Category: Bottom Line

Bottom Line

In new SEC filing, Humana warns investors about DOJ suit and possible ‘abandonment’ of $37B merger

The Louisville-based health insurer added new language to the “Risk Factors” section of its quarterly 10-Q report filled today with the Securities and Exchange Commission, about the Department of Justice’s lawsuit last month blocking Humana’s $37 billion merger with Aetna of Hartford. Here’s what the new section says.

Humana and Aetna logos 250On July 21, the DOJ filed a civil antitrust complaint (which we refer to as the DOJ action) against us and Aetna in the U.S. District Court for the District of Columbia, charging that the merger would violate Section 7 of the Clayton Antitrust Act and seeking a permanent injunction that would prevent the Merger. The filing of the DOJ action is delaying, and, if we and Aetna are unsuccessful in defending against or settling the DOJ action, could ultimately prevent, the consummation of the merger. There can be no assurance that we will be successful in defending against or settling the DOJ action or that the merger will be consummated by any particular time, if at all.

In addition, even if we and Aetna enter into a settlement with respect to the DOJ action, there can be no assurance that we and/or Aetna will not be required to agree to terms, conditions, requirements, limitations, costs or restrictions that could further delay completion of the merger, impose additional material costs on or limit the revenues of the combined company, or limit some of the synergies and other benefits we presently anticipate to realize following the merger. We cannot provide any assurance that any such terms, conditions, requirements, limitations, costs or restrictions will not result in a material delay in, or the abandonment of, the merger.

Bottom Line

Documents reveal the enormous cost of spinning off Yum’s China Division
KFC Shanghai
A KFC in Shanghai, where Yums’s China Division is based.

Last fall, Yum announced plans to turn the huge China Division into a standalone company, a mammoth undertaking the Louisville fast-food giant plans to complete by Oct. 31 — despite recent reports of stalled talks with two big investors.

Expenses for investment banking, legal, and other spin-related services are enormous, according to Securities and Exchange Commission documents. Yum disclosed initial expenses of $9 million in the annual report last February. They’ve mushroomed ever since, according to the most recent quarterly report:

$10 million

spent in the second quarter alone

$28 million

since the spinoff was announced in October

$58 million

projected total cost by Oct. 31

What’s at stake?
Greg Creed
Creed

Much of Yum’s future. Based in Shanghai, the China Division has 7,200 restaurants, mostly company-owned KFCs and Pizza Huts. Last year, they accounted for 61% of Yum’s $11.1 billion in revenue and 39% of $1.9 billion in profits. Overall, Yum has 43,000 restaurants. (About Yum.)

Yum CEO Greg Creed and the board of directors agreed in October to separate the China business under pressure from activist investors, including Corvex Management Founder Keith Meister, who gained a seat on the board as part of the deal. They think the sum of the parts is greater than the whole.

Yum’s risky China bet

The company has regularly warned investors about Continue reading “Documents reveal the enormous cost of spinning off Yum’s China Division” →

Bottom Line

Brown-Forman and other publicly traded companies file an annual report with the Securities and Exchange Commission that includes reams of facts, figures and other information. An essential section describes the business itself. This morning, the company filed its latest report; here’s the passage, slightly edited:

Garvin Brown IV
Chairman Brown.

“Brown-Forman Corp. was incorporated under the laws of the State of Delaware in 1933, successor to a business founded in 1870 as a partnership and later incorporated under the laws of the Commonwealth of Kentucky in 1901. We primarily manufacture, bottle, import, export, market, and sell a wide variety of alcoholic beverages under recognized brands. We employ over 4,600 people on six continents, including about 1,300 people in Louisville, home of our world headquarters. We are the largest American-owned spirits and wine company with global reach. We are a ‘controlled company’ under New York Stock Exchange rules, and the Brown family owns a majority of our voting stock.”

The company also published a summary of its brands:

Old Forester“Beginning in 1870 with Old Forester Bourbon Whisky — our founding brand — and spanning the generations since, we have built a portfolio of more than 40 spirit, wine, and ready-to-drink cocktail brands that includes some of the best-known and most-loved trademarks in our industry. The most important brand in our portfolio is Jack Daniel’s Tennessee Whiskey, which is the fourth-largest spirits brand of any kind and the largest American whiskey brand in the world, according to Impact Databank’s ‘Top 100 Premium Spirits Brands Worldwide’ list.”

Related: Fresh details emerge about the Brown family’s multibillion-dollar stake in the company now led by Chairman George Garvin Brown IV.

Bottom Line

Oh, boy! We invite you to read this 13,000-word document Kindred just filed with federal stock regulators
Kindred building detail
Kindred headquarters at Fourth and Broadway.

Kindred has reached a deal with lenders handing the hospital and nursing home giant more flexibility over entering into joint ventures, plus provides an additional $200 million in credit.

At least, that’s what we think today’s filing with the Securities and Exchange Commission means, because we haven’t slogged through the full 13,000-word filing; the 8-K material events notice was filed an hour ago.

Bottom Line

From Kindred, ‘fungible’ is our word for the day, and we’ll now use it in many conversations
Kindred headquarters
Company headquarters at Fourth and Broadway.

The healthcare giant just issued the following press release:

Kindred announced today it completed syndication and pricing of an incremental $200-million term loan, the proceeds of which will be used to repay outstanding borrowings under the company’s existing $900-million senior secured asset-based revolving credit facility (the “ABL Facility”). This borrowing will have the same terms as, and will be fungible with, the outstanding $1.18 billion of term loans under Kindred’s existing senior secured term loan credit facility (the “Term Loan Facility”). The incremental term loan will be issued at 99.05% of par.

In connection with the incremental term loan, the company also received consent from the required lenders under the Term Loan Facility and the ABL Facility to amend various provisions of those credit facilities, including to allow for a broader range of joint venture activity, increase the company’s financial flexibility and make other changes to better align the terms of these borrowings with Kindred’s strategic plan.

Kindred has retained J.P. Morgan Securities to act as sole lead arranger and sole bookrunner for the incremental term loan. JPMorgan Chase Bank is the administrative agent and collateral agent for the Term Loan Facility, under which the incremental term loan will be borrowed.

Related: investor relations, where you’ll find more press releases, plus SEC documents.

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