in a merger valued at about $25 billion that would create the first freight-rail network linking Mexico, the U.S. and Canada.
The companies said Sunday their boards agreed to a deal that values Kansas City at $275 a share in a combination of cash and stock. Kansas City investors will receive 0.489 of a Canadian Pacific share and $90 in cash for each Kansas City common share held.
If approved by regulators, the deal would unite two of the major North American freight carriers, linking factories and ports in Mexico, farms and plants in the midwestern U.S. and Canada’s ocean ports and energy resources.
The combined company would have about $8.7 billion in annual revenue and employ nearly 20,000 people. It would be run by Canadian Pacific CEO
Keith Creel.
Kansas City Southern is the smallest of the five major freight railroads in the U.S. but plays a key role in U.S.-Mexico trade. Its network mainly runs up the length of Mexico through Texas to its namesake city. The company last year rejected takeover bids worth roughly $20 billion from a group of institutional investors seeking to take it private, The Wall Street Journal reported.
Canadian Pacific has long sought a union with Kansas City to extend its reach into its busy freight routes that stretch from Mexico through southern and midwestern U.S. states. CP’s major rail lines run across Canada, some northern U.S. states and south to Chicago.
The Canadian railway’s leader, Mr. Creel, worked closely with former chief
Hunter Harrison,
who made a number of unsuccessful overtures to buy Kansas City. Mr. Harrison died in 2017 after taking over and revamping another U.S. operator,
CSX Corp.
“This will create the first U.S.-Mexico-Canada railroad,” Mr. Creel said in a statement.
Railway mergers face significant regulatory hurdles in the U.S. Under Mr. Harrison, Canadian Pacific abandoned a $30 billion pursuit of
Norfolk Southern Corp.
in 2016 after regulators expressed concern about reduced competition and potential safety issues.
Kansas City and Canadian Pacific currently have a single point where their two networks connect, in a Kansas City, Mo., facility they jointly operate. The merger could allow trains traveling north and south to avoid having to interchange cars and potentially bypass Chicago, a busy and often congested hub in the U.S. freight system.
The merger partners said the proposed combination wouldn’t reduce choice for customers since there is no overlap between their systems. They said the possibility for single-line routes would shift trucks off U.S. highways, reducing congestion and emissions in the Dallas-to-Chicago corridor.
The freight-rail industry suffered a sharp drop in volume last year as the pandemic slowed trade and temporarily shut many U.S. stores, but volume has bounced back as factories continued to operate and economies recovered. Trade volume has overwhelmed some U.S. ports, causing congestion and delays.
to dispose of its media assets, as officials grow more concerned about the technology giant’s sway over public opinion in the country, according to people familiar with the matter.
Discussions over the matter have been held since early this year, after Chinese regulators reviewed a list of media assets owned by the Hangzhou-based company, whose mainstay business is online retail. Officials were appalled at how expansive Alibaba’s media interests have become and asked the company to come up with a plan to substantially curtail its media holdings, the people said. The government didn’t specify which assets would need to be unloaded.
Alibaba, founded by billionaire
Jack Ma,
has throughout the years assembled a formidable portfolio of media assets that span print, broadcast, digital, social media and advertising. Notable holdings include stakes in the
Twitter
-like Weibo platform and several popular Chinese digital and print news outlets, as well as the South China Morning Post, a leading English-language newspaper in Hong Kong. Several of these holdings are in U.S.-listed companies.
Such influence is seen as posing serious challenges to the Chinese Communist Party and its own powerful propaganda apparatus, the people said.
The party’s propaganda department didn’t reply to a faxed request seeking comment.
Alibaba declined to comment on discussions with regulators pertaining to possible media asset disposals. In a statement, the company said it is a passive financial investor in media assets.
“The purpose of our investments in these companies is to provide technology support for their business upgrade and drive commercial synergies with our core commerce businesses. We do not intervene or get involved in the companies’ day-to-day operations or editorial decisions,” the statement said.
The asset-disposal discussions are the latest development in a series of run-ins between Beijing and Mr. Ma, who was once China’s most-celebrated entrepreneur. Late last year, Chinese leader
Xi Jinping
personally scuttled plans by Ant Group Co.—Alibaba’s financial-technology affiliate—to launch what would have been the world’s largest initial public offering, amid growing unease in Beijing over Ant’s complex ownership structure and worries that Ant was adding risk to the financial system. Mr. Xi was also angry at Mr. Ma for criticizing his efforts to strengthen financial oversight.
Antitrust regulators are also preparing to levy a record fine in excess of $975 million over what they call anticompetitive practices on Alibaba’s e-commerce platforms, The Wall Street Journal previously reported citing people with knowledge of the matter. In addition, Alibaba would be required to end a practice under which, regulators believe, the tech giant forbade merchants to sell goods on both Alibaba and rival platforms.
Beyond media and online retail, Alibaba also has a sizable entertainment division, consisting mainly of Hong Kong-listed
Alibaba Pictures Group Ltd.
and Youku Tudou Inc., one of China’s largest video streaming platforms. Officials also reviewed Alibaba’s entertainment portfolio, although outright divestitures in that part of Alibaba’s business may not be necessary, people familiar with discussions related to Alibaba’s entertainment business said.
It isn’t clear whether Alibaba will need to sell all of its media assets. Any plan that Alibaba comes up with will need approval from China’s senior leadership, people familiar with the matter said.
Concerns have been growing in recent years in China’s officialdom over Alibaba’s media clout and how the company may have leveraged its investments in news and social media to influence government policies deemed unfavorable to its businesses.
Those concerns grew following an incident in May last year when scores of Weibo posts about a senior Alibaba executive’s alleged involvement in an extramarital affair were deleted.
After Jack Ma criticized Chinese regulators, Beijing scuttled the initial public offering of his fintech giant Ant and he largely disappeared from public view. WSJ looks at recent videos of the billionaire to show how he got himself into trouble.
An ensuing investigation by the Cyberspace Administration of China, the country’s internet watchdog, found that Alibaba was responsible for the interference with Weibo posts and said the company had used “capital to manipulate public opinion” in a report to the leadership, the Journal has reported, citing officials who saw the report. It is the Communist Party that controls public opinion on all media platforms and the private sector should not take up the role, the officials said.
Alibaba owns about 30% of Nasdaq-listed Weibo Corp. and has been the largest customer of the social-media company, having contributed nearly $100 million in advertising and marketing revenue in 2019 to its platform, according to the most recent annual data available.
In June, the internet watchdog publicly reprimanded Weibo for what it called “interference with online communication” and asked it to rectify the situation. In November, Xu Lin, a vice-director of the Party’s central propaganda department, said in a public forum that China must “resolutely prohibit dilution of the party’s leadership in the name of [media] convergence, resolutely guard against risks of capital manipulating public opinion.”
He didn’t identify Alibaba by name during his speech but used the words that appeared in the cyber watchdog’s report.
Divesting its media interests isn’t necessarily a big negative for Alibaba, which could re-emerge from the regulatory onslaught in a more secure position with Beijing after giving up some noncore assets. It could also help steer the company clear of future political minefields as authorities maintain a tight grip on the media.
Alibaba isn’t the only Chinese tech giant that dabbles in media.
Tencent Holdings Ltd.
’s WeChat messaging service has become one of the primary ways in which ordinary Chinese people get news. Bytedance Ltd. operates popular news aggregator Jinri Toutiao, which employs artificial intelligence to push news to hundreds of millions of users.
It isn’t clear if any other tech companies will have to follow the same pattern as Alibaba in considering the disposal of media assets.
Alibaba’s media investments began before the company rose to international fame with its then record-breaking IPO on the New York Stock Exchange in 2014. Over the years, Alibaba and Ant purchased stakes in some of the country’s most popular media outlets, including business-focused Yicai Media Group and tech-focused news portals Huxiu.com and 36Kr.com.
One of the most prominent acquisitions was the South China Morning Post, which traces its roots to the era of British colonial rule in Hong Kong. Alibaba has also set up joint ventures or partnerships with powerful state-run media like Xinhua News Agency and local government-run newspaper groups in Zhejiang and Sichuan provinces.
Media outlets often met Alibaba’s overtures with enthusiasm, given the tech giant’s deep pockets and digital expertise. Since being bought by Alibaba in 2016, the Post has expanded its digital news offerings and editorial staff and completed a makeover of its Hong Kong headquarters.
Some journalists and readers worried that Alibaba, which has offices a few floors above the Post’s newsroom, would interfere with the paper’s coverage to please Beijing. But the newspaper at times published stories that appeared unfavorable to the Chinese leadership, including extensive coverage of Hong Kong’s 2019 and 2020 protests and Beijing’s growing control over the city.
Mr. Ma, explaining the reasons for his acquisition of the Post, said in a public forum in 2017 that he never interfered with newsroom operations and respected journalism.
“[We] must not let the media fall, must not let the media lose themselves, and must not let the media lose objective and rational communication because of money,” Mr. Ma said in the event, organized by Xinhua.
Media Empire
Media assets held by Alibaba include:
100% of the South China Morning Post, Hong Kong’s premier English newspaper.
Nearly 37% of Yicai Media Group, one of China’s most influential news outlets.
About 30% of Weibo, a Twitter-like social media platform. Its stake is valued at more than $3.5 billion.
6.7% of Bilibili, a video platform popular among younger Chinese people. Its stake is worth nearly $2.6 billion.
5% of Mango Excellent Media, a subsidiary of government-run Hunan TV. Its stake is worth about $819 million.
Nearly 5.3% of Focus Media, China’s largest offline advertising network. Its stake is worth nearly $1.2 billion.
Media assets held by Ant include:
16.2% of 36Kr, a U.S.-listed digital media outlet focused on technology. Its stake is worth $25 million.
Former 5.62% stake in Caixin Media, one of China’s most respected news sources. Ant sold its interest in 2019.
Sources: The Securities and Exchange Commission, Shenzhen Stock Exchange, National Equities Exchange and Quotations of China, National Enterprise Credit Information Publicity System of China, FactSet, Wind.
Note: Market values for U.S.-listed companies are as of March 12; for China-listed firms, as of March 15.
Investors who bet against stocks are targeting special-purpose acquisition companies, one of the hottest growth areas on Wall Street. The dollar value of bearish bets against shares of SPACs has more than tripled to about $2.7 billion from $724 million at the start of the year, according to data from S3 Partners.
Some of the stocks under attack belong to large SPACs that surged in recent months, in part because they were backed by high-profile financiers. A blank-check company created by venture capitalist
Chamath Palihapitiya
that plans to merge with lending startup Social Finance Inc. is a popular target, with 19% of its shares outstanding sold short, according to data from S&P Global Market Intelligence. The short interest in
Churchill Capital Corp. IV,
a SPAC created by former investment banker
Michael Klein
that is merging with electric-vehicle startup Lucid, more than doubled in March to about 5%.
Others are wagering against companies after they combine with SPACs. Muddy Waters Capital LLC announced last week it was betting against
XL Fleet Corp.
, a fleet electrification company that went public in December after merging with a SPAC. XL has since said Muddy Waters’s report, which alleged XL inflated its sales pipeline and made misleading claims about its technology among other issues, had “numerous inaccuracies.”
XL’s stock price dropped the day Muddy Waters released its report by about 13%, to $13.86, from its prior close on March 2. Shares closed Friday at $12.79.
Shares of
Lordstown Motors Corp.
fell nearly 17% Friday after Hindenburg Research released a report saying the electric-truck startup had misled investors on its orders and production. The company, which merged with a SPAC in October, said the report contained half-truths and lies. The short interest in Lordstown shares rose to 5% from 3.4% in the week before the report’s publication, according to data from S&P.
“SPACs are an area of focus,” said Muddy Waters’s
Carson Block.
The veteran short seller said SPACs largely make up the universe of companies he views as both “abysmal” and relatively free from technical challenges, such as high short interest, which can make betting against them difficult.
SPACs are shell firms that raise capital by issuing stock with the sole purpose of buying or merging with a private company to take it public. They are dominating the market for new stock issues, becoming a status symbol for celebrities while pumping the value of acquisitions, like betting company
DraftKings Inc.,
into the tens of billions of dollars.
Hedge funds that buy into SPACs early see them as a way to make lofty returns without much risk. Individual investors are attracted by the chance to get positions in newly public companies that they could rarely purchase through traditional IPOs. The Securities and Exchange Commission issued a statement on Wednesday warning that it “is never a good idea to invest in a SPAC just because someone famous sponsors or invests in it.”
A monthslong rally in the stocks lost steam recently amid a broad selloff in technology and high-growth companies. An index of SPAC stocks operated by Indxx fell about 17% from mid-February to March 10, while the Nasdaq Composite Index declined about 7.3% over the same period.
“These are all momentum stocks, and a lot of people want to short them,” said
Matthew Tuttle,
whose firm Tuttle Tactical Management runs an exchange-traded fund that allows investors to hold a portfolio of SPAC stocks. Mr. Tuttle is preparing to launch an ETF that bets against “de-SPAC” stocks of companies that have merged with a SPAC—like electric-truck manufacturer
Nikola Corp.
and baked-goods maker
Hostess Brands Inc.
—and a separate fund that invests in the stocks.
Private companies are flooding to special-purpose acquisition companies, or SPACs, to bypass the traditional IPO process and gain a public listing. WSJ explains why some critics say investing in these so-called blank-check companies isn’t worth the risk. Illustration: Zoë Soriano/WSJ
Postmerger companies are particularly attractive to short because they have larger market capitalizations, making their shares easier to borrow, and because early investors in the SPACs are eager to sell shares to lock in profits, analysts and fund managers said.
Short sellers borrow stocks they believe are overvalued and immediately sell them, hoping to repurchase the shares for a lower price when they need to be returned and to pocket the difference. The strategy proved dangerous in recent months when individual investors organized on social media to push up stocks like GameStop Corp., forcing short sellers to buy shares and cap their losses, helping to drive prices still higher.
Continued strong investor demand for SPACs could catch short sellers in a similar squeeze. Shorting SPACs can also be risky because their shares have a natural floor at $10, the price at which they can be redeemed before a merger, and because they are prone to sharp price moves, analysts said.
Still, the portion of shares sold short in SPACs and their acquisitions is climbing.
A blank-check company created by venture capitalist Chamath Palihapitiya that plans to merge with lending startup Social Finance Inc. is a popular target.
Photo:
Brendan McDermid/Reuters
Some are betting against stocks they believe rose too fast, to unsustainable valuations. The price of bioplastics company
Danimer Scientific Inc.
nearly tripled to $64 in the first six weeks of the year after it was bought by a SPAC. The short interest in Danimer stock has climbed to 8.5% from around 1% in January, and its share price has traded down to about $42, according to data from S&P.
Others are making bearish bets to hedge against potential losses in SPAC stocks they own.
Veteran short seller
Eduardo Marques
cited SPACs and their boosting the number of U.S.-listed stocks as a short-selling opportunity, according to a pitch for a stock-picking hedge fund called Pertento he plans to launch this year. America’s roster of public companies had shrunk from the mid-1990s onward, but that trend has recently reversed, partly because of SPACs.
Their popularity has helped spark new Wall Street offerings.
Goldman Sachs Group Inc.
this year started offering clients set baskets of similar stocks to short, pitching them as a way to hedge SPAC exposure, people who have seen the offering said. Clients typically customize the baskets Goldman offers, which are thematic and sector-focused, such as on bitcoin and electric vehicles.
Kerrisdale Capital founder
Sahm Adrangi
started shorting postmerger SPAC companies earlier than most, with a public bet in November against the stock of frozen-food maker
Tattooed Chef Inc.,
which still trades above its price at that time. But the stock has fallen about 13% during the recent market slump.
“We saw these stocks go up a lot and now that people are de-risking, these highflying SPACs are coming down to earth,” Mr. Adrangi said.
—Amrith Ramkumar and Mike DeStefano contributed to this article.
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Write to Matt Wirz at matthieu.wirz@wsj.com and Juliet Chung at juliet.chung@wsj.com
Grab Holdings Inc. is in talks to go public through a merger with a SPAC that could value the Southeast Asian ride-hailing startup at as much as $40 billion, making it by far the largest such deal on record.
The Singapore company is discussing a deal with a special-purpose acquisition company affiliated with Altimeter Capital Management LP that would value it at between $35 billion and $40 billion, according to people familiar with the matter. (Altimeter has two SPACS; it couldn’t be learned which one is in talks with Grab.)
As part of the deal, Grab would raise between $3 billion and $4 billion in a so-called PIPE, a funding round that typically accompanies a SPAC merger, the people said. That amount could still change as Grab and Altimeter will start meeting with mutual funds and other potential investors soon, some of the people said.
The parties could announce the deal in the next few weeks, though the talks could still fall apart and Grab could revert to an earlier plan to stage a traditional initial public offering on a U.S. exchange this year.
Should they move forward with a SPAC deal, it would be the high-water mark in a recent explosion of such transactions, in which an empty shell raises money in an IPO with plans to later find one or more companies to merge with. In some cases, the SPAC ends up with only a small sliver of the newly public target.
The vehicles have caught fire in the last couple of years, with everyone from former baseball player Alex Rodriguez to ex-House Speaker Paul Ryan getting in on the action. They have helped break a bottleneck between the private and public markets as companies that were reluctant to go public line up to combine with SPACs, which offer in many cases a speedier route to a listing without costs and disclosure limitations that accompany traditional IPOs.
The biggest SPAC deal to date is United Wholesale Mortgage’s roughly $16 billion combination with Gores Holdings IV Inc., announced in September. The biggest one so far this year is electric-vehicle company Lucid Motors Inc.’s agreement last month to merge with Michael Klein’s
Churchill Capital Corp.
IV, a deal valued at nearly $12 billion, according to Dealogic.
So far this year, a record $70 billion-plus has been raised for SPACs, which account for more than 70% of all public stock sales, according to Dealogic. A slew of companies are in talks for a SPAC merger or already have agreed to one, including office-sharing firm WeWork, online photo-book maker Shutterfly Inc. and online lender Social Finance Inc.
In addition to ride-hailing, Grab, which traces its roots back to 2011, delivers restaurant, grocery and other items and provides digital financial services to merchants.
Its backers include
SoftBank Group Corp.
,
Uber Technologies Inc.
and
Toyota Motor Corp.
It was last publicly valued at around $15 billion in an October 2019 fundraising round, according to PitchBook.
Its valuation is on the rise as public investors pile into other ride-hailing and food-delivery companies. Uber’s shares have jumped sharply in the past several months, while
DoorDash Inc.
went public in December at a valuation far in excess of where it had raised money privately. The restaurant-delivery company now has a market capitalization of nearly $47 billion.
Altimeter’s SPACs—Altimeter Growth Corp. and Altimeter Growth Corp. 2—raised $450 million and $400 million in October and January IPOs, respectively. Altimeter Capital, of Menlo Park, Calif., has around $16 billion under management and primarily invests in technology companies.
The firm has racked up a string of successful investments and was one of the main participants in a January round of funding
Roblox Corp.
raised ahead of its IPO at $45 a share. In its debut Wednesday, shares of the videogame platform traded more than 50% above that level and continued rising Thursday.
SoftBank, which invested through its Vision Fund, is also poised to win big on Grab, just as another of its bets proves to be a gigantic winner: The Japanese technology-investing giant has now made roughly $25 billion on paper on its $2.7 billion investment in South Korean e-commerce company
Coupang Inc.,
which soared 41% in its trading debut Thursday.
Private companies are flooding to special-purpose acquisition companies, or SPACs, to bypass the traditional IPO process and gain a public listing. WSJ explains why some critics say investing in these so-called blank-check companies isn’t worth the risk. Illustration: Zoë Soriano/WSJ
Write to Maureen Farrell at maureen.farrell@wsj.com
The Utah Jazz have been winning a lot this season, but not as much as their new owner.
Just look back at three days in late January. The Jazz — which Ryan Smith bought for $1.66 billion late last year — beat the Dallas Mavericks for their 10th win in a row on Jan. 27, the same evening that Qualtrics International Inc.
XM,
+2.83%,
the software company Smith co-founded with his father Scott and brother Jared in 2002, set the price for its $1.55 billion IPO. The next day, Qualtrics shares would soar 52% in their trading debut, giving the software company a market valuation of $27.3 billion; a day later, the Jazz would win their 11th straight, putting them solidly at the top of the NBA standings.
So it’s good to be Ryan Smith. At the NBA All-Star break, the Jazz have a league-best record of 27-9. At the same time, Qualtrics is a major mover in a market estimated to be worth $60 billion, and topped Wall Street estimates for earnings and sales in its first quarterly results as a publicly traded company Tuesday.
The combination of a successful basketball team and another large, publicly traded tech company are helping to secure an even loftier goal for Smith: Making the Utah region known for something more than majestic mountains and the Church of Jesus Christ of Latter-day Saints.
“His goals and objectives have never been anything but over the top,” Todd Pedersen, CEO of Vivint Smart Home Inc.
VVNT,
+0.40%,
told MarketWatch.
Qualtrics got its start in the Smith’s basement, which is near Pedersen’s home. And it’s not just Smith and Pedersen who are neighbors — their companies are right next to one another as well. And they can now watch the NBA team that Smith owns play at an arena that bears the name of Pedersen’s company, as they recently did for a nationally-televised Jazz game against the defending champion Los Angeles Lakers.
The Jazz won.
Handling double duties
Smith sits in a position occupied by few in the history of corporate America: head of a publicly traded company, and owner of an unrelated sports franchise. There is no such owner in the National Football League, Major League Baseball nor the National Hockey League, though Wayne Huizenga once owned franchises in all three while leading Blockbuster Video.
The NBA seems more willing to welcome public-company executives to its ranks, even while denying bids from Oracle Corp.’s
ORCL,
-0.10%
co-founder Larry Ellison. Another recent majority owner is Alibaba Group Holding Ltd.’s
BABA,
-1.34%
co-founder and Executive Vice Chairman Joseph Tsai, who snapped up the Brooklyn Nets for a record $2.35 billion in 2020. The reclusive Robert Pera, CEO of Ubiquiti Inc.
UI,
-0.68%,
is also owner of the Memphis Grizzlies.
Vivek Ranidive was still chief executive of Tibco Software Inc. when he led a group that bought the Sacramento Kings in 2013, and Miami Heat owner Micky Arison led Carnival Cruise Inc. for more than a decade while leading his franchise. In Pera’s first attempt to buy into the NBA, a bid for the Philadelphia 76ers, he was topped by a group that included AMC Entertainment Holdings Inc.
AMC,
+1.92%
CEO Adam Aron, who also served as CEO of the Sixers for the first two years the group owned the team.
Read more: 5 things to know as Qualtrics prepares for its IPO this week
Smith has adroitly navigated the corporate and professional sports worlds by delegating day-to-day operations at each organization.
“As executive chairman, my job during the day is running Qualtrics with [Chief Executive] Zig [Serafin]. My job with the Jazz is at night, and I leave it to the coaches, players, and executives in charge of the team,” Smith told MarketWatch. “The product is proof of their abilities.”
At Qualtrics, CEO Zig Serafin and Smith are self-described “co-builders” of a company that has grown in the four-and-a-half years since Serafin joined as chief operating officer. (Serafin, who was named CEO nine months ago, says he and Smith are “joined at the hip” in their vision.) During that time, Qualtrics has expanded employees (from 1,100 to 3,500), customers (3,000-4,000 to 13,500), and revenue (from less than $200 million annually to $763.5 million last year, the company reported Tuesday).
As the NBA’s newest owner, “One of Ryan’s leadership styles is to delegate. He lets people think big, but by doing so through smart decisions,” Jim Olson, president of the Utah Jazz, told MarketWatch.
To that end, the Jazz use Qualtrics’ data analytics technology to improve team performance on the court and off, down to traveling, sleep, and diet for players and coaching staff.
The rise of Silicon Slopes
Illustrated by Terrence Horan
Such partnerships have fueled not just the success of the Jazz and Qualtrics but the larger Salt Lake City-Provo-Orem area.
“The Jazz and Sundance [Film Festival] are the two most identifiable brands in this state, and Ryan is smartly leveraging the Jazz for global reach,” says Domo Inc.
DOMO,
+1.20%
CEO Josh James, who coined the term “Silicon Slopes” for the region and started the non-profit organization of the same name. “Ryan Smith used to be just another successful tech founder,” he said. “Now he is universally known as Ryan Smith, owner of the Jazz. This is a much larger megaphone and platform for the community.”
For example, the Jazz use Qualtrics software to collect and analyze fan data to improve their experience at home games on everything from concessions and apparel to parking and in-game entertainment. The two organizations have also teamed on 5 For The Fight, a nonprofit that invites everyone to give $5 for the fight against cancer. It is the Jazz’s official jersey patch, a rarity in the corporate-skewed NBA.
The winning ways of Smith and Qualtrics, amid a wave of freshly minted unicorns in the Salt Lake City region, underscores the rise of Silicon Slopes as one of a handful of regions in the U.S. to successfully mold itself after Silicon Valley. From the days of computer-networking pioneer Novell Inc. and word-processing maker WordPerfect Corp. in the 1980s, Utah has stood out as a tech outpost, albeit in the shadow of Silicon Valley and Seattle, but its recent string of triumphs has considerably raised its profile.
Indeed, the Provo-Orem area was deemed the best regional economy in America, according to rankings released in February by the Milken Institute.
Even COVID-19 hasn’t dampened the state’s can-do mindset.
Utah has among the most-open vaccination criteria in the nation. Starting in early March, anyone 50 and over is eligible for a jab—as well as those 16 and older with pre-existing conditions. By emphasizing “speed over perfection,” Nomi Health Inc. CEO Mark Newman says, the state has been able to send kids back to school since September, reduce the unemployment rate of 3% to a pre-pandemic level, and attain a budget surplus.
“The states that figure it out will have a long-tale of success over those states that don’t,” said Newman, whose direct healthcare company is partnering with the state of Utah and Qualtrics in bringing mass testing sites and vaccinations.
“Utah as a state has a get-it-done attitude,” says Newman, who moved to the state in 1993. “That goes back to Utah’s pioneer roots.”
James says Utah’s tech history can be divided into three phases: The first in the late 1980s and early ‘90s led by Novell and WordPerfect; a second in the late 1990s and 2000s, with internet plays Overstock Inc.
OSTK,
-2.18%,
Omniture (acquired by Adobe Systems Inc.
ADBE,
+0.69%
), Altris Corp. (bought by then-Symantec Corp.), Iomega (acquired by then-EMC Corp.), and dozens of companies that were sold for millions each; and the current one of big independent enterprise companies like Qualtrics and Domo, and consumer plays like Vivint.
“A giant crop of companies are coming behind us,” James said, mentioning such unicorns as MX Technologies Inc., Lucid Software Inc. and DivvyPay Inc. “This feels like Silicon Valley in the ‘90s. It’s a really exciting time.”
“Silicon Slopes is doing great, building off the great history of [tech pioneers] Novell and WordPerfect in the state,” Steve Case, the co-founder of AOL who now leads venture-capital firm Revolution, told MarketWatch. The latest iteration, he added, is the byproduct of the region’s focus on enterprise technology and “strong collaboration in building a community.”
Overstock CEO Jonathan Johnson credits Utah’s “rich entrepreneurial spirit” to a “business-friendly environment where constant innovation, great employment opportunities, and real technological advancement are present.”
“Utah is a mixing bowl of cultures,” says Serafin, whose previous stop was 17 years in Redmond, Wash., all of them at Microsoft Corp.
MSFT,
-0.10%.
“Utah is close to the coast, and San Francisco and Los Angeles. It’s not much different than Silicon Valley folks who moved to Nevada.”
An ‘interesting journey’
In a state increasingly bustling with unicorns, none arguably have been hotter than Qualtrics, which went public in late January.
The company’s XM tracker stands for experience management, a software category that Qualtrics coined. Qualtrics, whose software lets businesses gauge how customers use their products so those products can be improved, has about 13,000 customers from about 9,000 two years ago. The company’s sales jumped 30% in the first three quarters of 2020 to $550 million, from $413.4 million a year earlier.
Smith’s “rare and unique ability to spot markets before they exist” gave him an vision of the experience economy that has helped evolve the way enterprises think about culture, brand, products, and people,” says ServiceNow Inc.
NOW,
-1.32%
CEO Bill McDermott, who was previously CEO of SAP
SAP,
-0.10%
when it owned Qualtrics.
Read more: 5 things to know as Qualtrics prepares for its IPO this week
Smith co-founded Qualtrics with his father and brother in 2002. On the cusp of going public in 2018, Qualtrics was acquired by SAP for $8 billion, making it the largest private enterprise-software acquisition in tech history when the deal closed in early 2019.
“It’s been an interesting journey,” Smith says. “For one-and-a-half to two years with SAP, they took our name everywhere while keeping our company independent and keeping the management team together, which is rare. It retained our culture, with an option to IPO.”
“To be in this spot as a public company, so many things had to go right,” Smith said. “It’s freakin’ incredible.”
General Electric Co. is nearing a $30 billion-plus deal to combine its aircraft-leasing business with Ireland’s
AerCap
AER 1.62%
Holdings NV, according to people familiar with the matter, the latest in a string of moves by the industrial conglomerate to restructure its once-sprawling operations.
Though details of how the deal would be structured couldn’t be learned, it is expected to have a valuation of more than $30 billion, some of the people said. An announcement is expected Monday, assuming the talks don’t fall apart.
The
GE
GE 0.29%
unit, known as GE Capital Aviation Services, or Gecas, is the biggest remaining piece of GE Capital, a once-sprawling lending operation that rivaled the biggest U.S. banks but nearly sank the company during the 2008 financial crisis. GE already took a major step back from the lending business in 2015 when it said it would exit the bulk of GE Capital, and a deal for Gecas would represent another big move in that direction.
It would also represent another significant move by GE Chief Executive Larry Culp to right the course of a company that has been battered in recent years by souring prospects for some of its top business lines and a structure that has fallen out of favor with investors.
With more than 1,600 aircraft owned or on order, Gecas is one of the world’s biggest jet-leasing companies, alongside AerCap and Los Angeles-based Air Lease Corp. It leases passenger aircraft made by Boeing Co. and
Airbus SE
as well as regional jets and cargo planes to customers ranging from flagship airlines to startups. Gecas had $35.86 billion in assets as of Dec. 31.
AerCap has a market value of $6.5 billion and an enterprise value—adjusted for debt and cash—of about $34 billion, according to S&P Capital IQ, and around 1,400 owned or ordered aircraft. The company has experience in deal making, paying around $7.6 billion in 2014 to buy International Lease Finance Corp. AerCap’s revenue last year was about $4.4 billion, down from around $5 billion in the previous few years.
The aviation business has been hit hard by the Covid-19 pandemic, which has resulted in a sharp drop in global travel and prompted airlines to ground planes. Some airlines have sought to defer lease payments or purchases of new aircraft. Gecas had an operating loss of $786 million on revenue of $3.95 billion in 2020. GE took a roughly $500 million write-down on the value of its aircraft portfolio in the fourth quarter.
Combining the companies could afford cost-cutting opportunities and help the new entity weather the downturn.
Separating Gecas could help GE with its efforts to shore up its balance sheet and improve cash flows. Despite a recent increase, GE’s share price remains below where it was before significant problems in the company’s power and finance units emerged in recent years.
The Boston company has a market value of around $119 billion after the shares more than doubled in the past six months as it posted improving results. Still, the stock has fallen by about three-quarters from the peak just over 20 years ago.
Mr. Culp became the first CEO from outside of GE in late 2018 after the company was forced to slash its dividend and sell off businesses. The former
Danaher Corp.
boss has sought to simplify GE’s wide-ranging conglomerate structure further, as other industrial giants such as Siemens AG and
Honeywell International Inc.
have done in recent years.
Activist investor Trian Fund Management LP, which has owned a significant position in the company since 2015 and holds a seat on its board, has supported such changes.
Early in his tenure, Mr. Culp said he had no plans to sell Gecas, a move his predecessor
John Flannery
had considered after the unit drew interest from private-equity firms pushing further into the leasing business.
Mr. Culp has sought to even out cash flows and refocus on core areas. Operations he has parted with include the company’s biotech business, which was purchased by Danaher in a $21 billion deal that closed last year. GE also sold its iconic lightbulb business in a much smaller deal last year, and previously said it was unloading its majority stake in oil-field-services firm Baker Hughes Co.
GE has cut overhead costs and jobs in its jet-engine unit while streamlining its power business. The pandemic continues to pressure the jet-engine business, GE’s largest division, however.
The company also makes healthcare machines and power-generating equipment, and the rest of GE Capital extends loans to help customers purchase its machines and contains legacy insurance assets too.
AerCap is based in Ireland and Gecas has headquarters there as well. The aircraft-leasing industry has long had a significant presence in Ireland due to the country’s favorable tax regime and the importance of Guinness Peat Aviation in the development of the sector. (A deal between GE and AerCap would reunite two companies that bought their main assets from GPA.) The industry has gotten more competitive as Chinese companies have gained market share, however, and the combination could help the new group stem that tide.
Shares in aircraft-leasing companies plummeted along with much of the market in the early days of the pandemic as demand from major airlines, who lease planes to avoid the costs of owning them, evaporated. But many of the major lessors’ stocks have recovered lost ground and then some in the months since as lockdowns ease and the outlook for travel improves.
AerCap’s Chief Executive Aengus Kelly said on its fourth-quarter earnings call this month that he expects airlines to shift more toward leasing planes as they rebuild their balance sheets, in what would be a boon to the company and its peers.
“Their appetite for deploying large amounts of scarce capital to aircraft purchases will remain muted for some time,” he said. “The priority will be to repay debt or government subsidies.”
—Thomas Gryta contributed to this article.
Write to Cara Lombardo at cara.lombardo@wsj.com and Emily Glazer at emily.glazer@wsj.com
The head of Jeep’s owner said he is open to dropping the Cherokee name from vehicles after recent criticism from the Native American tribe’s leader.
Carlos Tavares,
chief executive officer of the recently formed
Stellantis
STLA -2.71%
NV, said the company was engaged in dialogue with the Cherokee Nation over its use of the name. Jeep has two models, the Cherokee compact sport-utility vehicle and larger Grand Cherokee, that it sells in the U.S. and beyond.
Asked in an interview if he would be willing to change the Jeep Cherokee’s name if pushed to do so, Mr. Tavares said, “We are ready to go to any point, up to the point where we decide with the appropriate people and with no intermediaries.”
“At this stage, I don’t know if there is a real problem. But if there is one, well, of course we will solve it,” Mr. Tavares said, adding that he wasn’t personally involved in the talks.
Debate over the Cherokee name is among the issues facing Mr. Tavares, who took control of Stellantis when it was formed earlier this year from the merger of Fiat Chrysler Automobiles NV and Peugeot-maker PSA. In the interview Wednesday, Mr. Tavares also discussed whether to cut down on the company’s 14 brands, making Fiat plants more competitive and his plan to stick with China.
Jeep has two models, the Cherokee compact SUV and larger Grand Cherokee, that it sells in the U.S. and beyond.
Photo:
FCA/TNS/Abaca Press/Reuters
The Cherokee Nation is the largest Native American tribe in the U.S., with some 370,000 members, and Jeep has sold millions of vehicles named after it. The auto brand extended its use of the Cherokee name to a compact SUV, a smaller version of the Grand Cherokee, in 2013.
The leader of the Cherokee Nation recently said he would like to see Jeep stop using his tribe’s name on its SUVs.
Chuck Hoskin Jr.,
principal chief of the Cherokee Nation, said that he believed Jeep had good intentions but that “it does not honor us by having our name plastered on the side of a car,” according to a statement first released to Car and Driver last week.
“The Cherokee Nation has an open dialogue with Stellantis leadership, and look forward to ongoing discussions,” a spokesman for the tribe said Wednesday. “We appreciate Stellantis’ reaching out and thoughtful approach on this.”
“
‘It does not honor us by having our name plastered on the side of a car.’ ”
— Chuck Hoskin Jr., principal chief of the Cherokee Nation
Mr. Tavares’s remarks come in the wake of a broad reckoning over racial and social injustice in the U.S. that was sparked by the police killing of
George Floyd,
an unarmed Black man, in Minneapolis over Memorial Day weekend last year. In December, the Cleveland Indians decided to drop the baseball team’s longtime nickname after fans and Native American groups criticized it as racist. The Washington Football Team of the NFL has dropped a name that had been seen as a racial slur.
The Jeep Cherokee and Grand Cherokee SUVs are among the brand’s bestsellers in the U.S., accounting for 43% of Jeep’s sales in its largest market, according to company figures. Stellantis is rolling out a long-awaited redesign of the Grand Cherokee later this year.
Mr. Tavares said the auto industry’s practice of naming cars after Native American tribes was a sign of respect.
“I don’t see anything that would be negative here. I think it’s just a matter of expressing our creative passion, our artistic capabilities,” Mr. Tavares said.
The Jeep brand sits alongside profit-drivers like Ram in the U.S. and Peugeot in Europe. But the company’s sprawling portfolio of 14 brands also includes some that will need to prove their worth, Mr. Tavares said.
Mr. Tavares said he has asked each of his brand chiefs to work on a 10-year plan to develop more long-term visibility on product planning.
“I’m saying, ‘Look guys, I’m going to give you a chance. You need to convince me—you, the brand CEO—that you have a vision,’” Mr. Tavares said.
After several turnaround efforts, Fiat Chrysler’s Alfa Romeo and Maserati brands have failed to mount meaningful comebacks in recent years. The Fiat brand struggles with aging models and weak sales, which has caused an overcapacity problem in the company’s Italian factories.
Even the storied Chrysler brand has waned in recent years, now selling only three models compared with the six it carried a decade ago. The brand’s U.S. sales have also slid to one-third their volume in 2015, according to company figures.
On the PSA side, the DS brand—which focuses on high-end sedans and SUVs—grew market share last year but continues to lag far behind some of its German competitors.
“After we give them a chance to fail, we need to be also fair,” Mr. Tavares said. “If the rest of the company is doing the right things and there is one part of the company that is pulling everybody down, we’ll have to take that into consideration.”
The Portuguese executive built his reputation in the automotive industry as a turnaround expert. Peugeot was bleeding money when it hired Mr. Tavares in 2013. Since then the French car maker has gone from losing 5 billion euros, equivalent to about $6 billion, in 2012 to becoming one of the most profitable mass-market car makers in the industry. Last year it reported a net profit of €2.17 billion, or roughly $2.62 billion, with an adjusted operating margin of 7.1% in its core automotive business.
This time, Mr. Tavares has a longer to-do list, including integrating the two companies’ European businesses and stemming losses in China.
In Europe, Mr. Tavares has been visiting Fiat Chrysler factories—including an Alfa Romeo facility 80 miles south of Rome—and encouraging them to benchmark their performance against PSA plants. Additionally, employees from Fiat Chrysler’s Fiat factory in Mirafiori, Italy, visited PSA’s Citroën’s plant in Madrid, and Mr. Tavares said they were surprised by the nonlabor cost savings they observed.
The auto executive said the new company could reach its cost-saving goals in Europe without closing factories.
Asked what lessons he had learned from the chip shortage that has idled car plants across the world, Mr. Tavares said large suppliers didn’t relay signals they were receiving about the looming crisis. “We were not protected,” he said. “That’s a clear lesson learned.”
Chinese regulators are taking a close look at Tesla operations after recent videos on social media appear to show a Model 3 battery fire and malfunctioning vehicles. WSJ explains how possible quality issues with Tesla cars could threaten the EV-maker’s meteoric rise. Photo Illustration: Michelle Inez Simon
Mr. Tavares said the industrywide shift toward electrification would continue to rely on government subsidies and other financial incentives for buyers until auto makers figure out how to lower production costs over the next few years.
“If we propose electric vehicles which are extremely efficient but nobody can buy because they are costly, what’s the point from an environmental perspective?” he said.
In China, the combined sales of Peugeot and Fiat Chrysler accounted for less than 1% of a market that sold 20 million vehicles last year, according to industry data. Fiat Chrysler has long struggled to turn a profit in the world’s largest automotive market, while the French car maker sold only 45,965 vehicles in China last year, continuing a rapid multiyear decline.
Mr. Tavares said Stellantis isn’t considering exiting China, removing an option that he said was still on the table when the company started trading in New York at the start of this year.
“We cannot be away from the biggest market in the world,” he said.
Write to Nick Kostov at Nick.Kostov@wsj.com and Nora Naughton at Nora.Naughton@wsj.com
M&T Bank Corp. is nearing a deal to buy People’s United Financial Inc. for more than $7 billion, according to people familiar with the matter, in the latest in a string of regional-bank tie-ups.
The companies are discussing an all-stock deal that could be announced as soon as this week, the people said, assuming talks don’t fall apart. Based in Bridgeport, Conn.,based People’s United has a market value of roughly $6.6 billion, while Buffalo, N.Y.-based M&T’s is more than $19 billion.
Combined, the banks would have more than $200 billion in assets, with a network of branches concentrated in the Northeast and mid-Atlantic regions. The deal would facilitate M&T’s expansion into the Boston market and strengthen its position in New York and Connecticut.
For M&T, a serial acquirer, it would be its first major takeover since its acquisition of Hudson City Bancorp Inc. in 2015. That deal was delayed for three years after regulators found “significant weaknesses” in M&T’s anti-money-laundering and consumer-compliance programs.
M&T is among the largest regional lenders in the Northeast, with $142.6 billion in assets at the end of 2020. Commercial real-estate loans comprise almost 40% of its portfolio, including some to New York City’s battered hospitality sector. But loan performance at the bank, as well as that of many of its regional peers, has been better-than-expected over the past year.
International Business Machines Corp. is exploring a potential sale of its IBM Watson Health business, according to people familiar with the matter, as the technology giant’s new chief executive moves to streamline the company and become more competitive in cloud computing.
IBM is studying alternatives for the unit that could include a sale to a private-equity firm or industry player or a merger with a blank-check company, the people said. The unit, which employs artificial intelligence to help hospitals, insurers and drugmakers manage their data, has roughly $1 billion in annual revenue and isn’t currently profitable, the people said.
Its brands include Merge Healthcare, which analyzes mammograms and MRIs; Phytel, which assists with patient communications; and Truven Health Analytics, which analyzes complex healthcare data.
It isn’t clear how much the business might fetch in a sale, and there may not be one.
IBM, with a market value of $108 billion, has been left behind as cloud-computing rivals Microsoft Corp. and Amazon.com Inc. soar to valuations more than 10 times greater. The Armonk, N.Y., company has said it’s focused on boosting its hybrid-cloud operations while exiting some unrelated businesses.
spoke about combining the oil giants after the pandemic shook the world last year, according to people familiar with the talks, testing the waters for what could be one of the largest corporate mergers ever.
Chevron Chief Executive
Mike Wirth
and Exxon CEO
Darren Woods
discussed a merger following the outbreak of the new coronavirus, which decimated oil and gas demand and put enormous financial strain on both companies, the people said. The discussions were described as preliminary and aren’t ongoing but could come back in the future, the people said.
Such a deal would reunite the two largest descendants of
John D. Rockefeller’s
Standard Oil monopoly, which was broken up by U.S. regulators in 1911, and reshape the oil industry.
A combined company’s market value could top $350 billion. Exxon has a market value of $190 billion, while Chevron’s is $164 billion. Together, they would likely form the world’s second largest oil company by market capitalization and production, producing about 7 million barrels of oil and gas a day, based on pre-pandemic levels, second only in both measures to Saudi Aramco.
But a merger of the two largest American oil companies could encounter regulatory and antitrust challenges under the Biden administration. President Biden has said climate change is one of the biggest crises the country faces. In October, he said he would push the country to “transition away from the oil industry.” He hasn’t been as vocal about antitrust matters, and the administration has yet to nominate the Justice Department’s head of that division.
One of the people familiar with the talks said the sides may have missed an opportunity to consummate the deal under former President
Donald Trump,
whose administration was seen as more friendly to the industry.
Darren Woods, CEO Exxon Mobil Corp., at an industry conference in 2018
Photo:
Andrew Harrer/Bloomberg News
A handful of sizable oil and gas deals were completed last year, including Chevron’s $5 billion takeover of Noble Energy Inc. and
ConocoPhillips
COP -2.63%
’ roughly $10 billion takeover of Concho Resources Inc., but nothing close to the scale of combining San Ramon, Calif.-based Chevron and Irving, Texas-based Exxon.
Such a deal would significantly surpass in size the mega-oil-mergers of the late 1990s and early 2000s, which included the combination of Exxon and Mobil and Chevron and Texaco Inc.
It also could be the largest corporate tie-up ever, depending on its structure. That distinction currently belongs to the roughly $181 billion purchase of German conglomerate Mannesmann AG by Vodafone AirTouch Plc in 2000, according to Dealogic.
Many investors, analysts and energy executives have called for consolidation in the beleaguered oil-and-gas industry, arguing that cutting costs and improving operational efficiencies would help companies weather the pandemic-induced downturn and prepare for an uncertain future as many countries seek to reduce their dependence on fossil fuels to combat climate change.
In an interview discussing Chevron’s earnings Friday, Mr. Wirth, who like Mr. Woods also serves as his company’s board chairman, said that consolidation could make the industry more efficient. He was speaking generally and not about a possible Exxon-Chevron merger.
“As for larger scale things, it’s happened before,” Mr. Wirth said, referring to the 1990s and early-2000s megamergers. “Time will tell.”
Paul Sankey,
an independent analyst who hypothesized a merger of Chevron and Exxon in October, estimated at the time that the combined company would have a market capitalization of about $300 billion and $100 billion in debt. A merger would allow them to cut a combined $15 billion in administrative expenses and $10 billion in annual capital expenditures, he wrote.
An abundance of fossil fuels combined with advances in technology to harness wind and solar power has sent energy prices crashing around the world. WSJ explains how it all happened at once. Photo illustration: Carlos Waters/WSJ
Exxon was America’s most valuable company seven years ago, with a market value of more than $400 billion, nearly double Chevron’s. But Exxon has fallen from its heights following a series of strategic missteps, which were further exacerbated by the pandemic. It has been eclipsed as a profit engine by tech giants such as
Apple Inc.
AAPL -3.74%
and
Amazon.com Inc.,
AMZN -0.97%
in recent years and was removed from the Dow Jones Industrial Average last year for the first time since it was added as Standard Oil of New Jersey in 1928.
Exxon’s shares have fallen nearly 29% over the last year, while Chevron’s are down about 20%. Chevron briefly topped Exxon in market capitalization in the fall.
Exxon endured one of its worst financial performances ever in 2020. It is expected to report a fourth consecutive quarterly loss for the first time in modern history on Tuesday and already has posted more than $2 billion in losses through the first three quarters of 2020.
Chevron also has struggled, reporting nearly $5.5 billion in 2020 losses Friday. But investors have expressed more faith in Chevron because it entered the downturn with a stronger balance sheet—in part because it walked away from its $33 billion bid to buy Anadarko Petroleum Corp. before the pandemic, having been outbid by
Occidental Petroleum Corp.
OXY -4.25%
in 2019.
Exxon has about $69 billion in debt as of September, while Chevron has around $35 billion, according to S&P Global Market Intelligence.
Some investors have grown increasingly concerned about Exxon’s direction under Mr. Woods as the company faces a rapidly changing energy industry and growing global consciousness about climate change. Some are also worried that Exxon may have to cut its hefty dividend, which costs it about $15 billion annually, due to its high debt levels. Many individual investors count on the payments as a source of income.
Mr. Woods embarked on an ambitious plan in 2018 to spend $230 billion to pump an additional one million barrels of oil and gas a day by 2025. But before the pandemic, production was up only slightly and Exxon’s financial flexibility was diminished. In November, Exxon retreated from the plan and said it would cut billions of dollars from its capital spending every year through 2025 and focus on investing in only the most promising assets.
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Meanwhile, the company’s woes have helped draw the attention of activist investors. One of them, Engine No. 1 LLC, has argued that the company should focus more on investments in clean energy while cutting costs elsewhere to preserve its dividend. The firm nominated four directors to Exxon’s board Wednesday and called for it to make strategic changes to its business plan.
Exxon also has been in talks with another activist, D.E. Shaw Group, and is preparing to announce one or more new board members, additional spending cuts and investments in new technologies to help it reduce its carbon emissions.
Rivals such as
BP
BP -2.80%
PLC and
Royal Dutch Shell
RDS.A -3.53%
PLC have embarked on bold strategies to remake their business as regulatory and investor pressure to reduce carbon emissions mounts. Both have said they will invest heavily in renewable energy—a strategy that their investors so far haven’t rewarded.
Exxon and Chevron haven’t invested substantially in renewables, instead choosing to double down on oil and gas. Both companies have argued that the world will need vast amounts of fossil fuels for decades to come, and that they can capitalize on current underinvestment in oil production.
Write to Christopher M. Matthews at christopher.matthews@wsj.com, Emily Glazer at emily.glazer@wsj.com and Cara Lombardo at cara.lombardo@wsj.com