All good rallies must come to an end, and Tuesday saw the stock market fall back from its record close earlier in the week. Major market benchmarks fell about half a percent, as market participants seemed nervous about the potential for the Federal Reserve to move forward with interest-rate increases despite tepid economic expansion. Inflation data released Tuesday morning didn't indicate any substantial pricing pressure, but with the international macroeconomic picture continuing to be cloudy, investors appear to have positioned themselves to deal with whatever the future might bring.
Cintas orders up a big buy
Cintas rose 5% after announcing that it would buy fellow uniform and facilities services company G&K Services in a deal worth $2.2 billion. The all-cash deal will give current G&K Services shareholders $97.50 per share, and the companies expect the merger to close late this year or early next year. Cintas expects to realize synergy-related savings of $130 million to $140 million annually within four years after closing, and Cintas CEO Scott Farmer indicated that the companies' "dedication to customers, employee-partners, and shareholders" should "build a great foundation for a successful combination." G&K shares jumped 18%, but the fact that the acquirer is also seeing its shares rise indicates that the price for the buyout appears to be a fair one for both parties.
Pinnacle bets big on its own stock
Pinnacle Entertainment climbed 8% in the wake of its decision to authorize a substantial stock repurchase program. The casino company said on Monday afternoon that it had authorized a $50 million buyback program, with the intent of funding the program without raising any additional debt.
The new program comes just three months after Pinnacle had authorized an earlier $50 million repurchase, but within just a couple months, Pinnacle had already bought back 4.53 million shares to use up every penny of the previous authorization. Combined with the original program, Pinnacle could see its total share count drop by as much as 15%, if it fully implements the just-authorized buyback at prices similar to where the stock currently trades.
CST Brands heads toward an acquisition
Finally, CST Brands gained 6%. Reports have continued to swirl that the convenience-store retailer is the target of Canadian industry peer Couche-Tard. The gas station and convenience store industry has been going through substantial consolidation, and investors appear to agree that a deal is possible even though Couche-Tard has made some big deals recently.
As the owner of Circle K and other well-known brands, Couche-Tard would benefit from CST's exposure to the U.S. and Canadian markets. Some had looked to other potential bidders to complicate the process, so it remains to be seen whether CST gets a buyout bid, and whether anyone else steps in and challenges any initial offer once it's made.
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