Towers Watson, Big Lots, Kohlberg Kravis Roberts, KKR Financial Holdings and
Goldman Sachs Group highlighted as Zacks Bull and Bear of the Day
CHICAGO, Dec. 18, 2013
CHICAGO, Dec. 18, 2013 /PRNewswire/ --Zacks Equity Research highlights Towers
Watson (NYSE:TW-Free Report) as the Bull of the Day and Big Lots Inc.
(NYSE:BIG-Free Report) as the Bear of the Day. In addition, Zacks Equity
Research provides analysis onthe Kohlberg Kravis Roberts & Co. L.P.
(NYSE:KKR-Free Report), KKR Financial Holdings LLC (NYSE:KFN-Free Report) and
The Goldman Sachs Group, Inc. (NYSE:GS-Free Report).
Here is a synopsis of all five stocks:
Bull of the Day:
Towers Watson (NYSE:TW-Free Report) is primed to cash in on the expansion of
health care exchanges. This Zacks Rank #1 (Strong Buy) has been acquiring
companies to expand its exchange business, which was already expected to grow
by the double digits in fiscal 2014.
Towers Watson is a professional services consulting company that specializes
in the management of employee benefits, talent management, rewards and benefit
exchanges, aka the health care exchanges. It has 14,000 associates worldwide.
On Nov 22, Towers Watson announced it had acquired Liazon Corporation, a
privately-held developer of private benefit exchanges for active employees,
for $215 million. Liazon, which was founded in 2007, focused on companies with
100 to 10,000 employees, or the small to mid-sized company.
This fills a hole in Towers Watson exchanges business which had focused on
larger companies with more than 100,000 employees. Towers Watson expects
smaller companies to move to the exchange model faster than the larger
companies. It also gives Towers Watson a big entry into the active employee
exchange business, instead of the retirees business.
Liazon had 100,000 on its active exchanges. Towers Watson expects to have
40,000 in fiscal 2014. Its combined 140,000 customers already puts it as one
of the larger national players in the active exchange business.
Bear of the Day:
What's wrong with Big Lots Inc. (NYSE:BIG-Free Report)? Once the darling of
Wall Street, this closeout retailer is a Zacks Rank #5 (Strong Sell) as
earnings are expected to fall 22.7% this year as same store sales decline.
Big Lots operates 1,526 Big Lots stores in the United States, 5 Big Lots
stores in Canada and 73 Liquidation World and LW stores in Canada.
On Dec 5, Big Lots reported its third quarter fiscal 2013 results and
announced it would close its Canadian operations by the first quarter of
fiscal 2014. It acquired the Canadian operations in July 2011 but it could not
turn around the business. The Canadian operations remained unprofitable.
Closing up Canada would allow Big Lots to focus on its U.S. stores. Those
stores are also struggling.
In the third quarter, same store sales at U.S. stores fell 2.5%. The company
expects fourth quarter same store sales to decline in the low to mid-single
For the year, total U.S. sales are expected to decline 6% to 8%.
Inventories also rose in the third quarter to $1.24 billion from $1.19 billion
a year ago. The rise was due to more U.S. stores and a 2% increase in
inventory per store in the U.S. Rising inventories are usually not a good sign
for a retailer.
KKR to Buy Financial Wing for $2.6B
In line with its acquisition strategy, private equity firm Kohlberg Kravis
Roberts & Co. L.P. (NYSE:KKR-Free Report) announced a deal to acquire KKR
Financial Holdings LLC (NYSE:KFN-Free Report) in an all-stock deal worth $2.6
billion. KKR Financial is currently managed by a subsidiary of KKR Asset
Management, a subsidiary of Kohlberg Kravis.
According to the deal, shareholders of KKR Financial will receive 0.51 common
units of Kohlberg Kravis for every common share of KKR Financial that they
hold. The exchange ratio represents $12.79 per share of Kohlberg Kravis,
reflecting a significant premium of 35% per share of KKR Financial, based on
closing price of both the stocks as of Dec 16.
After the acquisition, KKR Financial will operate as a subsidiary of Kohlberg
Kravis. However, Kohlberg Kravis will not alter KKR Financial's funding
The purchase will be funded from a proposed new issue of 100 million shares.
The deal, which is subject to a vote by shareholders of KKR Financial, is
expected to close by the first half of 2014.
Based in San Francisco, KKR Financial was founded in 2004 as a mortgage real
estate investment trust (REIT) but later turned into an investor in corporate
debt after being hit by the sub-prime mortgage crisis in 2007. Being a
specialty finance company, it operates a wide range of asset portfolios and
primarily invests in financial assets including private and public equity
investments, high yield bonds and distressed securities.
According to Kohlberg Kravis, upon closure the deal is expected to pave the
way for a 2% accretion on Kohlberg Kravis' total distribution per unit basis
while its balance sheet is expected to grow from $7.2 billion as of Sep
30,2013 to $9.3 billion. Further, it is expected that the acquisition will
enhance liquidity, increase return to shareholders and build capital.
For Kohlberg Kravis, The Goldman Sachs Group, Inc. (NYSE:GS-Free Report) and
Simpson Thacher & Bartlett are representing the company.
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