BorgWarner to Acquire Delphi Technologies in All-Stock Transaction to Strengthen Propulsion Systems Leadership

BorgWarner ($BWA) is to acquire Delphi Technologies ($DLPH) to strengthen its propulsion systems leadership.

The all-stock transaction happens at a time, when both companies are trading at low multiples. $DLPH is up ~60%, whereas $BWA is down ~7%.

Below is a summary of the segments of the two S&P500 companies and some of the powertrain manufacturers of the auto parts industry.

Aptiv ($APTV) spun off their Powertrain Systems segment into Delphi Technologies ($DLPH) in 2017. Tenneco ($TEN) acquired Federal-Mogul ($FDML) in 2018.

BWA and DLPH revenue.
Powertrain revenue.
Operating margin.
Quarterly revenue.
Trailing twelve months (TTM) revenue.
Weighted average diluted shares outstanding on an annual basis.
Weighted average diluted shares outstanding on a quarterly basis.
Time series of enterprise value over operating income.
Time series of price-to-sales ratio.

Reuters – BorgWarner to buy Delphi Technologies in $3.3 billion auto parts deal

Bloomberg – BorgWarner to Buy Delphi for $1.5 Billion in Auto-Parts Deal

Bloomberg 2020-01-28 – BorgWarner Is in Talks to Acquire Delphi

$DLPH 8K. $BWA 8K.

Pharmaceuticals S&P500

Mylan/Viatris and Teva at the 38th Annual J.P. Morgan Healthcare Conference

Mylan presented on Viatris at the 38th Annual J.P. Morgan Healthcare Conference. Below are selected slides from the presentations of Mylan and Teva at the conference and figures comparing the existing business entities prior to the merger with Upjohn.

Teva has closed many manufacturing sites, but still have more than Viatris; ~60 and ~50 respectively.

Viatris Synergy Cost Savings

The cost synergies between Mylan and Upjohn are expected to be approximately $1B, whereas Teva has already realized annual cost savings of $3B as part of their restructuring plan.

Teva Restructuring Plan Cost Savings

Whereas Viatris will be paying a dividend from day one (25% of free cash flow), Teva does not currently pay a dividend. This cash flow is spent almost entirely on reduction of debt.

It is not impossible to imagine an expansion of multiples at Teva and Viatris, if legal headwinds disappear.

Enterprise value to EBITDA for Mylan and Teva
Closing price and EBITDA for Mylan
Closing price and EBITDA for Teva

Teva and Upjohn have lost revenue in part because of generic competition to Copaxone® and Lyrica®, respectively.

Gross profit
Teva gross profit
Mylan gross profit

Teva is the only company that have lowered their SG&A significantly as part of their $3B restructuring plan as a response to the falling generic drug prices in the US.

SG&A as a percentage of revenue

The lowered SG&A translates to stabilized operating income.

Operating income

Future growth seems like a possibility for both companies.

2019-11-25 Bloomberg – Teva, Drugmakers in Talks With U.S. to End Generics Probes

2019-11-12 Mylan and Pfizer Announce Viatris as the New Company Name in the Planned Mylan-Upjohn Combination

2019-11-07 Bloomberg – Teva Profit Outlook Edges Up With Cost-Cutting Plan on Track

2019-07-29 Mylan and Upjohn, a Division of Pfizer, to Combine, Creating a New Champion for Global Health Uniquely Positioned to Fulfill the World’s Need for Medicine


European earnings calendar

The earnings season in the US has kicked off with earnings from the banks JP Morgan ($JPM) and Wells Fargo ($WFC). Below are the earnings date for selected European and Nordic publicly listed companies. The companies are mostly constituents of the indices EURO STOXX 50®, STOXX® Europe 50 and OMX Nordic 40.

Chr. Hansen Holding A/SCHR.CO2020-01-15Specialty Chemicals
Sandvik ABSAND.ST2020-01-21Specialty Industrial Machinery
ASML Holding N.V.ASML.AS2020-01-22Semiconductor
Tryg A/STRYG.CO2020-01-22Insurance—Diversified
KONE OyjKNEBV.HE2020-01-28Specialty Industrial Machinery
LVMHMC.PA2020-01-28Luxury Goods
Koninklijke Philips N.V.PHIA.AS2020-01-28Diagnostics & Research
SAP SESAP.DE2020-01-28Software—Application
Novartis AGNOVN.SW2020-01-29Drug Manufacturers
Banco Santander, S.A.SAN.MC2020-01-29Banks—Diversified
Telia Company AB (publ)TELIA.ST2020-01-29Telecom Services
Diageo plcDGE.L2020-01-30Beverages—Wineries & Distilleries
Orsted A/SORSTED.CO2020-01-30Utilities—Renewable
The Unilever GroupULVR.L2020-01-30Household & Personal Products
The Unilever GroupUNA.AS2020-01-30Household & Personal Products
UPM-Kymmene OyjUPM.HE2020-01-30Paper & Paper Products
BBVA, S.A.BBVA.MC2020-01-31Banks—Diversified
Demant A/SDEMANT.CO2020-02-04Medical Instruments & Supplies
Intesa Sanpaolo S.p.A.ISP.MI2020-02-04Banks—Regional
Pandora A/SPNDORA.CO2020-02-04Luxury Goods
ABB LtdABBN.SW2020-02-05Specialty Industrial Machinery
BNP Paribas SABNP.PA2020-02-05Banks—Regional
Danske Bank A/SDANSKE.CO2020-02-05Banks—Regional
VINCI SADG.PA2020-02-05Engineering & Construction
GN Store Nord A/SGN.CO2020-02-05Medical Devices
GlaxoSmithKline plcGSK.L2020-02-05Drug Manufacturers
Siemens AGSIE.DE2020-02-05Specialty Industrial Machinery
SimCorp A/SSIM.CO2020-02-05Software—Application
Vestas Wind Systems A/SVWS.CO2020-02-05Specialty Industrial Machinery
Vodafone Group PlcVOD.L2020-02-05Telecom Services
Enel SpAENEL.MI2020-02-06Utilities—Diversified
Fortum OyjFORTUM.HE2020-02-06Utilities—Renewable
TOTAL S.A.FP.PA2020-02-06Oil & Gas Integrated
Societe Generale SAGLE.PA2020-02-06Banks—Regional
ING Groep N.V.INGA.AS2020-02-06Banks—Diversified
H. Lundbeck A/SLUN.CO2020-02-06Drug Manufacturers
Nokia CorporationNOKIA.HE2020-02-06Communication Equipment
L'Oreal S.A.OR.PA2020-02-06Household & Personal Products
Sampo OyjSAMPO.HE2020-02-06Insurance—Diversified
SanofiSAN.PA2020-02-06Drug Manufacturers
DSV Panalpina A/SDSV.CO2020-02-07Integrated Freight & Logistics
Neste OyjNESTE.HE2020-02-07Oil & Gas Refining & Marketing
Eni S.p.A.ENI.MI2020-02-10Oil & Gas Integrated
L'Air Liquide S.A.AI.PA2020-02-11Chemicals
Amadeus IT Group, S.A.AMS.MC2020-02-11Information Technology Services
Daimler AGDAI.DE2020-02-11Auto Manufacturers
FLSmidth & Co. A/SFLS.CO2020-02-11Specialty Industrial Machinery
Koninklijke Ahold Delhaize N.V.AD.AS2020-02-12Grocery Stores
Swedish Match AB (publ)SWMA.ST2020-02-12Tobacco
Airbus SEAIR.PA2020-02-13Aerospace & Defense
Boliden AB (publ)BOL.ST2020-02-13Other Industrial Metals & Mining
Nestle S.A.NESN.SW2020-02-13Packaged Foods
Orange S.A.ORA.PA2020-02-13Telecom Services
RELX PLCREL.L2020-02-13Publishing
Vivendi SAVIV.PA2020-02-13Broadcasting
Zurich Insurance Group AGZURN.SW2020-02-13Insurance—Diversified
AstraZeneca PLCAZN.L2020-02-14Drug Manufacturers
HSBC Holdings plcHSBA.L2020-02-17Banks—Diversified
Deutsche Telekom AGDTE.DE2020-02-19Telecom Services
Genmab A/SGMAB.CO2020-02-19Biotechnology
AXA SACS.PA2020-02-20Insurance—Diversified
Fresenius SE & Co. KGaAFRE.DE2020-02-20Medical Care Facilities
Schneider Electric S.E.SU.PA2020-02-20Specialty Industrial Machinery
Telefonica, S.A.TEF.MC2020-02-20Telecom Services
Lloyds Banking Group plcLLOY.L2020-02-20Banks—Regional
Allianz SEALV.DE2020-02-21Insurance—Diversified
Jyske Bank A/SJYSK.CO2020-02-25Banks—Regional
Danone S.A.BN.PA2020-02-26Packaged Foods
ENGIE SAENGI.PA2020-02-26Utilities—Diversified
Iberdrola, S.A.IBE.MC2020-02-26Utilities—Diversified
ISS A/SISS.CO2020-02-26Specialty Business Services
Rio Tinto GroupRIO.L2020-02-26Other Industrial Metals & Mining
Anheuser-Busch InBev SA/NVABI.BR2020-02-27Beverages—Brewers
British American Tobacco p.l.c.BATS.L2020-02-27Tobacco
Bayer AGBAYN.DE2020-02-27Drug Manufacturers
Safran SASAF.PA2020-02-27Aerospace & Defense
Saint-Gobain S.A.SGO.PA2020-02-27Building Products & Equipment
BASF SEBAS.DE2020-02-28Chemicals
Munchener Ruckversicherung AGMUV2.DE2020-02-28Insurance—Reinsurance
EssilorLuxottica SAEL.PA2020-03-06Medical Instruments & Supplies
Deutsche Post AGDPW.DE2020-03-10Integrated Freight & Logistics
Royal Unibrew A/SRBREW.CO2020-03-10Beverages—Brewers
adidas AGADS.DE2020-03-11Footwear & Accessories
Prudential plcPRU.L2020-03-11Insurance—Life
Volkswagen AGVOW3.DE2020-03-17Auto Manufacturers
Inditex, S.A.ITX.MC2020-03-18Apparel Retail
E.ON SEEOAN.DE2020-03-25Utilities—Diversified

Constellation Brands raises forecast and takes further Canopy impairment charges

Constellation Brands issued a press release on its third quarter earnings before the opening bell with the following highlights.

  • Generates reported basis EPS of $1.85 and comparable basis EPS of $2.14, including Canopy Growth equity losses of $0.25; excluding Canopy Growth equity losses, achieved comparable basis EPS of $2.39
  • Generates $2.1 billion of operating cash flow and $1.5 billion of free cash flow, an increase of 5% and 14%, respectively
  • Increases fiscal 2020 reported basis EPS outlook to $0.95 – $1.05; increases comparable basis EPS outlook to $9.45 – $9.55
  • Increases fiscal 2020 operating cash flow target to approximately $2.3 billion and free cash flow projection to $1.5 – $1.6 billion
  • Agrees to revise original Wine & Spirits agreement with Gallo in connection with Federal Trade Commission review; expected to close by the end of fiscal 2020
  • In a separate, but related, transaction, agrees to divest Nobilo Wine brand to Gallo for $130 million; expected to close in first half fiscal 2021
  • Signs agreement with Kings & Convicts Brewing to divest the Ballast Point brand and certain related facilities; expected to close by the end of fiscal 2020
  • Promotes Garth Hankinson to Constellation’s CFO replacing David Klein who will assume the Canopy Growth CEO role

Volume, net sales, operating income and margins for wines and spirits (W&S) was down YoY for the quarter.

 Vol (%)Sales (%)Income (%)
Figures for the trailing twelve months (TTM) for shipment volume, net sales, operating income and operating margin.

The poor performance in terms of EPS was attributable to further impairment losses of $534 million related to Canopy Growth.


Given the headwinds caused by Canopy Growth it might be a while before Constellation Brands once more trades at its all time high of $234.22 from April 2018 despite some of the best operating margins in the industry.

Time series of enterprise value relative to EBITDA for selected breweries.
Operating margin time series for selected breweries.
Revenue time series for selected breweries.

Reuters – Constellation raises profit forecast after beer-driven quarter

Bloomberg – Constellation Brands Jumps After Boosting Profit Forecast