What You Need To Know This Week — December 5th, 2020
What You Need To Know This Week
A weekly recap to keep you informed on the most important events this week impacting markets, business, tech and the global economy.
RUMOURED SLACK ACQUISITION BY SALESFORCE IS CONFIRMED AS PARTIES STRIKE DEFINITIVE MERGER AGREEMENT
Following rumours, Salesforce inked a $27.7 billion deal to acquire messaging software company Slack in a cash and stock transaction. From a strategic standpoint, the Slack acquisition will allow Salesforce to better compete against industry giant Microsoft. The consideration offered to Slack shareholders, worth approximately $47.00 per share, represented a 59.0% premium and a lofty valuation of 24.5x next year’s sales. Traders who bought Slack shares on deal speculation after the rumour broke capitalized on the rumourtrage opportunity, earning a 5.2% return this week.
SPAC NORTHERN GENESIS ANNOUNCES DEAL WITH LION ELECTRIC
The trend of electric vehicle deals continues as blank check company Northern Genesis Acquisition announced a business combination with Lion Electric, a Quebec-based manufacturer of all-electric medium and heavy-duty urban vehicles. The pro forma company will be valued at $1.9 billion and will have about $500 million in cash, with $300 million from the SPAC and $200 million from a concurrent PIPE financing. The capital raised in the go-public transaction will be used to expand Lion Electric’s vehicle manufacturing, build a new battery assembly factory and develop new battery systems. The market remains keen on EV deals, as Northern Genesis’ stock is up more than 40% since the deal’s rumour first broke. The Accelerate Arbitrage Fund (TSX: ARB) owns shares and warrants of Northern Genesis.
ALASKA COMMUNICATIONS RECEIVES A SUPERIOR PROPOSAL, TRIGGERING POTENTIAL BIDDING WAR
A bidding war is brewing for small cap company Alaska Communications (“ALSK”). Last month, Macquarie and GCM Grosvenor struck a $300 million deal to acquire Alaska Communications for $3.00 per share, representing a sizable 57.1% premium but a relatively low valuation of 4.2x trailing EBITDA. As part of the deal, the ALSK board implemented a “go-shop” provision, allowing them to seek other buyers. This week, it was revealed that two bids came in, of which one was deemed to be superior to the current offer. Alaska Communications shareholders celebrated the new $3.15 offer from an interloper, bidding the stock up 23.3% on the news. Market participants have lofty expectations of a bidding war, as ALSK’s stock currently sits at a 19.4% premium to the current highest offer.
Notable Insights, Articles, Podcasts, and Tweets
Listen to BlockFi founder and CEO Zac Prince make a rational case for investing in Bitcoin on the Animal Spirits podcast.
Not sure what lidar and self-driving vehicle technology have to do with cannabis. However, it appears that another cannabis-focused SPAC, Collective Growth Corp., is in talks to do an autonomous vehicle tech deal with Israeli lidar startup Innoviz.
According to Dynamic Beta’s Andrew Beer, “the 2020s may well be a ‘lost decade’ for simple, passive portfolios.” With bond yields so long and equity valuations so high, he may be proven right.
Venture capitalist Tomasz Tunguz on entrepreneurship: “It’s hard. It’s meant to be hard. You’re changing the world.”
Bitcoin hit a new all-high price of $19,850, exceeding the previous high watermark set in 2017. Despite the tremendous rally, Bitcoin should continue to be considered for a small allocation in diversified portfolios.
The current market is indicative of a “risk on” environment as leveraged and inverse ETFs have raked in over $16 billion through the first 10 months of 2020, on pace to top 2008’s record haul of $16.7 billion.
S&P Global continues to consolidate the financial data sector, announcing a deal to acquire IHS Markit for $44 billion.
Real estate isn’t as safe and reliable as investors think. Canadian real estate giant RioCan REIT slashed its distribution by a third. Who’s next?
British private equity firm Hg Capital is buying Calgary-based startup Benevity for $1.1 billion.
Soon to be public fintech company Affirm is acquiring Canadian startup PayBright for $340 million.
