Good Tuesday Morning,
Daylight – Yesterday, two big deals went down the drain that could have done a world of good for global economic stability and growth for Entrepreneurs. First, U.S. and Russia both walked away from the negotiating table for a peace agreement in Syria, a sign of soured relations between both superpowers – not good. The next doomed deal was a shocker and a huge setback for economic growth in Latin America. After fierce fighting for 52 years, Columbia reached a peace agreement with the Revolutionary Armed Forces of Colombia or FARC, and polls predicted voters would give the agreement a wide margin of victory. Blame it on Hurricane Matthew, which it drenched the country and caused an anemic voter turnout, as many are saying this morning they were lulled by the polls. The toll of war should be measured in many ways, including the cost of customers. Syria is disrupting 350 million potential customers in the Middle East, and the failed peace agreement ballot in Columbia disrupts another 150 million potential customers in Latin America. Just think of the positive growth and quality of life of a half billion customers in a free, peaceful market. By the way, Hurricane Matthew, a dangerous Category 4 storm, is headed to Haiti this morning and has potentially catastrophic consequences. We hope for the best and some late luck. It is expected to hit the U.S. coast Friday morning, but be long gone by November 8, the second Tuesday of November. Entrepreneurs in both regions can only hope war in Syria and Columbia go with it.
M&A – Bass Pro Shops to buy Cabela’s was announced yesterday, but not the deal behind the deal. Yes, Cabela’s had 85 stores and 19,000 employees (Bass Pro Shops has 20,000), but the real juice of Cabela’s was in its credit card operation that had reached significant scale with $5.2 billion worth of credit card receivables, and its average credit score was 794, higher than any other retail operation, including Nordstrom and Neiman Marcus. Among the hunting, fishing and Field and Stream crowd, it was not a credit card – it was a status symbol that showed you had made it. Cabela’s essentially sold the credit card business to Capital One, while Bass Pro Shops will receive a royalty revenue stream from credit cards issued. Bass Pro Shops received $1.8 billion in financing from the merchant banking division of Goldman Sachs and another $600 million from the private equity players. Bass Pro Shops also plans to receive debt financing from Wells Fargo, but probably will not let them near the credit card business.
Here is the deal – this deal is not going to work for two reasons – huge integration risks with both companies being near the same size, but totally two different cultures. This is like Nordstrom buying Marshalls. Next, Cabela’s created a cult of customers and hooked a credit card business to it that kept the mojo going for the company, employees and customers. Selling it to Capital One – big mistake. Capital One will lower the eligibility for credit scores and issue one to almost every fisherman and hunter that walks through the door. Cabela’s was for the status of the driven Hunter and Fisherman and a big reason why they could not grow past 85 stores.
Economics – U.S. auto sales are slow after years of steady growth. U.S. auto sales tapped the brakes in September, with the No. 1 and No. 2 automakers reporting declines, despite efforts to keep dealer lots stocked and lure more car shoppers with sweetened incentives. General Motors Co. reported sales slipped 0.6 percent to 249,795, amid a planned pullback in fleet deliveries. Retail sales, meanwhile, edged 0.3 percent higher to 204,449. Ford Motor Co.’s sales skidded 8.1 percent to 203,444, dragged by a 21 percent decline in fleet sales, which the company said it planned to front-load this year.
Live Rounds – Just in case you think you had a bad day – Todd Orr was attacked twice by the same bear on the same day. Orr surprisingly lived and posted the revenant on Facebook. By the way, Facebook yesterday launched Marketplace to compete against Craig’s List, which has yet to produce an app for its business, relying on its old school website as a nostalgic draw from customers. Quaint ain’t going to get it against Facebook, but the vintage strategy worked longer than any of us thought it would. Many are waiting anxiously to see how Craig responds. I predict he will keep doing what he has been doing.
Buzzard’s Roost – U.S. construction spending weakens – Outlays for U.S. construction projects weakened in August and July, led by steep declines in spending on public projects, the Commerce Department reported Monday. Spending on construction tumbled 0.7 percent in August. That was well below forecasts.
Hedge Funds – Janus to Merge with Henderson, Forming Asset Management Giant – The deal highlights the extent to which smaller mutual funds are feeling the pressure from the explosive growth of lower costs and passive strategies.
Spotlight – Our Entrepreneur Briefing V will be held November 4, 8:30 a.m. at Avalon, home office of IDR Inc, the trailblazer and market creator for high tech staffing with over 400 consultants. Our topic will be “War on Talent – Battle for Brilliant Brains,” and at IDR, you will see the dynamics and environment that it takes to attract talent, as we head fast to year 2020. You will also know how IDR founder and CEO, Eric French, has attracted high caliber branch office teams in multiple cities.
Tuesday’s Waterfront View of Big Deals
IPO – Seven companies are expected to price IPOs on U.S. exchanges this week, including Camping World, Coupa Software and Advanced Disposal Services.
BlackLine Systems, an accounting software company has filed for a $100 million IPO.
Carbon Black has confidentially filed for an IPO.
Myovant Sciences Inc., a drug company focused on women’s health diseases and other endocrine-related disorders, has filed for a $172.5 million IPO.
Ra Pharmaceuticals Inc., a drug discovery company focused on diseases caused by excessive or uncontrolled activation of the complement system, has filed for an $86.25 million IPO.
Exits – Clariant Corp., a unit of Clariant AG, has acquired Kel-Tech Inc., a provider of specialty chemicals for onshore production, field stimulation, and drilling applications, from Arsenal Capital Partners.
Diamondback Energy Inc. is nearing a $2.5 billion agreement to acquire Silver Hill Energy Partners, a oil and gas company focused on the Permian Basin.
Venture Capital – Carrick Therapeutics Ltd., an oncology startup being spun out of the University of Cambridge, has raised $95 million.
Recursion Pharmaceuticals, a drug discovery company focused on rare genetic diseases, has raised $12.9 million.
Simplus, a provider of Salesforce quote-to-cash implementations, has raised $7 million.
Payzer, a maker of a mobile and cloud-based financial tool for specialty trade contractors, has raised $4.25 million.
CarForce, a SaaS solution that provides car dealerships with real-time connected car telematics, has raised an undisclosed amount of funding.
Private Equity – Apax Partners, BC Partners and The Carlyle Group have been short-listed to acquire 19 mental healthcare hospitals owned by Priory.
Apollo Global Management is in talks to acquire the Lumileds lighting parts unit of Royal Philips NV.
ATC Group Services, a portfolio company of Bernhard Capital Partners, has agreed to acquire Environmental Compliance Services, a provider of environmental consulting, site remediation and regulatory compliance services.
DTI, a legal process outsourcing owned by OMERS Private Equity and Harvest Partners, has completed its previously-announced acquisition of Epiq, a provider of technology and services for the legal profession.
Gary Comer Inc. and Safety Net Connect have partnered on the acquisition of CareConnect, a healthcare coordination platform.
Industrial Growth Partners has acquired SPL, a provider of outsourced hydrocarbon measurement, analysis and reporting services for oil and gas production and transport.
Linden Capital Partners has acquired MeriCal Inc., a maker of nutritional supplements.
And that’s what’s ahead, Cliff
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