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Where's the M&A? Replies |
rffrydr
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rffrydr
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 Posted: Sat Mar 10, 2012 9:08 am Post subject: |
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500 bps difference between highest high-yield rates and market free cash flow (1100 bps for some energy). As crunch fears fade this should build, if not take off, for greater cultural reasons.
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rffrydr
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rffrydr
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| Posted: Wed Aug 31, 2011 8:33 am Post subject: |
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| Quote: | | Now, the ATT deal. $6b failure-to-launch makes me too nervous to fade this....but bet it fails anyway. Buying the cell towers is probably the way to trade that. |
As predicted, T-Mobile merger foundering. Justice Dept steps in on FCC board is already "bought and paid for." Cell towers, Sprint bonds/captial winners.
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rffrydr
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| Posted: Fri Aug 19, 2011 10:39 am Post subject: |
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World not liking the Autonomy acquisition:
| Quote: | So, was Walter Hewlett correct after all? HP also announced that it will take the next 12+ months to evaluate options for HP’s PC business, including a spin-out or sale of the business. Thus the “Compaq” era might be over less than a decade after it began. The “Palm” era was much shorter, with a shut down occurring just a year after HP paid $1.2Bn for that unprofitable asset. With an approximate $330Mn loss there this quarter, we figure HP burned well over $2Bn of shareholder’s cash on that ill-advised acquisition, so shut-down probably makes sense. At this point it is difficult to gauge what kind of “value creation” might occur from the PC segment, and our estimate assumes no change.
BE
If at first you don’t succeed, overpay for yet another acquisition… HP also announced they would be paying just over $10Bn in cash for British based Autonomy, an information management software company with a leading position in data archive retrieval. Autonomy has been viewed by many as a “roll-up”, and the price tag of roughly 16x forward revenue and 64x forward PE seems extreme, and probably says a lot about the growth prospects of HP’s core software businesses. While HP expects the deal to be accretive on an EPS basis, it is massively dilutive to shareholder value if the true cost of capital is considered rather than current cash rates.
BE
Things likely get worse before they get better, so continue to avoid the value trap. HP is trading at the lower end of its 10-year ranges on P/E, EV/Sales and P/Book. HP is also trading below the $43 (down from $45) price target suggested by our 10-year DCF model, so the stock does appear “cheap” on traditional value metrics. But we continue to have concerns that fundamentals could further deteriorate at HP, thereby leading to future target reductions, and thus we maintain a Hold rating. |
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rffrydr
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| Posted: Mon Aug 15, 2011 5:56 am Post subject: |
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Nice job Google, Motorola's Mobility up 60% this morning should get some juices flowing.
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rffrydr
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| Posted: Mon May 16, 2011 8:10 am Post subject: |
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Regulators shut down this nonsense:
http://video.cnbc.com/gallery/?video=3000022204
Introduced on April 1st.
Now, the ATT deal. $6b failure-to-launch makes me too nervous to fade this....but bet it fails anyway. Buying the cell towers is probably the way to trade that.
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rffrydr
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| Posted: Tue Apr 26, 2011 8:40 am Post subject: |
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rffrydr
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| Posted: Fri Apr 08, 2011 8:28 am Post subject: |
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Bernstein's fantasy ball in the miners (from alphaville):
| Quote: | Among the larger cap miners, we expect to see a Glencore IPO in Q2 CY11, possibly followed by a
merger with Xstrata and then an offer for Anglo American by the combined entity. Even outside of this
scenario, we believe that Anglo American is the most likely acquisition target among the large diversified
miners, and could envisage interest in the company from a number of its peers especially considering
Anglo's share price is trading on a 50% discount to its SOTP. Outside of the 'Big 5' (the Big 4 plus Vale),
we think the 'do-able' deals in 'big caps' could potentially include Alcoa, ENRC, Fortescue Metals,
Groupo Mexico and Ivanhoe Mining (
BE
And here's the general overview
BE
M&A activity remains elevated in the mining sector - in the six months since we published our original
M&A list, we have noted 32 significant proposed deals totalling US$103bn of capital. Although these
transactions include and indeed were dominated by steel and fertilizer companies, we reiterate our belief
that M&A activity will remain strong in the remainder of 2011, including in the more mainstream
commodities, due to a rich combination of (i) strong cash flow generation and de-geared balance sheets;
(ii) reluctance to return cash to shareholders; (iii) difficulty in bringing new production on-stream; (iv)
cheap debt; and (v) the belief that the commodity cycle may have turned by the time new investment
projects can be brought to production.
BE
We have now widened our M&A radar and our updated list includes 25 targets (including 11 of the
companies identified in October) and an additional 7 coal-specific targets, reflecting the recent elevated
deal activity in the coal sub-sector, which we expect to continue in the short-term. Although our list has
expanded considerably, we still struggle to find many 'do-able' acquisitions among the largest 60
commodity companies, primarily due to the premium ratings given to precious metal producers, partial
ownership and control of companies by either governments or controlling families and the sheer size of
some of the larger mining companies. We believe there are merits for all the companies in our target list,
though our top 6 prospects are currently Ivanhoe Mining, Fortescue Metals, Lundin Mining, Kenmare
Resources, Iluka Resources, and Anglo American.
We expect to see significant M&A among the intermediate copper producers, which we identify as those
companies with market capitalizations of approximately US$3-5bn, producing around 100kt of copper per annum, as these companies may struggle with the financial requirements and risk implications of
large greenfield projects. These M&A transactions may include mergers of equals or acquisitions by the
larger diversified miners, which are cash-rich and opportunity-poor.
BE
We think that Chinese interests will continue to be active in the mining M&A space, regardless of their
modest success rate to date. We think China would be looking to acquire mining companies that: (i)
produce a seaborne product (as opposed to domestic) that China is short of (i.e. copper, nickel, alumina,
high quality iron ore and coking coal and possibly even PGM's); (ii) are mid-cap or smaller (almost as a
way of testing the water); (iii) are 'non-politically sensitive'; and (iv) utilise China's ability to take on
more geopolitical 'leverage' than 'Western' mining CEOs and boards are prepared to accept (i.e. many
parts of Africa and Middle East). It is likely that the preference of these Chinese acquirers would be for
non-public companies, but in the highly capital intensive mining industry, not many private companies
exist. From our target list, the six most likely Chinese targets might include: Cliff Resources, ENRC,
First Quantum, Inmet Mining, Kenmare Resources and SouthGobi Resources.
NH
deals galore
BE
We believe that the companies included on our M&A list offer the potential for substantial share price
outperformance in the short- to mid-term, particularly of course if they are on the receiving end of a
takeout offer. Within our coverage we have identified Lonmin as a possible target, while we believe that
Anglo American and Xstrata are likely participants in future transactions, either as predators or prey. The
most obvious acquirers in our coverage list are BHP Billiton and Rio Tinto. |
Play that one with the IBs.
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rffrydr
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| Posted: Mon Apr 04, 2011 9:57 pm Post subject: |
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TXN/NSM at a 78% premium oughtta shake the cobwebs in chips. High PEs have been in for inflationary discounting--that has yet to really appear.
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rffrydr
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| Posted: Wed Feb 23, 2011 11:10 am Post subject: |
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Takes the november bear to remind me of this piece of obvious:
Takeovers Could Take Us Under
By Doug Kass
| Quote: | | "History does not repeat itself; it rhymes." -- Mark Twain It is argued by bullish investors and strategists that the increased level of M&A activity highlights a greater appetite for risk assets, improving business confidence, a better lending climate and underscores the large cash hoards at the some of the world's largest companies. These arguments have merit. But so does the observation that takeovers are often done at or near the top of market and of the general economy. History also shows that the popularity of companies and industries often peaks (and goes to the extreme) coincident with takeover activity in those areas. Last week, in an case of impeccable timing after a doubling in the S&P 500 since March 2009, NYSE Euronext announced an agreement to be acquired... |
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rffrydr
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rffrydr
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rffrydr
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rffrydr
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| Posted: Wed Aug 25, 2010 9:28 am Post subject: |
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BHP profits more than doubled YOY, $13 billion.
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