|Bid||0.00 x 27000|
|Ask||0.00 x 41800|
|Day's Range||6.38 - 6.70|
|52 Week Range||5.48 - 13.26|
|Beta (5Y Monthly)||0.90|
|PE Ratio (TTM)||N/A|
|Earnings Date||Oct. 28, 2020|
|Forward Dividend & Yield||0.04 (0.63%)|
|Ex-Dividend Date||Jun. 26, 2020|
|1y Target Est||7.70|
(Bloomberg Opinion) -- The latest round of the SoftBank Group Corp. fire sale looks set to be a much-needed success for Chairman Masayoshi Son. But it’s not a validation of his strategy.Britain’s Aveva Group Plc. is in advanced talks to acquire OSIsoft LLC, an industrial software-maker backed by SoftBank, Bloomberg News reported on Friday. The deal would be a win for Son, whose strategy of writing big checks to invest in technology companies through his Vision Fund venture capital arm has faced mounting criticism, not least from activist investor Elliott Management Corp. The fund lost SoftBank almost $18 billion last year, whereas Elliott’s efforts to refocus attention on SoftBank’s other investments have prompted a recovery in the share price.OSIsoft is a bright spot. Son paid a little under $1 billion for a 45% stake in 2017. He’ll secure a 150% return on that investment if Aveva pays the reported $5 billion — pretty decent going.But that success also highlights the failings of so many other bets. When the Vision Fund poured billions of dollars into the likes of WeWork and Uber Technologies Inc., the aim was to give the start-ups a war chest they could use to undercut the competition on price. That would then squeeze out competitors, allowing them to raise prices and finally make a profit. So far, the vision has failed to pay off: Uber and WeWork alone accounted for write-downs of $9.8 billion for the fund last year. The OSIsoft investment was different. SoftBank did not inject any new capital into the business, but instead bought the stake from existing investors. While that gave J. Patrick Kennedy, OSIsoft’s founder and chief executive officer, cover to reinvest profits in growth, it didn’t make the California-based company a bully boy with the funds to push others out of business. Such a strategy would have been unwise: Competitors include the likes of General Electric Co., Siemens AG and Robert Bosch GmbH — industrial giants with pockets deep enough to compete in a price war.It was a classic late-stage venture bet on a company with good technology in a fast-growing niche — in this case, the collection and analysis of data from industrial machinery.For Aveva, acquiring OSIsoft is likely to require some inventive financing. The Cambridge-based company, which has an enterprise value of 7.4 billion pounds ($9.6 billion), can’t fund a deal from its current balance sheet, with just 114 million pounds of cash.Based on optimistic assumptions about the firms’ combined earnings, Aveva is also unlikely to raise more than 1 billion pounds in debt, since enterprise software companies can typically sustain debt representing only about double their Ebitda, an earnings measure. To fund the rest of the proposed $5 billion deal, Aveva can either offer stock, sell new equity or both.Schneider Electric SE, the French industrial company that owns 60% of Aveva, probably won’t want to dilute its stake, since software is a key leg of its growth strategy. That makes offering OSIsoft’s owners stock in the new company, which would entail such a dilution, less likely than a capital increase in which Schneider could buy some of the new shares.Were Aveva to seek 3.5 billion pounds by offering new equity, Schneider could readily participate: It has both 5 billion euros ($5.9 billion) of cash and headroom to raise more debt of its own. And Aveva could still offer a small slice of equity to OSIsoft’s Kennedy to keep him personally invested in the combined firm.There’s a risk that Son will point to investments such as OSIsoft as evidence of the Vision Fund’s merits, particularly if he resurrects efforts to raise a follow-up to the $100 billion fund. Investors would do well to remember that savvy technology bets can be more lucrative than trying to price out the competition.This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.Alex Webb is a Bloomberg Opinion columnist covering Europe's technology, media and communications industries. He previously covered Apple and other technology companies for Bloomberg News in San Francisco.For more articles like this, please visit us at bloomberg.com/opinionSubscribe now to stay ahead with the most trusted business news source.©2020 Bloomberg L.P.
(Bloomberg Opinion) -- The aerospace sector is headed for “a slow, multi-year recovery,” General Electric Co. Chief Executive Officer Larry Culp warned on last month’s second-quarter earnings call. There’s nothing unique about that view: Boeing Co. has said it will take about three years for air-travel demand to recover to 2019 levels; Raytheon Technologies Corp. is targeting 2023; and the International Air Transport Association recently pushed back its timeline for a recovery to 2024.The slump is particularly painful for GE, though. Unlike many of its rivals in the market for airplane production, it was already in the middle of a multi-year turnaround before the pandemic hit. The news that influential shareholder Trian Fund Management — led by Nelson Peltz — is trimming its position in the industrial giant should be viewed in that context.Trian cut its stake in GE by 46% during the last week to just over 32 million shares, according to regulatory filings. The sale was for “portfolio management purposes, including to provide for new positions,” Trian said in an emailed statement. Even with the divestiture, the fund remains relatively high up on GE’s shareholder register and chief investment officer Ed Garden will continue to serve on GE’s board. So Trian is hardly abandoning the investment, nor has it given up hope of a recovery. “Trian is highly supportive of GE CEO Larry Culp and his team’s restructuring efforts and focus on creating long term value,” the fund said. Still, it’s a tough time to be selling.GE shares are down more than 40% this year, compared with a nearly 4% gain for the S&P 500 Index. Trian’s average price for the sales was just over $6, a nearly 75% discount to the mid-$20 range where GE was trading during the month leading up to the fund’s October 2015 announcement of its investment.Back then, Trian argued the market wasn’t appreciating the “bold steps” that former CEO Jeff Immelt had taken to reshape the company and touted the “defensive growth” profile. By improving operating margins and adding $20 billion of debt to help fund share buybacks, the stock could trade for $40 to $45, Trian argued. It never came close.GE has since been bogged down by tens of billions in writedowns, with the brunt tied to a steep funding shortfall in its long-term care insurance business and an ill-timed acquisition of Alstom SA’s power business that increased the company’s position in the gas turbine market just as demand began to rapidly deteriorate. Immelt’s replacement, John Flannery, was pushed out and Culp took his place in late 2018. Buybacks are out of the question, with the company having instead spent the past few years doing everything it can to reduce a debt load that became untenable as the power business burned through cash.Culp was just starting to show progress on a turnaround of the embattled power unit when the pandemic arrived, with the high-margin and cash-flow generating pharmaceutical diagnostics and aviation units getting crushed the hardest. The company has recorded a cash outflow of more than $4 billion so far in 2020 and Culp was hesitant to give a firm commitment to a positive number for the second half of the year, which is typically when GE makes most of its money. Will GE survive the crisis? Yes, and it’s to Culp’s credit that’s the case. He has aggressively cut costs, accelerated asset sales and generally done a much better job fixing this massive enterprise than critics like myself thought was possible when he started. But what will the company look like on the other side of this?Siemens Healthineers AG’s announcement of a $16 billion purchase of cancer radiotherapy company Varian Medical Systems Inc. earlier this week speaks to the risk of missed opportunities. The Varian deal is pricey and risky with hospitals cutting their budgets to adapt to the pandemic. But the combination of Siemens Healthineers’ diagnostics expertise and Varian's treatment technology is strategically intriguing over the long haul and the takeover could end up being opportunistic. In a different world, this deal might have been GE’s to lose. After all, the CEO of Varian is a former GE Healthcare executive. As it is, the company is effectively side-lined from any kind of major M&A for the foreseeable future.Culp likes to talk about getting GE to a place where it can “play offense.” But the timeline for doing that has been pushed out indeterminately by the pandemic. In the meantime, there are more attractive places that both Trian and other investors can put their money. This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.Brooke Sutherland is a Bloomberg Opinion columnist covering deals and industrial companies. She previously wrote an M&A column for Bloomberg News.For more articles like this, please visit us at bloomberg.com/opinionSubscribe now to stay ahead with the most trusted business news source.©2020 Bloomberg L.P.
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