Daily Brief: Zendesk Probably Wishes It Said Yes To A Buyout Sooner

Daily Brief: Zendesk Probably Wishes It Said Yes To A Buyout Sooner

over 1 year ago3 mins

Mentioned in story

Customer service software company Zendesk finally agreed to be bought out for $10 billion on Friday.

What does this mean?

Zendesk has been getting on investors’ last nerve lately. First, a $4 billion agreement to buy SurveyMonkey-owner Momentive Global late last year was met with derision, and Zendesk’s stock subsequently plunged. That forced the company to drop the deal altogether in February. Then, that same month, a group of private equity (PE) firms offered to buy out the company for $17 billion, but Zendesk refused on the grounds that the bid was too low. Again, investors weren’t happy. And even though the company did then reach out to nearly 30 prospective buyers, it was hardly likely to find a better offer with tech valuations tumbling.

After all that, Zendesk announced on Friday that it had agreed to be bought out by a group of PE firms – among them Permira – for $10 billion. That’s around 34% more than it was worth before the deal was announced, but around 41% less than if it had accepted the first offer…

Zendesk stock
Source: Google Finance

Why should I care?

The bigger picture: Let’s call the whole thing off.

Zendesk embarked on this saga mostly because activist investor Jana Partners has been pushing hard for change at the company, even holding talks to replace the CEO earlier this month. Failing that, Jana was just keen to get a quick and dirty sale. That way, investors who have consistently been less than satisfied with the company could at least get a return on their investment.

Zooming out: Taboo in Japan.

Activist investors have also been putting pressure on Japanese conglomerate Toshiba, which is reportedly fielding offers of as much as $22 billion to take the company private. That’s particularly notable given that PE firms generally aren’t well-received in Japan. So if those investors are able to close the deal, it would be the biggest they’ve ever pulled off in the country.

Keep reading for our next story...

FedEx’s Quarterly Earnings Were Stronger Than Expected

FedEx image

Logistics powerhouse FedEx posted better-than-expected quarterly earnings late last week.

What does this mean?

The pandemic proved that you can package up treadmills, trampolines, and everything in between. But you can’t package up life, which is a sticking point for FedEx: the company’s been delivering fewer products as people opt to spend their money on travel, experiences, and entertainment. FedEx’s ground business – the main driver of the company’s growth – saw average daily package deliveries fall 5% last quarter from the same time last year. And its air freight business was MIA too, with daily deliveries down 11% as Chinese lockdowns took their toll. The good news is that those shortfalls were more than offset by higher prices, which were up 11% and 20% in each respective segment. That helped the company post a better-than-expected quarterly profit, and it rounded things off with an impressive yearly profit outlook too.

FedEx earnings

Why should I care?

The bigger picture: There’s no such thing as fashionably late.

FedEx probably can’t keep hiking prices as long as demand keeps falling, meaning it’ll need to improve services and operations to squeeze out more profit instead. So it might want to take another look at its delivery success rate: data from ShipMatrix shows the courier’s now delivering 93% of packages on time. That’s up from 89% in December, sure, but arch-rival UPS consistently hits the high 90s.

Zooming out: Britain heads for recession.

There’s another reason demand for FedEx is falling: inflation is cutting the amount of disposable cash people have to spend. Just look at the UK, where data out on Friday showed retail sales were 0.5% lower last month than the month before, even though shoppers spent 0.6% more. Meanwhile, separate data showed that UK consumer confidence fell this month to the lowest level on record. Put them together, and some economists think there’s more of a chance that the country’s economy will shrink this quarter and slip into a recession.

UK retail sales
Finimize

BECOME A SMARTER INVESTOR

All the daily investing news and insights you need in one subscription.

Disclaimer: These articles are provided for information purposes only. Occasionally, an opinion about whether to buy or sell a specific investment may be provided. The content is not intended to be a personal recommendation to buy or sell any financial instrument or product, or to adopt any investment strategy as it is not provided based on an assessment of your investing knowledge and experience, your financial situation or your investment objectives. The value of your investments, and the income derived from them, may go down as well as up. You may not get back all the money that you invest. The investments referred to in this article may not be suitable for all investors, and if in doubt, an investor should seek advice from a qualified investment advisor.

/3 Your free quarterly content is about to expire. Uncover the biggest trends and opportunities. Subscribe now for 50%. Cancel anytime.

Finimize
© Finimize Ltd. 2023. 10328011. 280 Bishopsgate, London, EC2M 4AG