SPOTLIGHT: BIGS GETTING BIGGER

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Each week, we report instances where the money junky hedge funds, private equity groups and the already big companies swallow another piece of the global economy.

Here are some more of what the BIGS have been gobbling up and how the Bigs keep getting bigger and the rich keep getting richer. It should be noted that when interest rates in the U.S. were floating at near zero, merger and acquisition hit an all-time high in 2021.

Now with rates rising, M&A activity is slowing down. And most importantly, a lot of these acquisitions were made with the belief of rising economic growth.

Also, as economies go down and interest rates rise, the debt burden from these M&A’s will grow heavier, crashing many of them into bankruptcy and default on debt.

AMAZON TAKES OVER ONE MEDICAL 

Amazon will buy One Medical for $18 a share, a premium more than 75 percent above One Medical’s closing share price on 24 July. 

The deal, which includes debt, is valued at about $3.9 billion.

One Medical is based on a subscription model, with subscribers paying a monthly fee to have access to physicians and other services.

It operates 180 medical offices in 25 U.S. metro areas and works with 8,000 other firms to provide a range of services and benefits. The company moved aggressively into telemedicine during the COVID War.

However, the business lost momentum and shares were trading last month below their initial offering price.

The purchase continues Amazon’s push into the $4-trillion U.S. health care industry.

Amazon opened a discount online pharmacy in 2020, two years after it paid $1 billion to buy PillPack, a mail-order prescription delivery service.

The new deal could face opposition from Lina Khan, chair of the Federal Trade Commission, who has been openly critical of economic power concentrated in a few mega-scale tech companies.

Jonathan Kanter, antitrust chief at the U.S. justice department, also has said it is crucial to rein in the power of giant tech firms to dominate markets.

JETBLUE BUYS TROUBLED SPIRIT AIRLINES FOR $3.8 BILLION

After months of bids and counterbids against Frontier Airlines, JetBlue Airways has agreed to pay $33.50 a share to take over Spirit Airlines to create the fifth largest U.S. passenger air carrier.

The deal values Spirit at $3.8 billion.

Spirit’s share price rose 5.6 percent on the news while JetBlue’s was unchanged. Frontier shares leaped up 20.5 percent after it bowed out of the contest.

Spirit canceled 2,800 flights between July and August last year due to staffing shortages and technical glitches. With American, it was one of two U.S. air carriers that have received the most complaints from customers, according to the Federal Aviation Administration.

Buying Spirit will expand JetBlue’s presence in Florida, Puerto Rico, and Los Angeles as well as at hub airports in Atlanta, Chicago, Dallas, Detroit, Houston, Miami, and Las Vegas.

Frontier and Spirit had reached an agreement earlier, then JetBlue jumped in with a competing offer.

The two carriers had been toying with the idea of a merger for years.

JetBlue’s guerilla offer sparked acrimony, particularly from Spirit, which defended its tentative deal with Frontier. In response, JetBlue accused Spirit’s management of not looking after shareholders’ best financial interests.

The prickly partners will seek regulatory approval early next year and expect to close the deal early in 2024, they said in a joint statement.

There may be turbulence along the way: regulators have said the U.S. airline industry is too concentrated and have sued JetBlue and American Airlines over the pair’s partnership at terminals in Boston and New York.

“The merger will be a case of the winner’s curse,” business professor Erik Gordon at the University of Michigan, said to The Wall Street Journal.

“JetBlue will face years of nightmares trying to integrate aircraft, systems, and cultures that are from different planets,” he predicted.

When American Airlines subsumed U.S. Airways a decade ago, negotiating contracts for different groups represented by the Transport Workers Union of America took four years, Gary Peterson, who leads the union’s air division, told the WSJ.

“Combining work groups is like combining the Mets and the Yankees into a single organization,” he said.

If the deal does get done, it may inspire smaller and regional carriers to merge to stay competitive, Helane Becker, senior analyst at investment bank Cowen, said to the WSJ.

2 Comments
  1. M2M 6 days ago

    This will be an interesting scenario to watch unfold.

  2. Craig Bradley 4 days ago

    THE BIG SQUEEZE

    “Electrification will play a crucial role in decarbonizing homes, but the transition will happen slowly as long as inexpensive fossil fuels are widely available,” says Lyla Fadali, an ACEEE senior researcher.

    Targeting manufacturing changes can also trickle down to consumers.
    “Rather than focusing on whether or not a consumer will buy into the product at this point, what we’re seeing is that the consumers’ hand is sort of going to be pushed over a certain amount of time because so many manufacturers and producers are incentivized to build more solar, more EVs and so on,” said Shannon Christensen, an attorney and a tax and accounting specialist editor

    Remember the Medallion or “All Electric Homes” built in the late 1960’s. All of a sudden, they went away during the seventies. Silly (giddy) ideas are a dime-a-dozen during cyclical bull market peaks and just before the onset of long bear stock markets and economic stagnation. So, here we are again right back where we started from. So, yes, history repeats on account of unchanging human nature.

    https://www.marketwatch.com/story/heres-how-the-inflation-reduction-acts-rebates-and-tax-credits-for-heat-pumps-and-solar-can-lower-your-energy-bill-11659901660?itm_source=parsely-api&mod=mw_pushly&send_date=20220808

    The Democrats plan on forcing homeowners and property owners to convert to all-electric homes/multifamily in the coming years and this landmark law guarantees decarbonization sticks and grows the trend from here. Local area governments, many in Blue States and cities, will carry the ball rather than just the Federal government. So, a Republican president won’t be able to stop it near as easily as Joe Biden started it, if at all. We are likely to bet the farm or our collective future that we can electrify everything and not come up way short on energy for basic essentials.

    How do you spell Brown-outs?. So, the private sector solution will undoubtedly be back-up home generators using fossil fuels such as gas or propane for those property owners who can afford it. Everyone else (the masses) can go dark or just get their Coleman lanterns out if they have one.

    Funding by the Federal government in this new “Anti-Inflation” Act is mostly targeting lower income households. However, funding for large commercial property owners and homeowners at the state and municipal levels will be through loans from the State or through private entities via public/private partnerships. For now, its not in this Bill, as far as I know. ( Not going to read it to find out what’s in it exactly ). Thus in ten years or so, virtually all will be REQUIRED to convert their properties to all- electric formats and appliances, at great expense. So, anyone with an older property (most) will probably eventually be required to meet new building codes for decarbonization.

    If it sounds like one big scheme, then you got it. By requiring all to take on debt (out of necessity) to meet the law and coming new local building codes, some won’t be able to pay it back and may lose their homes or rental properties to the government +/or private lenders. ( This is outright theft by the Bigs). In-addition, this is going to greatly favor the largest corporations who are currently buying-up single family dwellings such as Private Equity, Blackrock ($10 Trillion strong) or Invitation Homes. Obviously, this enables the biggest property owners to monopolize at the expense of the little guy and individual owners. ” The Big Squeeze” is already going-on in parts of SoCAL, as a matter-of-fact.

    This is COMMUNISM or Oligarchy and its being sold to the proles and the shepple as “saving the planet” or “climate change” Boy are we stupid. Never underestimate the stupidity of the American voters. Eventually, they will take everything you have if given enough time. Time again is the critical variable or component in any forecast and is of course, unknowable. This emerging trend (de-carbonizing or electrification) has already started and is quite obvious, to a minority of informed Americans and of course, the insiders who will be directly profiting.

    “You will own nothing and you will be happy”: Klaus Schwab, World Affairs Forum.

    Better Wake-Up and Connect the Dots folks, IF you possibly can.

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