Apple (AAPL) made a couple of dents in its massive cash hoard with two small but strategically significant acquisitions. The company finally confirmed that it bought superfast chip designer Intrinsity and today reportedly picked up voice recognition specialist Siri.
With the need to supply ultra-fast chips for its mobile devices, the Intrinsity deal leads Apple another step closer to designing more of its own high-performing chips in-house.
After the launch of the iPad, technology bloggers and analysts noted that the device was extremely fast compared to previous Apple products. They also found a chip named the A4 inside the iPad and industry insiders suspect the speedy new chip’s design was a combined effort between Intrinsity and Apple.
According to Tom R. Halfhill, a chip analyst for Microprocessor Report, Apple may have paid around $121 million for Intrinsity, the small Austin-based firm.
“The purchase price is like pocket change to Apple, and they get a lot of benefit,” said Halfhill. Intrinsity has also been working with a division of South Korea’s Samsung Electronics, the same division that manufactured the fast A4 chip, according to Chipworks, a firm that reverse-engineers and analyzes technology products. (NYTimes)
Will Strauss, an analyst with Forward Concepts, said one of Apple’s main objectives is to keep its competitors away from these fast-performing lower powered chips. ”The acquisition is both to improve Apple’s product line and to deprive potential competitors of Intrinsity’s’ intellectual property.” said Strauss, who expects Intrinsity-designed chips to be in future iPhone models and in other Apple products.
Strauss and other industry analysts say that Apple’s move is a sign that it has lost faith in P.A. Semi, a California chip design startup that Apple bought in 2008 for $278 million. Several of P.A. Semi’s top executives have since left Apple. (AmericanStatesman)
Siri, based in San Jose, makes a “personal assistant” app for the iPhone: people ask it questions or type them in and it searches for information on that subject.
Apple hasn’t made any statements about what it’s going to do with Siri, but the answer seems obvious, writes Gizmodo’s John Herrman: “They’re getting into search. Voice search, to be exact. And in competitive terms, they’re catching up with—and possible even shutting out—one of their biggest competitors.”
Speaking of Google, “considering that Apple may still have a Google Maps replacement in the wings, it certainly seems as if the company is making more of an effort to separate itself from Google, though both Apple and Google publicly insist that their relationship is still strong,” adds Jacqui Cheng at Ars Technica.
And in the view of Silicaon Alley Insider’s Dan Frommer Siri “represents what we think one form of effective search will look like on mobile platforms: It takes a request from you and brings back actual results.”
In other Apple-related developments, the notorious “lost iPhone” incident may lead to an earlier launch of the iPhone 4G, that’s according to Piper Jaffray analyst Gene Munster. Munster said the prototype leak may cause current sales of iPhone to go down as customers hold off for the newer model. (QuickPWN)
Just last night, Apple CEO Steve Jobs confirmed his attendance to be the opening speaker of Wall Street Journal’s All Things Digital conference, and Dan Frommer thinks it’s likely that Jobs will unveil the new iPhone 4G at the June 7th event.
Apple will also be aggressively opening up its iconic stores in cities around the globe as the company targets consumer markets in China and in Europe.
With 286 stores worldwide, the company plans to open another 40-50 new stores this fiscal year and over half of the new openings will be outside of the U.S. Apple expects to have about 25 stores in China by the end of 2011, said the firm’s CFO Peter Oppenheimer. ”About half the Macs sold in our stores during the March quarter were to customers who have never owned a Mac before,” he added.
Needham & Company analyst Charlie Wolf wrote in a note released Wednesday that Apple’s stores continue to play a pivotal role in attracting Microsoft (MSFT) Windows users to the Mac. Needham estimates that, since 2004, more than 18 million Windows users have switched to a Mac computer.
“Mac sales in the March quarter were almost four times higher than they were in the second quarter of fiscal 2004,” wrote Wolf. Windows switchers have more than doubled the size of the Mac installed base, he added. The customer services offered through the “genius bars” located in Apple stores have also helped woo Windows users onto Macs, according to Wolf. (TheStreet)
This post was based on Company Searches of Alacra Pulse for the companies mentioned.
See Also: Alacra Pulse Prognosis: Apple, Inc Price Targets and Pulse Check: Surging Sales Boost Apple and its Suppliers
Sheena Lee
Technorati Tags: (GOOG), (SIRI), AAPL, Apple, Google, Intrinsity, iPad, iPhone, M&A, mergers and acquisitions, Microsoft, MSFT, PulseCheck, Samsung Electronics
Despite running into some snags, there’s a growing sense of inevitability about a merger between UAL Corp (UAUA) and Continental Airlines (CAL). As our previous post noted, Continental makes a more logical partner for United than US Airways (LCC), which called off talks with UAL last week. Now the focus is shifting to the price and other details of a United-Continental combination.
DealBook reported today that “officials gave hints that deal negotiations were ongoing and that Chicago would remain the airline’s headquarters.” Glenn Tilton, United’s chief executive, said that the airline — which reported a loss for the quarter — still believes there are too many planes in the air and that consolidation is necessary to help the company make money.
Though Jamie Baker of JPMorgan Chase wrote in a report last week that a deal is much less likely now that Continental doesn’t have to worry about a potential US Airways deal, many analysts seem optimistic about the companies’ ability to work something out. “This is the right merger at the right time,” said Keay, who gave both UAL and Continental a “buy” rating. “I don’t see a lot of impediments. Corporate travel is improving, there’s no revenue crisis and oil isn’t $145 a barrel.” The deal would bring about a global network which Jeff Straebler, a fixed-income strategist at RBS Securities, Inc., expects would outweigh near-term costs. “They would make a much stronger carrier.” (BusinessWeek)
“Consolidation prospects would be a significant positive for the industry and, in our view, serve to enhance what is already a compelling stand-alone case for the equities,” said Barclays Capital analyst Gary Chase. (Reuters)
The question would then become, at what price. Jesup & Lamont’s Becker said United has been “able to improve revenue and cut costs” (Real Clear Markets). Still, Jim Corridore, a Standard & Poor’s equity analyst, sees a chance that “Continental will get more of a premium than previously thought if there is a merger agreement,” meaning not such good news for United. “That would be more costly for United, pushing United down.” (BusinessWeek)
But there’s a lot at stake here on both sides, according to Vicki Bryan, a debt analyst at Gimme Credit. She believes Continental and United would benefit almost equally from a deal. “If Continental plays a larger role at United, United could move away from Airbus,” said Teal Group analyst Richard Aboulafia. “And I think Continental could end up playing a significant role. Continental has a better track record of profitability, and their way of doing things will likely prevail.”
If the Continental-United talks do result in a deal, it would leave US Airways way behind, with analysts questioning its chances of survival. (DealBook)
Cowen & Co. aerospace analyst Cai von Rumohr questions whether just one manufacturer could even supply a combined carrier with all the jets it needs. “Their organization may be too big for just one supplier,” said von Rumohr. “They could buy from both Boeing (BA) and Airbus.” (MarketWatch).
But given that the airways are littered with failed merger talks, that may be jumping a little too far ahead.
Avram J. Davis
This post was based on Company Searches of Alacra Pulse for the companies mentioned.
See also Pulse Check: Airlines Get Lift From Merger Talk.
Technorati Tags: (BA), (CAL), (LCC), (UAL), Airlines, Boeing, Continental-Airlines, M&A, mergers, PulseCheck, UAL Corporation, US Airways Group
The announcement today that Thomas Weisel Partners Group, Inc. (TWPG) agreed to be acquired by Stifel Financial Corp. (SF) is just the latest sign of renewed M&A activity in the the financial services industry.
Analysts are now paying closer attention to the St. Louis, Missouri-based investment bank, Stifel, which also recently purchased 55 offices from UBS Wealth Management Americas branch network.
Morningstar notes that the deal was valued at over $300 million and each Thomas Weisel share at approximately $7.60 at the time of the announcement. “$7.60 per share is over 50% higher than our most recent fair value estimate for Thomas Weisel Partners Group, but the acquisition price includes Stifel’s management’s expectation of annual pretax cost savings of $62 million from the merger. We also agree with the companies’ management that there appears to be very little overlap in their investment banking business, so the companies are highly complementary to each others’ core competencies.”
Stifel has been a serial acquisitor as of late, and we believe that Stifel’s management should have the experience necessary for a successful integration. We are maintaining our current fair value estimate for Stifel Financial Corp as we await the company’s first-quarter earnings.
In addition to several other acquisitions over the past few years, Stifel acquired the capital markets unit of Baltimore, Maryland-headquartered Legg Mason in 2005. Steve Stelmach, a FBR Capital Markets analyst,said the transaction may signal in uptick in mid-market investment bank consolidation. He said M&A activity is a “logical course of action considering the difficult economics of the business (absent a material pick-up in investment banking activity).” (Deal Journal)
Small investment banks focused on growth stocks such as technology and health care like Thomas Weisel Partners are getting swallowed up, says Andre Cappon, president of The CBM Group. “You can’t make a profit anymore by doing the occasional IPO of the technology firms, there aren’t enough of those,” says Cappon. (RegisteredRep)
AXA Private Equity’s recent acquisition of Bank of America’s (BAC) $1.9 billion portfolio of private equity fund investments is another recent deal in the sector. AXA Private Equity’s unit also recently closed on its acquisition of the investment bank Natixis’s French private equity operations. (DealBook)
Terms of the deal were not disclosed, but Vincent Gombault, Axa Private Equity managing director for funds of funds, said the current environment suggested a single-digit percentage discount to the portfolio’s net asset value. “The market today (for good-quality portfolios) is currently in the single-digit range … below 10 percent to the NAV (net asset value).” (Reuters)
But it’s not all plain sailing for M&A. Australia’s antitrust agency last week blocked the purchase of AXA Asia Pacific Holdings (AXA) by National Australia Bank (NAB) for $13 billion. The regulator said an NAB takeover of AXA Asia Pacific would hurt competition by reducing the number of retail investment platforms in the market. “We think the ‘investment platform’ grounds for rejection is somewhat difficult to comprehend. Rather, we think that in an election year, the government would not be keen to see the major banks gain further market share,” said Craig Williams, an analyst at Citigroup. (Reuters)
NAB said it would not divest its recently acquired AVIVA unit in order to clear the antitrust hurdle.(The Australian). The bank is also hoping to acquire some of the Royal Bank of Scotland’s (RBS) branches.(Sydney Morning Herald)
Other recent deals have also been met with diverse reactions from analysts. Earlier this month, Warburg Pincus LLC purchased about 16 million shares of Citigroup Inc.’s (C) Primerica. Following the transaction, Rochdale Securities’ Dick Bove said Primerica’s successful spinoff made clear that Citi Holdings assets may have significant value. “The real book value of this company is substantially above what it’s being reported at and the capital is higher than what it’s being reported at,” Bove said (The Street).
See also Pulse Check Update: Is Citi’s Stellar Performance Sustainable?
Last month, Prudential plc, (PRU) the UK insurer (not related to Prudential Financial), bid $35.5 billion to purchase American International Group Inc.’s (AIG) Asian unit. A week ago, Prudential applied for a secondary listing in Singapore. Shore Capital Group Ltd analyst Eamonn Flanagan issued a “buy” rating on Prudential. He said the Singapore listing “is an effort to populate the register with Asian shareholders who are more supportive of the deal.” (Business Times)
Keefe, Bruyette & Woods analyst Greig Paterson intimated that Prudential had overbid for the AIG business unit. He said it would make sense to pay up to about $30 billion to complete the deal. Societe Generale’s Michael van Wegen said the deal could be 11% to 21% dilutive for existing shareholders, but noted that it could lead to a heftier dividend payout in the future. (MarketWatch)
Paterson also noted that Prudential’s secondary listing suggests an interest in the country’s sizable client base. Panmure Gordon analyst Barrie Cornes predicted Prudential shares would see “a great deal of volatility” until issued rights dealings started. Lansdowne Partners’ and Mason Capital’s recent short-selling of Pru’s stock “reinforces our view that the shares will be volatile.” (Fox Business)
With rumors that some struggling US regional banks may get snapped up by the likes of Barclays (BARC) Toronto Dominion Bank (TD), Royal Bank of Canada (RY) and Bank of Montreal (BMO), look for the M&A market for financial services to continue to heat up.
See also Research Roundup: Asia Insurance Unit Sale Helps AIG, Jury out on Benefit to Prudential Plc
Avram J. Davis
Technorati Tags: (AIG), (bac), (Barc), (BMO), (c), (NAB), (PRU), (rbs), (RY), (SF), (TD), (TWPG), American International Group, Aviva, AXA, AXA Private Equity, AXAHY, AXAS, Bank of Montreal, Bank-of-America, Barclays, Citigroup, financial-services, Insurance, M&A, National Australia Bank, PRI, Primerica, Prudential, PulseCheck, Royal Bank of Canada, royal-bank-of-scotland, Stifel Financial, Thomas Weisel, Toronto Dominion Bank
RBC Capital analyst Mike Ambramsky goes out a a limb on Palm Inc. (PALM), suggesting the struggling company could fetch as much as $10-14 a share, twice what most other analysts are predicting.
He believes Palm’s webOS may command a greater ’strategic premium’ than generally appreciated.
“If acquired, webOS may command a healthy strategic premium, given a ‘perfect storm’ of factors:
1) the frenetic ‘land grab’ in the huge, nascent Smartphone market;
2) rising Smartphone competitive intensity, with too many Apple/Google contenders;
3) the realization owning great software is key to leadership; and
4) carrier, OEM fear over Apple/Google’s growing power and threat of repricing down their businesses (Google Voice, iTunes, Nexus, etc.).”
Abramsky sees Hewlett-Packard (HPQ) as the best case acquirer for Palm.
In contrast, analysts at Morgan Joseph don’t expect Palm to find a strategic buyer and think the company is basically worthless. They reiterate their “sell” rating with a target of $0.
“Despite speculation that Palm has put itself up for sale, we continue to believe that the likelihood of a strategic buyer emerging is minimal.” Although PALM could receive offers from defensive acquirers “the prospects for the company’s survival look grim.”
Notable Calls adds that some Palm watchers have suggested that Elevation Partners, that controls around 30% has a cost basis of about $5.41 (factoring in the convertible preferred shares).
This post was based on Company Searches of Alacra Pulse for Palm Inc (PALM) and Hewlett Packard (HPQ). See also Pulse Check Update: Palm Reads the Signals and Pulse Check: Palm Readings Don’t Bode Well for PDA Pioneer
Technorati Tags: (HPQ), (PALM), Hewlett-Packard, M&A, mergers and acquisitions, Palm Inc., PulseCheck, smartphone
Merger & acquisition activity in the US financial services sector will gain momentum in 2010 as industry conditions continue to improve and the outlook for regulatory reform gains clarity, according to PricewaterhouseCoopers.
Selected excerpts from On the Road Again – Transactions in an Opportunistic Market,
Deal-making in the remainder of 2010 will be marked by a steady stream of FDIC-assisted M&A deals in the banking sector, continued consolidation among small- to mid-size asset management firms, and an uptick of deals in the property and casualty (P&C) insurance segment.
Although year-to-date transaction volume has been modest, PricewaterhouseCoopers expects activity to increase over the remainder of 2010. Improving sector fundamentals will reduce the gap between buyer-seller pricing expectations and uncertainty surrounding regulatory reform is likely to be clear. These factors will enable the potential impact of prospective reforms to be priced into term sheets.
We believe the current market presents a significant number of potential opportunities in the banking, asset management and insurance sectors for investors that have the liquidity and capital strength to be acquisitive and the infrastructure and capabilities to realize potential synergies - Gary Tillett, PricewaterhouseCoopers
- Banking. Continued high credit losses, weak asset generation, and a reduction in the availability of cheap liquidity will make it difficult for banks to return to historical levels of profitability and growth.
- Asset management. Asset managers are likely to benefit from increased savings rates. Individual investors, however, remain averse to the market volatility that significantly impacted their savings and retirement accounts.
- Insurance. Insurance companies achieved improved performance in 2009 driven by the recovery in asset values; however, continued soft pricing in property and casualty insurance and a shift to safer products for life insurance may mean lower profits in the near future.
Technorati Tags: asset management, banking, financial-services, Insurance, M&A, mergers and acquisitions
Applied Materials, Inc. (AMAT) is apparently on the hunt for bolt-on acquisitions. Chief Executive Mike Splinter told the Wall Street Journal he is open to more deals after buying Semitool, Inc. in December. On Wednesday, Applied Materials shares rose following its revised sales outlook for the fiscal year. The semiconductor manufacturer, which had predicted in February that its sales would increase over 50%, now expects 60% revenue growth compared to its 2009 results.
Analysts have responded enthusiastically to the company’s earnings projections and the possibility of upcoming M&A activity. Takeout targets could include start-up companies such as Crossing Automation, a semiconductor wafer manufacturer that purchased Asyst Technologies Inc. assets following Asyst’s bankruptcy last year. Other possible targets are Advanced Inquiry Systems Inc., a portfolio company of Intel Capital, Northwest Ventures, OVP Venture Partners, TL Ventures and Applied Ventures; semiconductor wafer polishing pad makers InnoPad Inc. and NexPlanar Corp.; or Qcept Technologies Inc., which is backed by Pittco Capital Partners, Imlay Investments and Jackson Capital. Other semiconductor makers, such as Lam Research Corp. and Tokyo Electron Ltd. may similarly pursue M&A transactions (WSJ).
Following a slump in the first half of 2009, the chip industry has received muted interest from analysts and investors. TheStreet named Cree (CREE), NVE Corp. (NVEC) and Altera (ALTR) as its favorite picks in the sector. Last month, shares of Cree were downgraded from Buy to Neutral by GARP Research (Benzinga). Altera revised its outlook for the first quarter of 2010, forecasting a revenue increase of 7% – 10%, compared to the previous projection of 5 – 10%. (Zacks). Last month, Needham & Company reaffirmed its ‘Buy’ rating for Novellus Systems (NVLS) and set a price target of $28 after the company raised its earnings guidance on its mid-quarter call (Street Insider).
Applied Materials is arguable in the strongest position to pursue an acquisition. On Wednesday, Needham & Co. analyst Edwin Mok reaffirmed a “Buy” rating and valued AMAT stock at $18 (The Dividend Daily). Credit Suisse raised the semiconductor manufacturer’s 2010 EPS estimates to $0.75 per share and maintained a neutral rating. UBS, meanwhile, maintained its buy rating and raised its target to $18 per share. (Forbes). Piper Jaffray and GC Research predict Applied shares could reach $22. Barclays maintains an “equal weight” rating on the stock and referred to Applied Materials as a “show-me story.” TheStreet rates Applied Materials “hold.”
In a March 24 note, Oppenheimer analyst Gary Hsueh, reiterated “our recent view that owning semi cap equipment stocks over the next 1-2 qtrs warrants caution as the order/shipment gravy train begins to decelerate.” Nevertheless, he maintained an “Overweight” rating on AMAT.
In a Feb 18 report, S&P’s Angelo Zino held a “Strong Buy” rating on Applied Materials with a $17 price target.
“We think flat panel display spending is being driven by lower-priced televisions and improving consumer sentiment.We view solar as a large growth driver and see segment sales being driven by China manufacturers expanding capacity.”
Applied Materials stock closed at $13.35 per share on Thursday.
Avram J. Davis
Read Applied Materials Inc.’s sales outlook.
Technorati Tags: (ALTR), (AMAT), (NVLS), Altera, applied materials, computers, Cree, M&A, mergers and acquisitions, Novellus Systems, PulseCheck, semiconducters
Sustained flows of private investment will be crucial for economic recovery in South-east Asia as fiscal measures are phased out. Banks will remain cautious with lending until growth picks up, but FDI, portfolio investment and M&As are each set to rise.
Guest Post by Oxford Analytica
Fixed investment in South-east Asia dropped sharply last year, as the combined effects of weaker domestic demand and lower foreign orders hit output. Hardest hit were the export-dependent economies of Thailand, Malaysia and Singapore, which also experienced substantial capital outflows.
Signs of a recovery have been apparent since the end of September, as fiscal stimulus measures lifted consumption. Though weak US demand continues to restrain growth in some economies, notably Malaysia and Thailand, inventories are being rebuilt and capacity utilisation is rising across the region.
Recovering flows. Foreign reserves, a leading indicator of investment flows, have been growing since world financial markets began to stabilise in March 2009, strengthening the region’s currencies:
- The exception has been Vietnam, which faces inflationary pressures and a burgeoning trade deficit. The central bank was this month forced to devalue the dong by 3.4%, bringing it into line with black market rates.
- For the region’s other economies, stronger growth and a faster pace of monetary tightening than in other parts of the world has created expectations of currency appreciation. Indonesia’s rupiah has been the strongest performer, rising 17% against the dollar last year.
Supporting investment. Public investment is set to decline as governments progressively withdraw their fiscal stimulus policies. This will put the burden back on financial markets to sustain growth by funding private investment. The World Bank expects private investment to rise by 7-10% across the region in 2010, with impetus coming from several quarters:
Countries that adopted the most aggressive reforms during the downturn, particularly Vietnam and Indonesia, now look set to attract the bulk of medium-term inflows.
- Indonesia expects disbursed capital to grow by 15% to 13.8 billion dollars this year, after a 24% drop in foreign direct investment (FDI) in 2009. Vietnam has forecast a 10-12% rise on its 2009 inflow of 21 billion dollars, with 10 billion dollars being disbursed.
- Political instability and policy inertia will undermine flows into Thailand, Malaysia and the Philippines, the other main FDI recipients.
Capital markets. Equity markets lost about half of their turnover in 2008 but recovered in the second half of 2009 as investors sought safe havens from volatility on Wall Street. Spurred by low inflation and higher earnings, trading in Indonesia, Singapore and Thailand has more than doubled since the deepest trough in late 2008, according to World Bank data.
Bond issues have rebounded as interest rate spreads narrowed, while listings have surged. Malaysia and Indonesia saw 65% increases in initial public offerings in the year to October 31, though returns were mixed. Liquidity is generally ample, but borrowing costs are still high due to debt concerns in Europe and tighter bank scrutiny of loans.
Mergers and acquisitions. South-east Asian companies have become prime targets for equity alliances and takeovers as they struggle to secure funding. Cash-rich investors in India and China are leading the way, with South Korean, Japanese and Western European buyers also active.
Last year saw some 290 mergers and acquisitions (M&As) worth 1.1 billion dollars in Vietnam, a 71% increase on 2008, mostly in banking, construction and manufacturing. In the first two months of 2010, Indonesia had a 10.7% share of global buyouts, largely due to a 770-million-dollar deal by Europe-based CVC Capital Partners for an 80% stake in retailer Matahari Putra Prima.
Brand-name retail and manufacturing firms, construction groups and real estate holdings will be highly sought after elsewhere in the region, as the removal of tariff barriers through recently implemented free trade agreements encourages cross-border expansion.
Technorati Tags: FDI, Indonesia, M&A, Malaysia, Philippines, Singapore, South-east Asia, Thailand, Vietnam
There’s little sign of Kraft (KFT) getting any closer to acquiring Cadbury (CBRY) as the bid deadline approaches.
Cadbury today continued its vigorous rebuffing of Kraft, announcing a strong forecast for 201o and pouring scorn on Kraf’ and its “derisory” and “inadequate” offer.
Roger Carr, chairman of Cadbury, said the Kraft shares in the bid also exposed Cadbury “shareholders to Kraft’s low-growth conglomerate business model, its long history of underperformance and its track record of missed targets.”
Kraft will publish the final details of its offer on Jan. 19, and Cadbury shareholders have until Feb. 2 to decide whether or not they will accept it.
Martin Deboo at Investec Securities believes “Kraft will need to come up with an offer north of 8 pounds and with a significantly enhanced cash component to take over Cadbury.”
“We suspect that an increased offer in the range of 825-850p could well be sufficient to clinch the deal,” said analyst Graham Jones at Panmure Gordon.
Bloomberg reported that the strong report “doesn’t add anything new to the debate in our view,” Nomura International analyst Alex Smith wrote today. “We still see a majority probability of a successful Kraft takeover at a higher price of around 840 pence.”
Cadbury shares closed off 0.5 percent at 775.6p on Tuesday. Kraft’s shares rose 19 cents to $28.99, meaning that Cadbury shares were trading at a 1.5 percent premium to the current value of Kraft’s offer, according to Dealbook.
Now that it seems unlikely that a rival bid will emerge, Kraft only needs to calculate the minimum it can pay to win Cadbury, without alienating shareholder Warren Buffett who has warned Kraft against overpaying. Italy’s Ferrero has decided not to bid for Cadbury. A source close to the situation told Reuters that Ferrero would not proceed with a bid. A second source close to Ferrero said the company had ceased talking with Hershey , a potential partner in a rival bid.
Execution analyst Martin Dolan believes that Cadbury will end up being acquired by Kraft, but that the the current offer is inadequate.
Without a higher bid, Cadbury may still stay independent.
For latest analyst comment see Alacra Pulse.
For previous Research Recap posts on the topic click here.
Technorati Tags: (KFT), Cadbury, CBRY, Kraft, M&A
Latest developments in Kraft’s (KFT) pursuit of Cadbury (CBRY):
From DealBook:
The Sunday Times of London reports that Kraft is planning to increase its bid in the next two weeks, but provides no sourcing and few details.
Kraft’s cash-and-share offer currently values Cadbury at 736 pence a share, 8 percent below its closing price of 797.5 pence on Dec. 31.
Under Britain’s Takeover Panel rules, Kraft has until Jan. 19 to raise its offer, after which it can only do so if a rival bid emerges.
A report on Saturday suggested Italian confectioner Ferrero had met with private equity firms, as well as Hershey, to discuss a possible bid for Cadbury.
Cadbury said on Dec. 14 that Hershey and Ferrero had both indicated they were also contemplating bids.
However, The Sunday Times said that Cadbury’s chairman, Roger Carr, is expected to reject any bid from Hershey or Kraft unless it tops 800 pence a share.
Britain’s Takeover Panel gave Cadbury three extra days this week to publish its 2009 results that could become a key plank in its defense against Kraft’s bid.
Reuters reports that “Kraft Foods is set to clear a hurdle in its hostile 10 billion pound takeover bid for Cadbury by winning EU approval this week, a source familiar with the situation said on Monday.”
Deal Journal suggests Nestle (NESN) may use some of the proceeds of today’s Alcon deal to go after Cadbury: “Novartis is paying Nestle $28 billion for its 52% stake in Alcon, the eye-care company. Nestle says it plans to use about $9.65 billion of the proceeds to buy back shares. That means about $18 billion will be left over, enough to, perhaps, top Kraft Foods’ $16.9 billion bid for Cadbury.”
But Bloomberg reports that the buyback may signal no big acquistions by Nestle. “They’re basically telling you that they aren’t planning a major acquisition, but it still leaves them with the flexibility if a strategic opportunity comes by,” said Marco Gulpers, who has a “hold” recommendation on Nestle shares as an analyst at ING Wholesale Banking.
John Ogg at 24/7 Wall Street speculates that a deal for Cadbury would spur more M&A activity in the sector: “ConAgra Foods, Inc. (CAG) would suddenly look tiny when compared to Kraft as ConAgra’s market cap is about $10.2 billion versus about $40 billion for Kraft (KFT). Unilever NV (UN) and Nestle might be interested in other deals out there. General Mills (GIS) would risk being small despite a $23 billion market cap. HJ Heinz (HNZ) would suddenly be a small fish despite a $13.5 billion market cap, and farther down the chain is Hershey with its $8.15 billion market cap.
For latest analyst comment see Alacra Pulse.
Technorati Tags: (CAG), (GIS), (HSY), (KFT), (NESN), (UNA), Cadbury, CBRY, ConAgra, confectionery, Ferrero, General Mills, H.J. Heinz, Hershey, Kraft Foods, M&A, mergers and acquisitions, Unilever
Confidence is returning to the European mergers and acquisitions market, with a significant proportion of companies planning a major deal in 2010, according to the second annual survey of European companies’ M&A plans, conducted by The Boston Consulting Group (BCG) and UBS Investment Bank.
Yet ongoing uncertainties about the economic outlook and sustainable levels of profitability are likely to lead to smaller, lower-risk consolidation deals than before and might deter some companies from entering the M&A market.
As the survey reveals, there are grounds for being both courageous and cautious.
Key findings include the following:
- One in five companies plans to buy a business with sales of more than €500 million in 2010, including nearly one in two large companies with market capitalizations in excess of €20 billion.
Although there are substantial variations among industries, one of the encouraging signs is that 44 percent of companies within the chemicals sector—often a harbinger of economic recovery—are planning to make a large-scale acquisition within the next 12 months.
- M&A transactions are most likely to be “horizontal” consolidation deals, expected to be the dominant deal type by 68 percent of surveyed companies. Typically, these are expected to be smaller, lower-risk acquisitions than the transformational deals previously anticipated for and to some extent executed in 2009. This indicates that there is a degree of caution in the market and that the effects of the financial and economic crisis are still being felt.
- Restructuring deals are also expected to rise steeply, with nearly one out of three companies planning to strengthen its strategic and financial positions by divesting businesses. These disposals will be essential not only for cleaning up corporate portfolios but also for generating proceeds to help fund new acquisitions as the M&A market picks up. In fact, 75 percent of companies believe that investors, banks, and other creditors will exert greater pressure to go down the deal-based restructuring route in the coming 12 months. Moreover, one-third of companies believe that even distressed divestitures could make valuable targets.
Full free report can be downloaded here.
Technorati Tags: European companies, M&A, mergers and acquisitions
