — maybe the world’s first? It features two microphones, button activation and a speaker. The Loop is meant to be paired with a smartphone and can alert you to incoming calls or texts. This product might actually catch on, especially among those who want smartphone connectivity, but are not that fond of smartwatches.
- Amazon Smart Oven. Yes, you read that right. A smart oven. This kitchen monstrosity is a combination microwave/convection oven/air fryer that is, of course, tied into Alexa. The Alexa integration allows the oven to use presets to cook many common foods, making dinnertime that much more convenient. If it weren’t for Amazon snooping on Alexa conversations, I might actually be interested in this product.
But wait … there’s more.
Amazon also announced that Alexa will be able to mimic celebrities’ voices, with their permission, of course.
In the announcement, Amazon used the ever-popular Samuel L. Jackson as an example, noting that for only $0.99, you can have Mr. Jackson tell you when your $*%#$ fries are done on your Smart Oven.
I wonder if it will change heating up a cheeseburger to a Royale with cheese…
The Takeaway:
Much like Apple events of the past several years, there’s nothing groundbreaking in these new Amazon products … although the Echo Loop comes close and just might create a new wearables market all on its own.
The financial media, however, are buzzing about Amazon’s Echo Buds as a serious competitor for Apple’s AirPods. For all intents and purposes, the two devices are remarkably similar. Echo Buds have one key advantage, however: They’re $30 less than AirPods.
Then again, this only means something to you if you need a major brand name on your wireless earbuds. A quick search of Amazon.com reveals a plethora of similar devices for nearly $100 less than both the AirPods and Echo Buds.
In the long run, Amazon’s product extravaganza was more about Alexa product integration than anything else. This is both a blessing and a curse.
With Amazon monitoring and storing your conversations with Alexa, the question is: How much of your privacy are you willing to give up for convenience?
These new products make it even more enticing to relax your stance on personal privacy. They almost had me at the thought of Sam Jackson shouting: “Say Alexa again, I dare you!”
The Good: I Want to Ride My Bicycle
I want to ride it where I like. Sorry, Freddie Mercury, it had to be done.
Stationary bike maker and fitness televangelist Peloton Interactive Inc. (Nasdaq: PTON) is going public today.
The company’s initial public offering (IPO) priced at the top end of its range at $29 per share, raking in $1.16 billion. The IPO also values Peloton at a whopping $8.1 billion.
Now you too can be a well-entertained hamster on a wheel getting “swol” — whatever that means.
The offering is a clear win for Peloton in an increasingly tough IPO market (I’m looking at you, WeWork). But Peloton still has its issues. First and foremost, the company’s net loss widened by 412% from $47.9 million in 2018 to $245.7 million in 2019. And costs are expected to continue to rise as Peloton targets the international market.
What’s more, Peloton is facing a $300 million lawsuit from music publishers for using 2,200 songs without licensing them.
Still, the company’s subscription model has low overhead and revenue is soaring. Investors will want to keep a close eye on PTON shares as they begin trading.
While you’re deciding on whether to invest in PTON or not, I know the perfect people to help you make that decision. Banyan Hill expert Paul has all the information you need to make the best decision on IPO investing.
It’s a wild IPO market out there, and you need people like Paul to help guide you through it.
The Bad: See a Penny, Pick It Up
Or maybe not. Especially if that “penny” is a bitcoin (BTC).
The leading cryptocurrency crashed this week, suffering its worst single-day drop in 20 months.
Since June, bitcoin has plunged more than 36%. The losses are a setback for crypto traders, who had seen bitcoin as the perfect hedge against rising market volatility and global uncertainty. The new gold, if you will.
There are a myriad of factors driving bitcoin’s crash, such as the lackluster launch of a bitcoin futures product called Bakkt.
Bakkt was hailed as the first of its kind in that it settled in actual bitcoins, instead of U.S. dollars like a similar product from CME Group.
This difference was seen as providing additional legitimacy to bitcoin and cryptocurrencies in general.
Bakkt’s failure to inspire more demand has hit cryptocurrency sentiment hard. That said, bitcoin is now trading near technical price support, which could mean the worst is over and that now is the time to buy.
If you’re looking for someone to cut through the morass of the cryptocurrency market, I can think of no one better than Banyan Hill expert Ian King. Ian’s Crypto Profit Trader service pinpoints winning crypto trends with a unique, three-part trading strategy.
To get in on Ian’s crypto wisdom, all you have to do is click here.
The Ugly: Up in Smoke
The smoky romance is over. The merger between Philip Morris International Inc. (NYSE: PM) and Altria Group Inc. (NYSE: MO) is no more.
“While we believed the creation of a new merged company had the potential to create incremental revenue and cost synergies, we could not reach agreement,” said Altria CEO Howard Willard.
Altria has decided to move forward on its own in developing a smokeless alternative in the U.S. In other words, it’s doubling down on its $12.89 billion stake in e-cigarette maker Juul Labs Inc.
But that will be no easy task.
Juul’s CEO just stepped down amid a federal investigation into the company’s advertising practices. What’s more, the U.S. government is close to banning the sale of flavored vape products, which are seen as enticing to underage users.
Investors should remain wary of investing in either MO or PM at the moment … at least until all the government action dies down.
As for legal smokers out there who favor their flavored vape products — smoke ’em if you got ’em. They won’t last long.
You know the drill by this point. You Marco, I Polo. It’s reader feedback time!
I have to say, I absolutely love my readers. Even the ones who decide to unsubscribe flatter me to no end. Like this note from Les L.:
Great Studd,
Please remove me from all of your email lists and send me no more emails. Thank you.
Oddly inappropriate, but flattering nonetheless.
Les, I’ll make sure to do more for you down the road should you ever decide to come back. In the meantime, I’ll see that your request is taken care of.
Moving on, we have Gerald J., who wrote:
Let’s be clear: “Politically agnostic” means that I don’t care which party has control of the U.S. government. Do I have my own personal opinions? Yes. I’m still a person behind all these words. I have feelings too!
However, I set those aside when I’m writing Great Stuff. My job is to focus on what makes YOU money. (See, I can use all caps too!) Like him or not, President Trump’s tax cuts were a significant shot in the arm for the stock market. That made you money.
If any of the Democratic candidates stand a good chance of affecting your portfolio returns — be it negatively or positively — I’ll be sure to point that out with as little political bias and as much snark as possible.
And that’s all I have to say about that.
And now for something completely different … here’s a Great Stuff haiku from Steve G.:
Great Stuff charts the course
Stock insight with wry humor
Email I wait for
I never thought I’d see the day I’d get a haiku from a reader.
You’ve made my day, Steve. Thank you.
Great Stuff: Haiku Contest!
With this week’s reader feedback out of the way, it is, of course, that time again.
Time to feed the Great Stuff beast.
This week, I’m having a haiku contest in honor of Steve G.
Send me your Great Stuff-inspired haiku, and I’ll publish the best of the bunch here next week.
Down the road, I hope to have more to offer you than just getting published in this e-zine, but you’ll have to settle for internet fame for now.
So, send your Great Stuff haiku to [email protected].
Or just drop me a line. I can’t answer or publish everything, mind you. I get a lot of comments even weirder than Les’, after all. But I’ll do my best to answer/publish what I can.
Until next time, good trading!
Regards,
Joseph Hargett
Great Stuff Managing Editor, Banyan Hill Publishing | AMZN | 129.11 |
https://www.reuters.com/article/us-unilever-amazon-idUSKBN1WB17T | Amazon accounts for tiny fraction of overall sales: Unilever CFO | (Reuters) - Unilever ULVR.L gets a tiny fraction of its sale from
Amazon.com AMZN.O as most of its products sold on the website are priced
below $10,... | Sep 26, 2019 | Reuters | (Reuters) - Unilever ULVR.L gets a tiny fraction of its sale from Amazon.com AMZN.O as most of its products sold on the website are priced below $10, the company's chief financial officer said at a conference.
“People are surprised that our Amazon business is only a couple of hundred million,” CFO Graeme Pitkethly said at the Bernstein conference in London, adding that the company generated less than 200 million pounds ($246.32 million) in sales from the online behemoth last year.
“No one makes money on Amazon if you sell below $10 ... and a lot of our business is in products below $10,” he said.
Unilever, the maker of Dove soap and Ben & Jerry’s ice-cream, reported annual sales of about 51 billion pounds in 2018.
E-commerce sales represented about 5% of the total, or about 2.55 billion pounds, and were growing at a pace of 30% year over year, Pitkethly said.
Reporting by Siddharth Cavale in Bengaluru; Editing by Anil D’Silva
Our Standards: The Thomson Reuters Trust Principles. | AMZN | 129.11 |
https://www.bloomberg.com/news/articles/2019-09-25/ebay-ceo-wenig-steps-down-amid-ongoing-operating-review | EBay CEO Wenig Steps Down Amid Pressure to Sell off Assets | AMZN. AMAZON.COM INC. 130.15. USD. +5.32+4.26% · 978325Z. ELLIOTT
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https://investorplace.com/2019/09/7-next-gen-growth-stocks-to-buy-for-long-term-gains/ | 7 Next-Gen Growth Stocks to Buy for Long-Term Gains | Ten years ago, Amazon (NASDAQ:AMZN) represented the next generation of
commerce, leveraging technology to allow customers to shop from the
convenience of... | Sep 25, 2019 | InvestorPlace | When looking for high-quality growth stocks to buy for long-term gains, it is often best to find a company that represents the next generation of something. According to a recent study — “Explaining the Demise of Value Investing” — by Baruch Lev of the Stern School of Business and Anup Srivastava of the Haskayne School of Business, value investing lost its luster around 2007. Alternatively, momentum investing remains a strategy that many investors cling to.
In today’s environment, investors should look for companies that are fundamentally changing the way things work in an established industry — for the better — and which can leverage that change to grow by leaps and bounds in that industry over the next several years.
Historical examples: FANG.
Five years ago, Facebook (NASDAQ:FB) represented the next generation of advertising, leveraging a wealth of consumer data to enable brands to advertise to whoever they wanted, whenever they wanted and in whatever format they wanted. Facebook has since gone from niche to dominant player in the global ad world. As it has over the past five years, FB stock has risen 150%.
Ten years ago, Amazon (NASDAQ:AMZN) represented the next generation of commerce, leveraging technology to allow customers to shop from the convenience of their home, and do so whenever they wanted. Amazon has since gone from niche to dominant player in the global commerce world. As it has over the past ten years, AMZN stock has risen nearly 2,000%.
Lather, rinse, repeat for Netflix (NASDAQ:NFLX) and Alphabet (NASDAQ:GOOG, NASDAQ:GOOGL). Netflix represented the next generation of media consumption, allowing consumers to watch movies and TV shows whenever they wanted, through whatever screen they wanted. Alphabet represented the next generation of search, allowing consumers to search for anything quickly and seamlessly. Both of those stocks are up more than 400% over the past decade.
Which next-generation stocks today could follow in the footsteps of the FANG giants? Legendary tech investor Matt McCall has some thoughts on “keystone” technologies that will drive the next leg of innovation and high-powered growth.
Likewise, here’s a list of seven next-gen growth stocks that could be big winners in the long run:
Next-Gen Growth Stocks to Buy: Shopify (SHOP)
“The Next Generation of Commerce”
A decade ago, Amazon represented the future of commerce and Amazon leveraged that position to turn into a trillion dollar company. Today, e-commerce solutions provider Shopify (NYSE:SHOP) represents the future of commerce, and the implication is that with a $35 billion market cap today, this company is far from being done growing.
The logic here is simple. The e-commerce world today is one defined by marketplaces. Consumers go to centralized marketplaces like Amazon, eBay (NASDAQ:EBAY) and Etsy (NASDAQ:ETSY), where retailers list their products. Consumers buy a product from a retailer through those marketplaces. The marketplace takes a cut. It’s that simple today.
This model will never go extinct. The natural benefits of being in a marketplace are too large. But, these marketplaces also take pretty sizable cuts, so retailers and merchants are also looking to drive more traffic through their own websites. Shopify helps these merchants do that. They help them build great e-commerce sites and drive traffic to those sites. For doing this, Shopify takes a small cut of sales on these sites — but it is a tiny cut relative to what centralized marketplaces take.
Because of the economic benefits of partnering with Shopify, merchants and retailers everywhere are doing this. At the same time, consumers are increasingly discovering products through social platforms, like Instagram and that discovery leads customers to the merchant’s website, not the Amazon listing. As such, both the supply and demand sides of the commerce market are moving toward more direct, decentralized commerce.
Shopify is the backbone of this commerce model. Total retail sales in the world measure north of $20 trillion. This is a $35 billion company. Thus, the potential for long-term gains in SHOP stock is enormous.
Louis Navellier’s Portfolio Grader rates Shopify stock as a “strong buy,” earning the renowned investor’s highest quantitative grade possible. As the leader of one of the world’s leading think tanks, Louis has identified the “master key” of AI investing.
Roku (ROKU)
“The Next Generation of Media”
For all intents and purposes, streaming device maker Roku (NASDAQ:ROKU) represents the next generation of the media industry.
In the 2000s, the media consumption landscape comprised cable TV and movie theaters. By the early 2010s, the market had shifted some to include cable TV, movie theaters and streaming services. In the 2020s, the market will change even more. With more streaming services coming to the forefront — see the new offerings coming from Disney (NYSE:DIS), AT&T (NYSE:T) and more — the media consumption landscape will be dominated by streaming services.
In other words, the media consumption landscape is in the middle of an enormous pivot to streaming services. Roku is at the epicenter of this pivot. They provide streaming device makers which: 1) enable consumers to access those streaming services from any TV, smart or not, and 2) provide a content-neutral ecosystem for streaming services to reach consumers. In so doing, Roku is connecting all the supply in the streaming TV world, to all the demand. They are becoming the cable box of the streaming TV world.
The long-term implications here are that Roku will one day have over a hundred million consumers watching hours of content through its ecosystem. They monetize all those consumers and all those viewing hours through high-margin subscription sharing agreements and high-margin ads, which should produce robust profit growth in the long run … and all that growth should drive ROKU stock materially higher.
The Trade Desk (TTD)
“The Next Generation of Advertising”
Programmatic advertising is the future of advertising, and programmatic advertising leader The Trade Desk (NASDAQ:TTD) is the stock to buy to play the programmatic advertising trend.
Long story short, everything is in the process of being automated. There are three big drivers here. First, automation saves money, since it takes recurring human labor expense and turns it into a one-time technology hardware installation fee (and some maintenance costs thereafter). Second, automation improves efficiency, since machines and algorithms work more quickly than humans and aren’t subject to fatigue. Third, automation makes things smarter, since automated technologies leverage data to make better decisions.
Consequently, everything is being automated. This includes ad transaction processes. The automation of ad transaction processes is called programmatic advertising, and companies left and right are adopting programmatic advertising since it’s cheaper, more efficient and produces better results.
At the forefront of the programmatic advertising trend is The Trade Desk. That’s why the company has reported 40%-plus revenue growth for the past several years. This big growth will stick around for a lot longer. The global ad market is marching toward $1 trillion in size. Gross spend on TTD’s platform is between $2 and $3 billion.
Thus, there’s a long runway here for further growth — and as The Trade Desk moves down that runway, TTD stock should move higher.
Okta (OKTA)
“The Next Generation of Security”
Digital security is increasingly turning into one of the most important industries in the global economy, and in that increasingly important industry, Okta (NASDAQ:OKTA) represents the next-generation of superior security.
The story here is pretty simple to understand. Everything is going digital, and everything is going to the cloud. That means all-important enterprise data and workflows are migrating to the cloud. All that important information needs to be protected. So, enterprises are investing big in cloud security.
Traditionally, cloud security solutions encompass the whole ecosystem. That is, they are like castles of security surrounding all the important data and workflows. But, castles of security are limiting in terms of flexibility and mobility, and aren’t entirely ideal. As such, Okta is pioneering identity-based cloud security solutions, which is equivalent to getting rid of the castle altogether and instead outfitting each individual in the ecosystem with an armor of personal security. The logic is that, if everyone has armor, you don’t need a castle, and you can employ a fully secure cloud security system that simultaneously optimizes flexibility and mobility.
Enterprises are coming around to Okta’s identity-based cloud security solutions. As such, Okta’s customer base and revenues have soared over the past several years, and at really high gross margins. But, there’s still a lot of growth left. Okta is a $12 billion company. The global cybersecurity market is marching towards $250 billion in revenues.
As Okta continues to expand and grow share in the secular growth cybersecurity market, OKTA stock will run higher.
Stitch Fix (SFIX)
“The Next Generation of Retail”
One of the lesser known stocks on this list, personal curated stylist service Stitch Fix (NASDAQ:SFIX) is nonetheless a revolutionary company changing the way the retail market works.
At present, the clothes shopping process is highly inefficient. You either: 1) walk into a store with thousands of items, with no idea what you want, and end up spending forever trying to find the right outfit(s), 2) walk into a store with thousands of items, with an idea of what you want, but still end up spending forever trying to find that item(s), or 3) do all of it online, which saves you on the “going into the store” part, but doesn’t really cut back time in terms of deciding what you want. None of those processes are efficient.
Stitch Fix makes clothes shopping efficient. Pay Stitch Fix to be your personal stylist. Tell them the stuff you like. Let them do the rest. They will pick out outfits for you, and send them to you. You try them on, keep what you like, and send back the rest. It’s that easy, and consumers are quickly turning to it because it takes out all the thinking, time and hassle that are inherent to clothes shopping today — all for a relatively small fee.
Over the next several years, Stitch Fix will become an increasingly important part of the huge global retail machine. That is a multi-trillion dollar market. Stitch Fix is a $2 billion company. Thus, the runway for growth here in the long run is very compelling.
Tesla (TSLA)
“The Next Generation of Transportation”
The company gets a lot of negative press thanks to its lack of profits, huge debt load and outspoken CEO, but beyond all the noise, Tesla (NASDAQ:TSLA) is transforming the transportation market in a big way. In many ways, Tesla represents the next generation of auto transportation.
Here’s the thing. The EV revolution is well on its way. It won’t stop anytime soon. Thanks to the internet, social media and the ease with which information spreads across the world, consumers today are hyper-aware of the world’s environmental issues — and they are doing everything they can to fix those issues. One of the most tangible ways to do that is by ditching your gas powered car for an electric car. Consumers are already doing this, and they will continue to do this with greater frequency as electric battery technology gets better and the EV charging network becomes more fleshed out.
Net net, by the end of next decade, it is reasonable to say that about one out of every four to five cars on the road globally will be electric. That represents huge growth from today 2% penetration rate. Tesla is at the epicenter of that huge growth, and it is the biggest electric player today in every market besides China. New car launches over the next several years should keep Tesla at the top of this booming electric industry.
In fact, Tesla CEO Elon Musk believes his company’s fully autonomous vehicles will be on the road as early as next year. As Louis Navellier puts it, “this isn’t a technology that might or might not happening. It’s happening right now!” See what Louis believes will be the “master key” to unlocking the potential of AI.
Bottom line: Tesla projects as a huge grower over the next several years. Inevitably, all that growth will lead to TSLA stock marching higher in the long run.
Chegg (CHGG)
“The Next Generation of Education”
Last, but not least, on this list of next-gen growth stocks to buy for the long haul is digital education pioneer Chegg (NASDAQ:CHGG).
The narrative here is easy to follow. Think about your average high school or college student. They are constantly plugged into the digital channel, watching shows on Netflix, sending images on Snapchat, sharing videos on Tik Tok, sharing pictures on Instagram, messaging friends on Messenger, seeing videos on YouTube, so on and so forth. Everything they do, they do with a smartphone, tablet or smart TV.
Except education.
The academic world hasn’t pivoted to the digital transformation yet. So, all these students are going from spending all their free time in the digital channel, to sticking their heads in physical textbooks when it comes learning time. That doesn’t make sense. All it says is that the academic world is behind the curve. In an ideal world, educational materials are digitized, too, and learning is done through the digital channel, like everything else.
Chegg is doing this. They are creating a digital education platform that is becoming a highly desirable learning companion for high school and college students across America. This platform is growing rapidly. But, Chegg only has 3 million subs. There are 36 million high school and college students in the U.S. alone — and many, many more internationally.
Thus, the Chegg growth narrative is really just getting started. Over the next several years, this company will continue to transform the education industry, and as they do, revenues, profits and the stock will move higher.
As of this writing, Luke Lango was long FB, NFLX, GOOG, SHOP, EBAY, DIS, T, TTD, OKTA, SFIX, TSLA and CHGG. | AMZN | 129.11 |
https://musicmayhemmagazine.com/is-the-my-chemical-romance-reunion-is-coming-as-band-is-teasing-something/ | Is My Chemical Romance Reuniting? As Band Teases ... | To Celebrate, Press play on our Best of My Chemical Romance playlist:
https://amzn.to/2C0e3iG” which quickly got deleted but not before a fan for
a... | Oct 31, 2019 | Music Mayhem Magazine | My Chemical Romance have been teasing throughout their social media after it being dormant for quite some time, bringing their MCR Twitter back to life and rarely posting to it since March of 2013 when the band broke up.
It started with the band updating their social media with a new profile photos throughout socials which can be seen below:
Then, MCR created an official band Instagram profile updating their Instagram stories with several photos including one that read “ex. 1: Clarity,” accompanying what maybe their new band logo which is the profile photo across their social media platforms today. Then the band updated their Instagram story again with another post, this one reading “ex. 2: Courage” with a different logo to accompany the post. Now posting yet another photo with this one reading, “ex. 3: Sacrifice” and more reading “ex. 4: Devotion” and then a new logo reading MCR with all of these symbols.
Earlier today, Amazon Music seemed to accidentally post an announcement of the reunion of My Chemical Romance saying in a post, “WE ARE NOT OKAY (WE PROMISE)… My Chemical Romance is back together, and we cannot wait to see what the band has in store! To Celebrate, Press play on our Best of My Chemical Romance playlist: https://amzn.to/2C0e3iG” which quickly got deleted but not before a fan for a screenshot of the post, which can be seen below.
My Chemical Romance’s label, Warner Music Artists, have seemingly maybe leaked some new RETURN merch on their website, which can be seen below:
On Twitter the band has an official hashtag emoji showing a melting candle which can be seen below and fans are freaking out:
Remember, earlier this year Joe Jonas of Jonas Brothers did say that My Chemical Romance was rehearsing in next to them in New York in a studio which Frank Iero did deny was happening but then said “anything is possible.” Jonas saying “I’ve got some dirt, My Chemical Romance were apparently rehearsing next to us in New York recently, which, I thought they broke up, so… that’s the gossip!”
My Chemical Romance’s second album Three Cheers For Sweet Revenge did turn 15 back in June 2019, while next year (2020) will mark the 10th anniversary of their final album together, Danger Days: The True Lives Of The Fabulous Killjoys. So maybe we will see a reunion with some celebratory tour or new music? Stay tuned we will keep you updated as we find out more information!
All of the members (Gerard Way, Ray Toro, Mikey Way and Frank Iero) of My Chemical Romance have been touring and releasing things on their own as solo projects for the last several years.
UPDATE: The band has unveiled their first live performance since 2012!
My Chemical Romance Returns with First Live Show Announcement Since 2012 | AMZN | 129.11 |
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https://www.forbes.com/sites/oliviergarret/2019/10/31/the-boring-industry-that-hands-500-gains/ | The Boring Industry That Hands +500% Gains | Amazon (AMZN) first went after bookstores like Barnes & Noble and Borders.
What could be easier than selling books online? Books are easy and cheap
to... | Oct 31, 2019 | Forbes | Smart hunters prey on the weak.
That may sound heartless, but lions instinctually know not to chase fast, young gazelles. Instead, they run down the old limping gazelle in the back of the pack.
Smart disruptors also target easy prey.
Amazon (AMZN) first went after bookstores like Barnes & Noble and Borders. What could be easier than selling books online? Books are easy and cheap to mail... don’t spoil like food... don’t come in different sizes like clothes... and book buyers rarely demand refunds.
Then there’s Netflix (NFLX). It didn’t challenge mighty Disney (DIS) right away. It went after the limping gazelle known as Blockbuster, a company that hadn’t evolved much in decades.
But One “Hall of Fame” Disruptor Broke all the Rules
It went after the world’s tech giants from the very beginning... and won! This company quietly went public in June 2004.
There wasn’t a media circus around its initial public offering (IPO) like we often see. In fact, most investors didn’t even notice. Everyone was focused on Google (GOOGL), which was set to go public just two months later.
But you would have made far more money buying this under-the-radar stock than buying Google.
The company I’m talking about is Salesforce (CRM). It has surged an incredible 4,400% since it went public in 2004—nearly doubling Google’s return!
Salesforce Is One of the World’s Most Dominant Companies
It’s worth over $120 billion—in the same ballpark as Netflix (NFLX), McDonald’s (MCD), and Nike (NKE). Still, it’s something of a mystery. Everyone’s heard of the company but most investors couldn’t tell you what it does.
Salesforce sells customer relations management (CRM) software. Hence its ticker, CRM. Its software helps sales teams retain clients, provide better customer service, and acquire new customers.
But that’s NOT why Salesforce’s business grew more than a hundredfold in just 15 years. Instead, it became a world dominator by disrupting how software is sold.
Remember back when you’d buy software from a store? It came in a shrink-wrapped CD case. You’d then go home and install the program on your computer.
Companies had to do the same except they used A LOT more software. To manage it all, a company had to hire an IT team or at the very least, a “tech guy.”
A company needed servers to run the software. If it was big enough, it would need warehouses full of servers!
Salesforce Disrupted the Software Business
Salesforce CEO Marc Benioff was convinced that using software should be as easy as visiting a website like Amazon.com. And paying for it should be as simple as paying your electric bill.
So, he started selling software on a subscription basis. Customers paid monthly for access, instead of buying the software outright.
In short, Benioff reinvented software. He took it from a “product” that companies sold, to a “service” that it managed for its clients. This might seem like a subtle shift. But Benioff’s simple idea ignited one of the biggest stock booms of the century... a boom that’s still going strong today.
Salesforce pioneered the SaaS—or software as a service—model. Hundreds of other companies then copied it. The stocks of many of these SaaS companies have shot to the moon, handing investors massive profits.
SaaS Stocks Are the Hottest on the Planet
It’s really no contest.
Look at Alteryx (AYX)—an SaaS company that helps businesses better analyze their data. It’s spiked 883% since its March 2017 IPO.
Okta (OKTA) also went on one of hell of a run. Its exploded 528% after its IPO April 2017.
ZenDesk (ZEN) helps companies work better with their customers. Its jumped 758% after going public in 2014…
There are plenty others...
Paycom Software (PAYC) skyrocketed 1,595% in under three years. Twilio (TWLO) soared 538% after going public in 2016. ServiceNow (NOW) rallied 1,228% following its 2012 IPO. And Atlassian (TEAM) spiked 465% in under four years.
SaaS Companies Are Some of the Fastest-Growing Businesses Around
Alteryx’s sales are growing at a blistering 48% per year… Okta’s at 42% per year… and ZenDesk at 35% per year. For perspective, the S&P 500’s sales are growing at about 8% per year.
And let’s not forget about Salesforce. Its sales are still growing around 27% per year. That’s incredible for a giant $120 billion company that went public 15 years ago.
Why are SaaS companies growing at warp speed?
For one, customers love the pay-as-you-go model. They’re happy to avoid shelling out a ton of money on software upfront. And many CEOs are thrilled they no longer need to maintain a warehouse of servers…or hire a small army of highly paid computer engineers… or worry about constantly upgrading the software.
The SaaS provider takes care of all that overhead.
Investors Love the SaaS Model, Too
And not just because it supercharges growth.
Subscription revenue is recurring—which is the best kind of revenue. Subscription revenue is predictable, consistent, and comes in month after month.
Software is also what’s known as “scalable.” It’s not like selling cars where you have to pay for the material and labor to manufacture every car you sell. Once the software service is up and running, the incremental cost to serve a new customer is often dirt cheap.
Many SaaS companies enjoy sky-high gross profit margins above 70%.
If You Missed Out On These Incredible SaaS Stock Runs…
Don’t worry. There’s a new crop of cash-gushing SaaS companies getting ready to go public.
Like Salesforce, many of these companies won’t get nearly as much attention as companies like Uber (UBER) or Lyft (LYFT).
I get it... software is boring.
But these are exactly the sort of IPOs you should be buying into on the ground floor.
Here are two private SaaS to keep an eye on. Both should go public in the near future:
Snowflake Computing helps companies like Netflix, Square, and Adobe analyze their data. Like other SaaS companies, it’s growing at warp speed. Snowflake’s customer base has quadrupled over the past year, and its sales are growing about 30x faster than its peers.
In May, Snowflake brought in Frank Slootman as CEO. Slootman previously headed up ServiceNow, which—again—has surged 1,228% since it went public in 2012.
Databricks also helps companies make sense of their data… and business is booming. Its subscription revenue has tripled since last year.
Databricks is aiming to have its financials “IPO ready” before the end of the year, suggesting that an IPO is likely around the corner.
Get our report "The Great Disruptors: 3 Breakthrough Stocks Set to Double Your Money". These stocks will hand you 100% gains as they disrupt whole industries. Get your free copy here. | AMZN | 129.11 |
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