Stocks rose Tuesday after Chinese President Xi Jinping made comments that eased investors' trade concerns. The Dow Jones Industrial Average (DJINDICES:^DJI) and the S&P 500 (SNPINDEX:^GSPC) both closed with substantial gains.
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Energy was the strongest sector thanks to a 3.7% rise in crude oil futures; the SPDR S&P Oil & Gas Exploration & Production ETF (NYSEMKT:XOP) jumped 4.2%. Tech stocks also rebounded, with the Technology Select Sector SPDR ETF (NYSEMKT:XLK) gaining 2.5%.
As for individual stocks, Verifone Systems (NYSE:PAY) is being acquired by a group of private investors, and Tenneco (NYSE:TEN) is buying an auto parts business before splitting into two public companies.
Verifone is being taken private
Shares of payment system provider Verifone soared 51.9% on news that it is being bought out by private investors in a deal worth $3.4 billion. Verifone shareholders will receive $23.04 in cash and the investor group, led by private equity firm Francisco Partners and including British Columbia Investment Management Corporation, will assume Verifone's debt. After the transaction, Verifone will be a private company.
The deal is expected to close in the third quarter, pending regulatory and shareholder approval. Verifone is also free to entertain competing offers through May 24, 2018.
Verifone CEO Paul Galant said in the press release:
We are pleased to reach this agreement with Francisco Partners. This transaction delivers significant cash value to our stockholders and provides compelling benefits for our clients. We believe this transaction reflects the progress we have made executing our transformation from a terminal sales company to a payments and commerce solutions provider.
The supplier of point-of-sale terminals and the payment service platform that supports them has been slimming down by shedding non-core businesses in order to get back to growth. With that work substantially done, the company became attractive to private equity, and patient shareholders were rewarded today.
Tenneco acquires Federal-Mogul and will split in two
Tenneco stock rose 4.1% after the global manufacturer announced that it is acquiring auto parts supplier Federal-Mogul for $5.4 billion from activist investor Carl Icahn, and will subsequently split into two public companies.
Tenneco will acquire Federal-Mogul from Icahn Enterprises L.P. through a combination of $800 million in cash, 29.5 million shares of Tenneco stock, and assumed debt. After the acquisition, the Clean Air product line of Tenneco, which took in $6.2 billion in revenue in 2017, will combine with the Powertrain business of Federal-Mogul, which had revenue of $4.5 billion last year, to create a powertrain technology company. Tenneco's $3.1 billion Ride Performance business will combine with Federal-Mogul's $3.3 billion Motorparts business to create an aftermarket auto parts company, with brands such as Monroe, Walker, Wagner, and Champion.
"This is a landmark day for Tenneco with an acquisition that will transform the company by creating two strong leading global companies, each in an excellent position to capture opportunities unique to their respective markets," said Tenneco CEO Brian Kesseler in the press release. "Federal-Mogul brings strong brands, products and capabilities that are complementary to Tenneco's portfolio and in line with our successful growth strategies."
Announcing a merger and a split all at once allowed the company to spin the move as simultaneously an opportunity to "unlock significant shareholder value" and a chance to save $200 million in annual "earnings synergies" and $250 million in "working capital synergies," ostensibly achieving the benefits of both merging and splitting without any of the downsides of either. Shareholders bought it, though, and the fact that Icahn is maintaining an equity position in the two companies going forward is a strong endorsement of the deal.