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THE HEADLINES

 

CATCH THIS SMOKE

In talks that almost certainly took place at an evil lair deep inside a volcano, Philip Morris and Altria discussed reuniting to create a tobacco conglomerate worth more than $200B.

Eleven years ago, the firms split to combat a slowing US market for cigs, while simultaneously avoiding looming lawsuits and regulation stemming from that whole “cigs are bad for you” movement. The merger would give Philip Morris 59% of the combined company if the all-stock deal were to close.

But why?

Despite what your chain-smoking coworkers would lead you to believe, tobacco sales are on the decline. Presumably, because all the cool kids are vaping in high school bathrooms now. It’s not just the US where sales are falling, other major cigarette markets like Japan and Russia are sinking as well, but Altria and Phillip Morris think they have an answer …

If you can’t beat ‘em, join ‘em

Altria, as you’ve probably heard, bought a $12B stake in Juul Labs earlier this year. Likely due to those pesky sales numbers. It’s also been working with Philip Morris (hence the merger talks) to develop its own e-cig, the IQOS, which heats tobacco as opposed to the magical mystery fluids you’ll likely find in a Juul.

Both firms believe that e-cigarette consumption could eclipse combustible and other traditional tobacco products in the coming years, and investment in e-cig technology is “the future.” Which will probably help them end up right back in the FDA’s crosshairs.

Investors were not so optimistic. After the news broke, Philip Morris and Altria saw share prices drop 6% and 2%, respectively.

 

PAPA SUPREME

Papa John’s finally found the CEO it believes will give it a seat at the big boy table. The company tapped Arby’s President Rob Lynch for the job. Lynch will replace current CEO, and John Schnatter crony, Steve Ritchie in hopes that he can “bring the meats” to the struggling pizza franchise.

Look back at it

But before we look to the future, let’s remember the past …

It’s been a far fall from grace for Papa John (the man). Just imagine, one day you’re shooting commercials with/BFFs with NFL legend Peyton Manning and the next you’re getting kicked to the curb by your own Board of Directors.

Of course, the whole issue stemmed from Schnatter’s disapproval of the NFL’s take on the National Anthem controversy … and it all ended with an infamous conference call. Read: he’s a bigot.

Bring the meats!

In February, activist investment group Starboard Value invested in Papa John’s with the goal of replacing Ritchie as CEO. And it seems like Starboard believes Lynch is the perfect guy for the job.

As Chief Marketing Officer from 2013 to 2017, Lynch helped Arby’s consolidate regional marketing strategies … shifting the perception of the company from a local roast beef shack you’ve never heard of to a national roast beef shop you would never go to.

Inexplicably, the guy even led Arby’s to 16 consecutive quarters of same-store sales growth. But the most coveted line on his resume is the fact that he created the slogan “we got the meats” … which is the “there’s an app for that” of the fast-food roast beef industry.

Lynch wasted no time in citing the company’s plans to involve its second-biggest hire of the year, Shaq, in a more prominent role as the spokesman of the franchise.

Investors, Shaq, and even Papa John Schnatter himself are excited about the future. Papa John’s stock rose 7% following the announcement.

 

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IN OTHER NEWS

• Costco opened its first store in China yesterday, and let’s just say, people lost their sh*t (figuratively). The store was forced to close early after officials warned about the traffic, which was essentially at a standstill for 1km (as Americans we can only assume that is roughly a few miles) around the store. Going forward, August 27th, 2019 will be forever known in Shanghai as Black Tuesday. Just wait until they get a load of the deals at Walmart.

 

• “Shut up and drive.” – words that Anthony Levandowski should have followed during his career at Uber. Levandowski was charged by US prosecutors with 33 counts of theft and attempted theft of trade secrets from Google. He faces 10 years in prison and $250k per count, or $8.25M in total. Tony Autonomy was one of the founding fathers of Google’s self-driving project, Waymo, and co-founded the self-driving truck company, Otto, which was later bought by Uber. One star for you, Mr. Levandowski.

 

• Potential investors got a peek into Peloton’s financials, as the home fitness equipment company revealed its documents filed with securities regulators for its upcoming IPO. The good news? Sales grew 110% from $435M in the fiscal year ended June 2018 to $915M (June 2019). The bad news? Its net loss increased drastically, from $47.9M to $245.7M. Peloton expects to bring $500M through its offering.  And you still don’t have a gorgeous open plan living room overlooking a mountain to put your Peloton in.

 

• BP sold off its Alaskan oil and pipeline assets to Hilcorp yesterday after six decades of laying the pipe in The Last Frontier. The price is a cool (but quickly melting thanks to global warming) $5.6B. This sale contributes to BP’s larger initiative of divesting $10B in assets through 2019 and 2020.

 

• Craig Wright, who claims to have invented Bitcoin, will have to surrender more than $4B of his own creation due to his submission of false documents and lies in a legal dispute with a former business partner. This might be difficult though, as he claims he doesn’t know where they are. Hint: check under his virtual mattress. Mr. Wright is rumored to be Satoshi Nakamoto, the anonymous creator of Bitcoin. Whether he started those rumors himself is yet to be determined.

 

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