Amazon (AMZN) has been one of the main headliners today, and it comes after the company officially announced it will acquire MGM for $8.45 billion. With this move, Amazon is buying a historic studio that has an extensive catalog featuring more than 4,000 films -- including the James Bond franchise -- and 17,000 TV shows.
"The real financial value behind this deal is the treasure trove of IP in the deep catalog that we plan to reimagine and develop together with MGM's talented team. It's very exciting and provides so many opportunities for high-quality storytelling," Mike Hopkins, senior vice president of Prime Video and Amazon Studios said in the press release here.
This deal the second-largest acquisition in company history, but we are not surprised by this significant investment in Prime Video based on what we heard in the first-quarter earnings call. In fact, in April, we suggested in our earnings write-up here that beefing up content for Amazon Prime Video would be one of Amazon's major objectives this year. As management explained on the earnings call, Prime members who watch Video have a higher free trial conversion rate, renewal rate, and engagement level. In other words, the video offering has made the overall Prime subscription service sticky, and companies need a sticky service if they want to keep churn rates low and eventually raise prices in the future. Based on the value that Video adds to the overall Prime subscription, we think the strategic rationale behind this deal makes a lot of sense.
Union Pacific's ASR
In other news, Union Pacific Corp (UNP) announced after the close Tuesday night it has established an accelerated share repurchase (ASR) program worth $2.0 billion. According to the company's filing, approximately 7.2 million shares of common stock repurchased under the ASR will be received on May 26, 2021. The final number of shares repurchased under the ASR will be based on the volume-weighted average price.
What's interesting about this move is that the company recently raised some debt at a very favorable rate. And now, Union Pacific is using most of those proceeds to retire shares through this ASR, as confirmed by CFO Jennifer Hamann at the Wolfe Research Global Transportation & Industrial conference on Wednesday morning. Management must be seeing some type of opportunity to retire shares right here. Union Pacific's stock has been stuck in the low $220s since late March despite a significant rebound in volumes, as we detailed here.
Lastly, we are prepping for Nvidia's (NVDA) fiscal first-quarter earnings report Wednesday night. As a brief reminder, we already got some sense into how strong the upcoming results would be after CFO Colette Kress said at the company's April Investor Day that revenues were tracking above the company's previously issued guidance of $5.3 billion +/- 2%.
In the report, we will be looking for more information about gaming and data center demand trends as well as how much of a role crypto mining played in the quarter. Also, any commentary around the pending acquisition of ARM Holdings would be greatly appreciated, because few people believe regulators will approve the deal. At the time this was written, the first-quarter consensus estimates per FactSet call for revenues of about $5.395 billion and adjusted earnings per share of $3.29.