Top US stocks to watch: Sanderson Farms, Norwegian Cruise and Citigroup

There’s M&A news from Sanderson Farms, Citi, Brookfield Asset Management and Philip Morris, Norwegian Cruise triumphs in its battle for vaccine passports, Tyson Foods ups expectations, Amazon and Walmart are dealt a blow in India, and AMC reports later today.

USA (1)

Sanderson Farms

Sanderson Farms has agreed to be taken over by a joint venture between Cargill and Continental Grain for $4.53 billion, a sizeable 30% premium to its closing share price last June before speculation over a potential takeover.

Sanderson Farms shares have rocketed over 17% since media speculation about a deal emerged in mid-June. The joint venture will pay $203 per share, which is still some 11.5% higher than Sanderson’s current share price.

Cargill and Continental Grain plan to combine Sanderson Farms with Continentals’ Wayne Farms to form a new privately held poultry business.

Norwegian Cruise Line

Norwegian Cruise Line has won the backing of a US judge that has ruled it can ask for written proof of vaccinations before allowing guests to board cruise ships after a governor in Florida tried to ban the implementation of vaccine passports.

A preliminary ruling has been made in Miami that said Norwegian was likely to win its argument against the ban on vaccine passports that was signed into law by governor Ron DeSantis back in May on grounds that it could jeopardise public health. The judge has blocked the governor’s ability to implement the ban on Norwegian, which will allow it to operate as planned with vaccine passports in place when it resumes operations from Miami next week.

Norwegian is in the process of restarting operations after a lengthy period of having its ships stuck in ports, but has agreed that at least 95% of all cruise passengers will be fully vaccinated.

Citigroup

Citigroup has agreed to sell its Australian consumer business to National Australia Bank for around $882 million.

The exact sum to be paid will be the value of the net assets of the business plus a $250 million premium. The deal will need regulatory approval but should be completed before the end of March 2022, and will see around 800 Citigroup employees move over to NAB.

NAB said it was buying the business because it brings scale in unsecured lending, particularly credit cards. It is hoping the acquisition will help it grow its market share in payments and transaction data. Citigroup is selling up after it announced it would exit from its consumer businesses in 13 countries, including Australia, in an effort to boost profitability.

Tyson Foods

Tyson Foods raised its sales forecast for the rest of the year after reporting strong growth at the top-and-bottom line during the latest quarter, driven by higher volumes and improved prices.

Sales rose to $12.5 billion in the second quarter from $10.0 billion the year before while net income jumped to $753 million from $526 million. Adjusted net income per share climbed to $2.70 from $1.40. Every product category saw improved volumes and better prices in the period. Beef saw the largest volume gain, up 24% year-on-year, while pork experienced the sharpest increase in prices, up over 39%. Overall, volumes were up 9.7% and prices were up over 17%.

Tyson Foods said it is expecting sales of $46 to $47 billion over the full year, up from its previous range of $44 to $46 billion. That was also ahead of the $45 billion expected by Wall Street.

Amazon and Walmart

Amazon and Walmart’s Flipkart will have to face the antitrust investigations being pushed for by officials in India, the country’s Supreme Court ruled today, dealing a major blow to both companies in a key growth market.

Both companies have tried to stop a probe launched by the Competition Commission of India last year after being accused of favouring certain sellers on their platforms and stifling competition from rivals.

‘We expect organisations like Amazon and Flipkart, big organisations, they have to volunteer for inquiry and transparency. We expect that and you don’t even want (an) inquiry,’ said chief justice NV Ramana. ‘You have to submit and an inquiry has to be conducted’.

Tesla

India is considering making large cuts to import taxes on electric vehicles shipped into the country after US carmaker Tesla lobbied the government to bring them down in order to reduce the price of electric cars and encourage more people to make the shift to greener forms of transport, according to reports from Reuters.

Citing unnamed officials, Reuters said the country could cut the import tax on cars worth less than $40,000 to 40% from the current rate of 60%, while more expensive cars will see their rate fall to 60% from 100%. However, the scale of the actual reduction has not been decided yet.

It was reported in July that Tesla had asked the government to lower import taxes, but this clashed with India’s commitment to promoting domestic manufacturing by keeping duties on foreign-made goods high. Notably, Tesla has said it would be willing to consider launching a factory in India if it was successful in getting import taxes reduced.

Berkshire Hathaway

Berkshire Hathaway reported second quarter results after the markets closed on Friday, revealing higher earnings as its investments recovered from being hit by the pandemic.

Markets pay close attention to updates from the company, which has been led by icon Warren Buffet since 1965. Berkshire Hathaway reported lower year-on-year earnings from its insurance investments but said this was offset from growth from railroad, utilities, energy and other businesses. Overall operating earnings jumped to $6.68 billion from $5.51 billion.

Berkshire Hathaway also repurchased $6 billion worth of stock in the second quarter, building on the $6.6 billion bought back in the first quarter. The fact it did not repeat warnings that some of its business units were struggling like it did in the previous quarter has also bolstered confidence.

Brookfield Asset Management

Brookfield Asset Management’s reinsurance business has agreed to buy insurance outfit American National Group for $5.1 billion in cash.

Brookfield Asset Management Reinsurance Partners will pay $190 in cash for each share, marking a 24.7% premium to American National’s 30-day volume-weighted average price on Friday. Brookfield said the deal is part of the continued expansion of its insurance division, citing American National’s ‘strong track record of stable growth and disciplined underwriting’ as attractive elements of the business.

The merger is expected to be completed during the first half of 2022 and will need to be approved by regulators.

Philip Morris

The battle for London-listed Vectura Group is heating up after Philip Morris International raised its bid for the company, which it wants to ‘form the backbone’ of its inhaled therapeutics business as it shifts away from traditional tobacco products.

The latest offer from Philip Morris is for 165 pence per Vectura share, valuing the company at £1.02 billion in total. That has been raised from its previous bid of 150p after US outfit Carlyle Group tabled an improved offer of 155p offer over the weekend.

Philip Morris said it wants Vectura to play a big role in its transition away from traditional tobacco products as part of its ‘Beyond Nicotine’ plan, which will see the company generating over $1 billion in annual revenue from its next-gen products in 2025. It said it plans to operate Vectura as an autonomous business and said its size and scale will allow it to boost the firm’s research and development.

Barrick Gold

Barrick Gold reiterated its full year expectations as it revealed higher gold prices boosted earnings in the latest quarter.

The miner produced 1.04 million ounces of gold in the second quarter, down from 1.14 million ounces the year before. However, lower output and a mild rise in production costs was countered by average prices rising to $1,820 per ounce from $1,725. That resulted in adjusted net earnings of $513 million from $415 million the year before, with reported net earnings growing to $411 million from $357 million.

Barrick reiterated its hopes of producing 4.4 to 4.7 million ounces over the full year. It also launched the second $250 million tranche of its $750 million capital distribution plan, equal to $0.09 per share.

Alibaba

Alibaba has sacked a manager following allegations of rape and two other managers that failed to act on the accusations have resigned, according to a memo seen by the BBC.

The letter, sent to employees by chief executive Daniel Zhang, said the manager at the centre of the storm ‘will be fired and never be rehired’, adding it was down to law enforcement to determine whether the allegations are true. The manager in question has admitted that ‘intimate acts’ happened with the person in question while they were ‘inebriated’.

AMC Entertainment

AMC Entertainment is in focus today ahead of its second quarter results that will be released after the closing bell today.

The movement in the stock, which has become a favourite among retail traders, has not been driven by the fundamentals this year but investors will be hoping to see strong evidence that the cinema industry is bouncing back. Still, data from Bloomberg suggests industry box office figures were still 74% lower than the pre-pandemic levels in the quarter.

Analysts are expecting revenue to surge to $367.4 million from just $18.9 million the year before when theatres were shut during lockdown. Still, it is expected to remain in the red with a loss per share of $0.93 but that will still be an improvement from the hefty $5.63 loss booked last year.

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