The Week Ahead - July 6th

The Big Beautiful Bill was signed, plus tariffs are pushed to August 1st

The Week Ahead Of Us 🔍

Welcome back!

Hope everyone had a relaxing past week. We’ve got a very busy edition for you tonight, with important news re: tariffs and fiscal spending, but first a quick note:

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Futures are slightly lower as tariffs will go into place on August 1st - with announcements on rates coming July 9th. Given how much of a “T.A.C.O. Trade” we’ve seen over the past few months, this delay in enacting tariffs likely means there will be room for countries to continue to negotiate. Let’s get into it.

Here’s a look at this week’s slow earnings schedule.

  • Thursday: Delta Air Lines, Conagra Brands, Levi Strauss

Here’s a look at economic data this week (estimates are in quotations).

  • Wednesday: Wholesale inventories (-0.3%), Minutes of Fed’s May FOMC meeting

  • Thursday: Initial jobless claims (235,000), St. Louis Fed President speech, San Francisco Fed President Daly speech, U.S. retail sales (-0.9%), Retail sales minus autos (-0.3%), Import price index (0.0%), Import price index minus fuel (0.3%), Philadelphia Fed manufacturing survey (-4.0), Business inventories (0.0%), Home builder confidence index (32)

  • Friday: Monthly U.S. federal budget (-$66B), Housing starts (1.26 million), Building permits (1.39 million), Consumer sentiment, prelim (60.7)

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Earnings Corner 📈 📉

Constellation Brands $STZ ( ▼ 0.89% ) results were a miss, hurt by weaker beer demand and higher aluminum costs due to tariffs. However, its FY outlook of organic sales -2% to +1%, with EPS of $12.6-$12.9, was reiterated. The Company cited that consumers in zip codes with larger Hispanic populations stopped gathering as much, with Jim Cramer of CNBC blaming ICE raids for the decrease in get-togethers

Today’s Headlines 🍿 

  • The Big Beautiful Bill passes: Here’s what you need to know 👇️ 

    • Corporate tax cuts are extended, making the cuts in the 2017 Tax Cuts and Jobs Act permanent. The bill also permanently increases the standard deduction, child tax credit, and estate and gift tax exemptions

    • There are a slew of temporary tax benefits, including no taxes on tips or overtime (up to $25k). The state and local tax (SALT) deduction increased to $40k, and there is a $10k annual deduction on auto loan interest. Additionally, some seniors will be getting a $7.6k ‘bonus’ deduction, which is being touted as no taxes on social security

      • Meanwhile, every new baby born in the Trump administration will receive $1,000 in a tax-advantaged investment account

    • Medicaid coverage is decreasing, due to requirements getting enhanced, mainly through the addition of work requirements and more frequent eligibility checks, and hospitals are getting smaller funding amounts. Manatt Health estimates that over the next decade, there will be 8.7 million fewer people covered by Medicaid (although the CBO estimates this number to be nearly 12mm) and Medicaid payments to hospitals will be reduced by $665B

    • Other notable provisions include raising the debt ceiling to $5 trillion, reductions to SNAP, phasing out clean energy tax credits, a $150B budget increase for the U.S. military, and allocating $100B to ICE to combat illegal immigration

  • Tariffs are set to go into effect August 1st, an update from initial guidance of July 9th. It sounds like rates are getting set this week though - with further room to negotiate until August 1st. Trump says tariff letters to 12 countries are signed and are going out Monday. The U.S. is reportedly going to impose 10% tariffs on 100 countries, including those “negotiating in good faith”

    • Last week, Trump announced a Vietnam trade deal, landing at a 20% tariff on imports to the U.S. (lower than the 46% rate floated) and giving the U.S. tariff-free access to Vietnam’s markets. The deal also includes a 40% tariff on any transshipping, a process reportedly used by China to circumvent trade barriers

    • The big trading partner to watch is the EU, with up to 50% tariffs on goods potentially going into place on the 9th. The EU is considering a temporary trade where there’s a 10% tariff on exports while a final deal is negotiated

  • Jobs numbers and Unemployment were a beat: The U.S. added 147k jobs in June, easily beating expectations of 110k on the back of strong growth in healthcare and state and local government education. The unemployment rate fell to 4.1% from 4.2% - a slight increase to 4.3% was expected

  • Private Payrolls data showed a decline, with the June ADP report showing a 33k loss in jobs. This marks the first decline since March 2023, and is well below the forecasted gain of 100k

  • OPEC+ members agree to a larger-than-expected oil production hike for August, aiming to expand market share despite risks of oversupply pressuring crude prices

  • Devastating flooding in Texas: The death toll has risen to 79, with over 40 still missing after flash floods slammed the Texas Hill Country

  • Jane Street is banned in India: Regulators barred the company from the local market and seized $567mm of its funds, citing “manipulative” and “fraudulent” trading. The move is meant to protect retail investors, especially in the derivative market, but hits Jane Street hard, as they have $4.3B in profits in India over the last ~2 years

  • OpenAI’s Head of Recruiting complains about Meta’s hiring practices: The HR lead took to X to complain about Meta offering “exploding offers” and poaching talent from OpenAI. Meta has been on a warpath, acquiring AI talent from several startups such as OpenAI, to boost their own “super-intelligence team”

  • Microsoft is laying off 9,000 workers (4% of its global workforce): The company aims to trim management layers and boost agility as it reorganizes for the new fiscal year

  • Are LMEs even worth it? According to HPS’s Purnima Puri, distressed debt swaps forced on lenders often fail and result in longer restructuring processes - “There’s a lot of money and fees going out the door and there’s a lot of brain damage and creditors and recovery rates have been totally demolished and it didn’t work anyway”

  • Carlyle is in talks to hand over the keys of Dainese SpA to creditors HPS and Arcmont, in one of the first potential private credit takeovers in Italy (BBG)

  • Cubic’s debt exchange: Cubic Corp, an Elliott and Veritas backed company, cut its debt load and extended its maturities, with the Sponsors injecting $170mm into the business. The Company will add $275mm of new liquidity and $200mm of interest expense savings over 3 years

  • Joe & The Juice may go public: The overpriced juice chain may IPO as soon as next year, potentially valuing the General Atlantic backed company at $2.4B

  • BlackRock is hoarding Bitcoin: Blackrock’s Spot Bitcoin ETF now holds 696k+ bitcoin. The ETF is closing in on becoming the firm’s top revenue generator as inflows soar

  • Tripadvisor has an activist – with Starboard Value taking a 9% stake in the travel and booking company, saying the stock is undervalued and aiming to boost its performance

  • Zohran leads the polls: In the latest NYC mayoral poll, Zohran Mamdani polled at 41%, well ahead of Cuomo and Mayor Adams at 26% and 16% respectively.

  • DEI is being deprioritized: Over 200 S&P 500 companies removed “diversity” and “equity” (in the DEI terms) from their annual reports this year

  • CalPERS is evaluating reducing its Private Equity exposure - per Pensions & Investments. Retirees are funding a probe into high fees and lagging returns as concerns over transparency grow

  • Amazon will shut down its Freevee streaming TV service in August, consolidating everything into Prime Video

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M&A Transactions💭 

Grammarly, a writing assistant, acquired Superhuman for $130.0M.

SGS agreed to acquire ATS, provider of testing, inspection, and calibration, for $1.3B.

BlackRock finalized its $12B acquisition of HPS Investment Partners.

vLex, developer of a legal information platform, has reached a definitive agreement to be acquired for $1.0B by Clio. J.P. Morgan advised on the sale.

Simmonds Precision Products, manufacturer of fuel and proximity sensing and structural health monitoring solutions, has reached a definitive agreement to be acquired for $770.0M by TransDigm Group (NYS: TDG). EV/Revenue was 2.2x.

Shreyas Stones, operator of multi-mining company, has reached a definitive agreement to be acquired for $1.99B by Mahindra Lifespace (BOM: 532313).

Onto Innovation (NYS: ONTO) has reached a definitive agreement to acquire The Materials Analysis Business of Semilab for $545.0M. Needham advised on the sale.

SEI Family Office Services, developer of investment management and reporting software, was acquired for $120.0M by Aquiline. Morgan Stanley advised on the sale.

RG Gold, operator of a gold mining and production company, has reached a definitive agreement to be acquired for $1.2B by Zijin Mining Group (SHG: 601899). EV/Net Income was 5.94x and EV/Revenue was 2.54x. BMO Capital Markets and J.P. Morgan advised on the sale.

QC Holdings, provides financial services, was acquired for $115.0M by Prospect Capital Corporation BDC.

PlayAGS, a designer and supplier of gaming products, was acquired for $1.06B by Brightstar Capital Partners. EV/EBITDA was 7.26x and EV/Revenue was 2.7x. Macquarie Capital advised on the sale.

Matariki Forestry Group, provider of forest management and woodlot harvesting services, was acquired for NZD 710.0M by The Rohatyn Group. Perella Weinberg Partners advised on the sale.

Lynxeo, manufacturer of advanced cable technology, was acquired for EUR 525.0M by Latour Capital. EV/Revenue was 0.8x. J.P. Morgan advised on the sale.

LBC Tank Terminals, operator of midstream and downstream bulk liquid storage, was acquired for $1.715B by Mitsui O.S.K. Lines (TKS: 9104).

LayerZero Power Systems, manufacturer of power distribution and quality monitoring products, has entered into a definitive agreement to be acquired for $1.0B by Advent International. Citizens Capital Markets & Advisory advised on the sale.

Stellex Capital Management entered into a definitive agreement to acquire The Air and Noise Filtration Technology Business of Durr for EUR 250.0M. EV/Revenue was 0.65x.

Curtis, manufacturer of industrial controllers, has reached a definitive agreement to be acquired for $1.0B by Parker-Hannifin (NYS: PH). EV/Revenue was 3.13x. Bank of America, Guggenheim Securities, and Goldman Sachs advised on the sale.

Capstan Therapeutics, operator of a biotechnology company, has reached a definitive agreement to be acquired for $2.1B by AbbVie (NYS: ABBV). Centerview Partners advised on the sale.

A2A, operator of natural gas distribution networks, was acquired for EUR 430.0M by Ascopiave (MIL: ASC). Rothschild & Co advised on the sale.

4Refuel, provider of refueling services, was acquired for CAD 400.0M by H.I.G. Capital. EV/EBITDA was 4.06x and EV/Revenue was 7.9x.

Tong Yang Life Insurance (KRX: 082640), provider of life insurance products, was acquired for KRW 1.3T by Woori Financial Group (KRX: 316140). EV/EBITDA was 3.53x and EV/Revenue was 0.7x. UBS Group advised on the sale.

The AZEK Company (FRA: 4N1), a designer and manufacturer of beautiful, low maintence and environmentally sustainable products, was acquired for $6.65B by James Hardie Industries (ASX: JHX). EV/EBITDA was 25.21x and EV/Revenue was 5.92x. Bank of America, Jefferies Financial Group, and Sofali & Co advised on the sale.

TerraSource Global, manufacturer of material processing and handling equipment, was acquired for $245.0M by Astec Industries (NAS: ASTE). EV/Revenue was 1.63x.

The Telia TV and Media Business of Telia Company (STO: TELIA) was acquired for SEK 6.55B by Schibsted Media. EV/EBITDA was 23.16x.

SpringWorks Therapeutics, a clinical stage biopharmaceutical company, was acquired for $3.4B by Merck (ETR: MRK). EV/Revenue was 15.51x.

Southern States Bancshares, a full service community bank, was acquired for $368.4M by FirstBank (NYS: FBK). EV/Net Income was 9.93x and EV/Revenue was 3.56x. Performance Trust Capital Partners advised on the sale.

The Logistics Services Business Unit of Solistica were acquired for $127.0M by GEF Capital Partners and Vinci Compass.

Redfin, a residential real estate broker, was acquired for $2.708B by Rocket Companies (NYS: RKT). EV/Revenue was 2.61x. Goldman Sachs advised on the sale.

Prospect Medical Holdings, operator of hospitals, was acquired for $708.0M by Astrana Health (NAS: ASTH). 

Lexmark International, developer and manufacturer of cloud-enabled imaging, was acquired for $1.5B by Xerox (NAS: XRX).

The Gaming Business of International Game Technology was acquired for $4.05B by Everi Holdings.

Dorna Sports, operator of sports management, was acquired for $2.3B by Liberty Media (NAS: FWONA).

Olo (NYS: OLO), an open software as a service platform, has entered into a definitive agreement to be acquired for $1.73B by Thoma Bravo. EV/Revenue was 5.77x. Goldman Sachs advised on the sale.

Pension Insurance Corporation, provider of insurance services, has entered into a definitive agreement to be acquired for GBP 5.7B by Athora. EV/EBIT was 12.33x and EV/Revenue was 8.75x.

Crayon Group, an information technology advisory firm, was acquired for $1.4B by SoftwareONE (SWX: SWON). EV/EBITDA was 15.4x and EV/Revenue was 2.15x. Houlihan Lokey and ABG Sundal Collier advised on the sale.

DirectTV, provider of satellite television network, was acquired for $7.6B by TPG. TPG acquired AT&T’s 70% stake in the entity.

Enstar Group, a reinsurance group, was acquired by Sixth Street Partners, Liberty Strategic Capital, J.C. Flowers & Co for $5.1B. EV/EBITDA was 7.66x and EV/Revenue was 4.5x. Goldman Sachs advised on the sale.

Juniper Networks, engaged in designing, developing, and selling products and services, was acquired for $16.23B by Hewlett Packard Enterprises (NYS: HPE). EV/EBITDA was 28.97x and EV/Revenue was 3.12x. Citigroup and Goldman Sachs advised on the sale.

TPG Peppertree, provider of private equity investments, was acquired for $960.0M by TPG (NAS: TPG).

Intralot (ATH: INLOT) has reached a definitive agreement to acquire The International Interactive Business Unit of Bally’s (NYS: BALY). 

Direct Line Insurance Group, insurance seller, was acquired for GBP 3.7B by Aviva (LON: AV.).

Dotmatics, developer of software, was acquired for $5.1B by Siemens (ETR: SIE). EV/Revenue was 17.0x.

Everi Holdings, provides entertainment, was acquired for $6.3B by Apollo Asset Management. EV/EBITDA was 26.16x and EV/Revenue was 8.4x.

Private Placement Transactions💭 

TK Elevator, manufacturer of elevators, has reached a definitive agreement to receive $160.0M of financing from Alat.

xAI, developer of an AI platform, raised $5.0B of venture funding from Morrison Seger and Pittco Management.

Ninja, operator of grocery retail platform, raised $250.0M of venture funding led by Riyad Capital at a pre-money valuation of $1.25B.

Zhipu AI, developer of an AI large model platform, raised CNY 1.0B of venture funding from PDVC and Zhangjiang Group.

Terra CO2, manufacturer of low-carbon geopolymer cement, raised $125.0M of Series B venture finding led by Eagle Materials, Just Climate, and GenZero at a pre-money valuation of $175.5M.

Talon.One, developer of promotion software, raised $135.0M of venture funding from Silversmith Capital Partners, Meritech Capital Partners, and CRV.

Newmo, developer of a ride-sharing service platform, raised JPY 17.9B of Series A venture funding from Hirac Fund, Kyoshin Social Capital, and other investors.

Kardium, developer of medical devices, raised $250.0M of venture funding led by MMCAP International.

Genesis AI, developer of an AI-driven simulation platform, raised $105.0M of seed funding led by Eclipse Ventures and Khosla Ventures.

Climeworks, developer of carbon dioxide removal services, raised $162.0M of venture funding from BigPoint Holdings AG, Partners Group, and Carbon Removal Partners.

Castelion, manufacturer of military systems, raised $350.0M of Series B venture funding led by Lightspeed Venture Partners and Altimeter Capital Management.

Laxey, operator of fish farm, raised EUR 158.0M of venture funding through a combination of debt and equity. The EUR 63.0M of equity was provided by Sigurjon Oskarsson.

Odds of the Day 🍒 

Kalshi traders are pricing in a 27% chance of Eric Adams winning the NYC Mayoral race, with Zohran Mamdani highly tipped to win the race.

*New Traders on Kalshi receive a $20 bonus of trading credit when depositing $100+ with the code “HYH”.

Noteworthy Chart 🧭 - Apple keeps buying back shares

Meme Cleanser 😆 

Until next time!

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