The stock market continued to rise to start the week ahead of a highly anticipated Tuesday meeting between President Trump and North Korean leader Kim Jong Un. Even after paring their gains late in the day, both the Dow Jones Industrial Average (DJINDICES:^DJI) and the S&P 500 (SNPINDEX:^GSPC) closed just in the green when all was said and done Monday.
Today's stock market
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Retail stocks set the pace today, with the SPDR S&P Retail ETF (NYSEMKT:XRT) up 1.1%. Oil stocks also rose on higher oil prices amid supply disruptions from Iran and Venezuela; the SPDR S&P Oil & Gas Exploration and Production EFT (NYSEMKT:XOP) jumped 0.7%.
Positive disruption for Sempra Energy?
Shares of Sempra Energy gained 15.5% today after activist investor funds Elliott Management and Bluescape Resources -- which collectively own a 4.9% stake in the utility company worth roughly $1.3 billion -- released a letter and presentation to Sempra's board of directors arguing that the company has a "readily achievable value creation opportunity" worth between $11 billion and $16 billion. That would mean shares could be worth $139 to $158 each, or a premium of 38% to 57% from Friday's close.
Elliott and Bluescape believe that Sempra's "focus on sheer size" has created an unfavorable structure with "disparate businesses [...] grouped together with no compelling strategic or financial rationale," which in turn led to the stock's meaningful underperformance. For perspective, Sempra stock had fallen around 12% over the past year as of Friday's close, badly lagging the S&P 500's nearly 15% gain over the same period.
As such, the activist investors have proposed the formation of a "strategic review committee" to conduct a full portfolio and operational review, as well as six new directors to join Sempra's board. They further believe that such a review could be completed by the end of 2018. Considering their previous successes working to create value for shareholders at NRG Energy and FirstEnergy, it's no surprise to see Sempra Energy stock up today in response.
A bid for Boston Scientific
Boston Scientific stock rose 7.4% today after The Wall Street Journal reported (subscription required) that the medical device specialist has received a takeover bid from rival Stryker Corporation (NYSE:SYK). Shares of Stryker simultaneously declined more than 5% on the news.
According to "people familiar with the matter," Stryker recently approached Boston Scientific with a buyout offer that would create a combined industry juggernaut worth over $110 billion (Boston Scientific, for its part, boasts a market capitalization of just over $47 billion as of this writing). But The Wall Street Journal also said it's "unclear whether Boston Scientific is receptive to the approach," cautioning that a deal "is far from guaranteed."
And even then, a takeover of this size would also need to tackle significant regulatory and antitrust hurdles. But the resulting cost savings and competitive synergies could make pursuing the deal a compelling option for the shareholders involved.