On Friday, the board of Anheuser-Busch Cos. Inc. (NYSE: BUD) met and discussed the $46.3 billion unsolicited bid from rival InBev NV. However, there was nothing announced to its eager shareholders.
But, hey, why speed things up? Might as well keep InBev guessing, right?
And, there's much for the rumor mill to chomp on. For example, Carlos Fernandez said he has resigned from Anheuser's board. He is the CEO of Grupo Modelo, which is half-owned by Anheuser.
One possibility is that Anheuser will buy the rest of Grupo, making it tougher for InBev to pull off its buyout. So, does the resignation mean that Anheuser and Grupo are talking about such an arrangement?
It's really tough to tell. Perhaps Grupo is actually talking to InBev? After all, it looks like Grupo wants to remain independent.
Yet, all this stuff seems more of a sideshow. The fact remains that Anheuser can't ignore InBev and is under lots of pressure to sell out (especially in light of its sluggish operating performance over the past few years).
Actually, Adolphus A. Busch IV sent a letter to Anheuser's board urging negotiation with InBev to get a deal done. He's the uncle of the CEO, August A. Busch IV.
Finally, there is another interesting dynamic: Warren Buffett. His company, Berkshire Hathaway (NYSE: BRK.A), owns 5% of Anheuser's shares. No doubt, it should be interesting to get his views on the matter.
Perhaps the credit crunch is showing some improvement? For example, according to a report in the Telegraph, it looks like InBev – the world's no. 2 beer company -- is close to getting $50 billion in financing for a bid for Anheuser-Busch Cos Inc. (NYSE: BUD). Some of the banks include JP Morgan (NYSE: JPM), Santander, BNP Paribas and Merrill Lynch (NYSE: MER).
But isn't the Busch family resistant to a bid? In theory, that may be the case. However, it's hard to say "no" to a premium buyout deal. Besides, the beer industry is in the midst of a global consolidation trend. And, with Anheuser-Busch's relatively high cost structure and lackluster global strategy, the future does look murky.
In the meantime, Anheuser-Busch is preparing for a fight. That is, it appears that the firm is getting anti-takeover advice from Goldman Sachs (NYSE: GS) and Citi (NYSE: C).
Founded in 2000, Kintera Inc. (NASDAQ: KNTA) has built on-demand technologies to help nonprofits with fund-raising. Interestingly enough, the company has never reached a profit. So, it should be no surprise that the stock price was below a buck and that the Nasdaq provided a delisting notice.
Well, things were much brighter this week. Blackbaud (NASDAQ: BLKB), which has an extensive software suite for nonprofits, has agreed to purchase Kintera for $46 million or $1.12 per share. On news of the traction, the company's share price spiked 58%.
For the past year, Kintera has been restructuring operations. For example, the company has reduced its operating expenses by $1 million per quarter.
But, as a part of Blackbaud, there should be even more cost savings, such as with R&D and the salesforce. Keep in mind that there will be no public-company costs for Kintera (which is a big deal).
Something else: Kintera's losses are quite valuable. That is, they represent a $10 million present value for Blackbaud (which can use them to shelter taxes). In other words, this essentially reduces the price tag of the acquisition.
Although, Blackbaud also sees some major strategic benefits. First of all, Kintera helps bolster the fund-raising segment, which looks like a growth market. Next, Blackbaud is transitioning to on-demand software approaches. Finally, the company will pick up 4,000 customers from Kintera.
This past week, Wrigley Co. (NYSE: WWY) filed a proxy statement for its $23 billion sale to Mars. And, if you go to page 18, you'll see an account of the transaction -- and how Goldman Sachs Group (NYSE: GS) was a key player.
Actually, it was back in 2006 that Goldman arranged a meeting between Wrigley and Mars. After signing confidentiality agreements, the parties talked about possible business arrangements (although, a buyout was not mentioned -- but, I'm sure, it was something everyone was thinking about, especially Goldman).
However, by August 2007, Mars and Goldman talked about possible strategic options. One suggestion: buy Wrigley. To this end, Goldman arranged a meeting with Berkshire Hathaway (NYSE: BRK.A) to explore financing possibilities.
By April 2008, Mars had made an overture to William Wrigley, Jr., to discuss a possible transaction. The result: Mars offered $75 per share.
Of course, the price was not enough. As a result, there were several more bids -- with the final one at $80 per share.
When it comes to M&A, JP Morgan's (NYSE: JPM) Jamie Dimon is a pro. But, when he agreed to purchase the distressed Bear Stearns Cos. (NYSE: BSC), he had to reinvent the playbook. After all, he had only a couple days to evaluate the transaction.
Well, there's an excellent piece on this in the Wall Street Journal [a paid publication]. Basically, Dimon realized that speed was critical -- as well as real-time communications. In a complex deal, things can implode easily.
For example, JP Morgan quickly setup fiber cables to connect its information technology (IT) system with that of Bear Stearns. This was critical to allow for the unloading of portfolio assets, which helped to reduce the overall risk of the deal.
In fact, JP Morgan has an army of advisers and employees that are combing through many documents and computer files. No doubt, there are thousands of reports trying to track the progress. And so far, it looks like things are running smoothly.
For the past year, Hewlett-Packard (NYSE: HPQ) posted revenues of $107 billion. So, to grow just 5%, the company will need to essentially create another Fortune 500 company.
That's something HP's CEO, Mark Hurd, definitely has mentioned on various occasions. Basically, how can a behemoth continue to grow?
Perhaps a smart strategy is to make big acquisitions?
Well, today HP has announced a hefty $13.9 billion buyout deal for EDS (NYSE: EDS), an information technology (IT) consulting operator. Over the past year, EDS posted about $22 billion in revenues.
But Hurd is not just concerned about the top-line. If anything, he's highly disciplined with generating profits. In fact, since he has come on board HP (back in 2005), Hurd has been masterful in finding efficiencies – while still pushing revenue growth.
While the history of transformative M&A is filled with failures, with the HP-Compaq combination a prime example of what can go wrong, the strategic rationale for the EDS deal makes sense. In today's global environment, customers want strong technologies but also sophisticated services. Actually, companies are increasingly outsourcing services to players like EDS.
Moreover, with much more heft, HP and EDS will become a formidable alternative to IBM (NYSE: IBM), which has proven the technology/services model.
Finally, I'm sure that Hurd will take out his cost-cutting knife. It's something that hasn't been emphasized but I'm sure it will be a big part of the deal.
Just a few weeks ago, it looked like the $19.4 billion buyout of Clear Channel Communications (NYSE: CCU) was dead. But in the deal market, things can change quickly.
Just today, the New York Supreme Court said there will be a stay on the litigation on the deal. According to CNBC, it looks like the parties are engaged in heavy settlement talk.
No doubt, a trial could be problematic for the banks that are on the hook for $22 billion in debt financing. These banks include: Citigroup (NYSE: C), Credit Suisse (NYSE: CS), Morgan Stanley (NYSE: MS), Royal Bank of Scotland, Deutsche Bank AG and Wachovia (NYSE: WB).
Now, they may be willing to fund the deal.
Why? Well, it looks like the debt markets are improving and the major banks have worked hard to boost their balance sheets.
In other words, the US credit crunch may be thawing. If so, we may see some more dealmaking – which would be a relief for Wall Street banks eager to get some juicy fees.
So far in today's trading, Clear Channel's shares are up 9.5%.
Since the onset of the credit crunch, it's been hard times for merger arbitrageurs. Simply put, there have been a variety of high-profile deals that have imploded.
Yet, if you look at the stock price of Yahoo!, it looks like the arbitrageurs are still optimistic that a deal will happen. In fact, there is speculation that an activist fund will launch a proxy fight.
In January, Bank of America (NYSE: BAC) made a gutsy move when it decided to purchase Countrywide Financial (NYSE: CFC). True, it would greatly expand its mortgage footprint, but it would also mean taking on lots of risk.
Of course, since then, the financials went into a swoon. In fact, the US financial system almost imploded because of the Bear Stearns (NYSE: BSC) debacle.
As a result, there is much skepticism that Bank of America will close its deal, as evident by remarks from an analyst with Friedman, Billings, Ramsey & Co. – Paul Miller – who thinks that Bank of America should forgo the deal.
His belief is that there will be a need for a whopping $30 billion writedown, which would be tough to swallow for Bank of America's shareholders.
Interestingly enough, there are already signs that Bank of America is getting skittish. Last week, the firm was not clear that it would back Countrywide's debt. The upshot was that S&P downgraded the debt to junk status.
And yes, in today's trading, Countrywide's stock is down 10% to $5.35.
Discretion is the better part of valor -- that's what I was always taught. Perhaps the time for a strategic withdrawal has come in the battle of Microsoft Corp. (NASDAQ: MSFT) vs Yahoo Inc. (NASDAQ: YHOO). Somehow, though, I can't imagine it will take that turn, as I read the analysts, strategists and pundits. How could it have become so adversarial? Surely something ugly may be at hand.
Did Steve Ballmer envision this type of scenario when launching his original bid for Yahoo? Did he ever imagine the attempted synergy would become a battle of wills as much as money? To what degree does pride factor into this pending recipe for disaster? I dare say that is what it has all come down to now. Pride goes before a fall, they say.
Does Steve Ballmer have the grace within him to fold his tents and quietly withdraw? Or shall his siege works be lain against the walls of Yahoo in an attempt to forcibly take it? Already he has warned that he will appeal to the sensibilities of Yahoo's investor rank and file. It's a tactic which has been used in many a war. However, attempting to romance the populace away from their leaders seldom, if ever, has worked. In the meantime, Microsoft's own shares are on the decline, diluting the strength of its acceptable offer.
I submit to you that at this time Microsoft should disengage from the situation entirely. Giving Yahoo some time to fully digest the reality of what it is facing might be a worthwhile strategy. To force the matter any further right now may only lead to the degradation of the reputations of both companies. That is something that no one desires.
The powerful silence emanating from an adversary which has quietly withdrawn places nothing but unanswerable questions on the horizon.
Gary Sattler is a freelance blogger. He does not knowingly have interest in the companies mentioned in this blog post.
After hitting a one-year high of $84.83 in June, the stock hit a one-year low of $56.20 in February. CEPH opened this morning at $64.94. So far today the stock has hit a low of $64.45 and a high of $66.18. As of 12:45, CEPH is trading at $65.27, up 1.05 (1.6%). The chart for CEPH is neutral and improving, while S&P gives the stock a bullish 4 Stars (out of 5) buy rating.
For a bullish hedged play on this stock, I would consider a May bull-put credit spread below the $55 range. A bull-put credit spread is an options position that combines the purchase and sale of put options to hedge risk in case the stock doesn't do what you think but still leverage nice returns. For this particular trade, we will make a 7.5% return in just five weeks as long as CEPH is above $55 at May expiration. Cephalon would have to fall by more than 15% before we would start to lose money. Learn more about this type of trade here.
CEPH hasn't been below $56 at all in the past year and has shown support around $59 recently. This trade could be risky if the company's earnings (due out on 5/1) disappoint, but even if that happens, that position could be protected by support the stock might find between $55 and $60, where it bottomed out in the past two months. Brent Archer is an options analyst and writer at Investors Observer.
DISCLOSURE: Mr. Archer owns and/or controls diversified portfolios of long and short stock and option positions that may include holdings in companies he writes about. At publication time, Brent neither owns nor controls positions in CEPH or MLNM.
As I fully expected, I've received a fair amount of comments on a recent blog post in which I proudly took a stance in favor of Exxon's court backed demand that the government of Hugo Chavez immediately ante up for the oil infrastructure which the country he leads has stolen from Exxon Mobil Corp. (NYSE: XOM). Most of the commentary was lucid and well thought out on both sides of the argument, but one particular commenter really piqued my sense of intrigue.
The comment I'm referring to was an assertion that what the Chavez government has done by seizing the Cerro-Negro oil development is legal. For the purpose of this rebuttal, and because I am near totally ignorant of international law, I'm going to assume that comment was correct. Now, here comes the Devil's Advocate:
Bill Miller, the investment guru at Legg Mason Capital Management, has published a letter to his shareholders. Keep in mind that his firm is the number two owner of Yahoo! Inc. (NASDAQ: YHOO) shares.
So what's his take on the $44 billion buyout offer from Microsoft Corp. (NASDAQ: MSFT)?
Well, it should be no surprise that Miller thinks the offer is under the fair value. In fact, he says that it appears that Microsoft "had been prepared to pay over $40 per share previously."
That would certainly be nice for Miller's shareholders. But, is it realistic to expect that Microsoft will bid against itself?
It's been a tough year for Wendy's (NYSE: WEN). The company has struggled to grow same-store sales, and then in June, the company garnered a mention on TheStreet.com's weekly list of the "Five Dumbest Things on Wall Street," for "announcing once a month that it's up for sale."
Now, with the stock touching a 52-week low on the year's last day of trading, Lehman Brothers analyst Jeffrey Bernstein is criticizing the company for failing to turn itself around in spite of an economic environment that should be conducive to the industry, and added that the company's earnings and sales targets may be too "aggressive." Bernstein also said that investors are frustrated with the lack of an outcome so far to the company's exploration of strategic alternatives.
Shares of Wendy's have fallen precipitously since the original announcement that the company was exploring a possible sale. Given that a cheaper share price should make the company a less expensive acquisition target, you would think that the offers would be rolling in.
Maybe the company is taking forever to mull its alternatives because there are just so many bids to choose from that it just can't pick one. However, my experience has been that a long period of silence after a big announcement that a company is up for sale is most often indicative of a lack of offers.
Tribune (NYSE: TRB) is recently down 55 cents to $29.95. TRB expects its $34-per-share sale to Sam Zell, private equity, debt holders and employees to be closed by end of 2007. The FCC granted temporary waivers to complete the deal on Dec. 30. TRB call option volume of 2,688 contracts compares to put volume of 15,775 contracts. TRB December option implied volatility of 80 is above its 26-week average of 36 according to Track Data, suggesting larger price risks.
LDK Solar (NYSE: LDK) is a manufacturer of multicrystalline solar wafers. Dow Jones reported LDK will tap $700 million in long-term debt and credit lines, as well as about $100 million in customer prepayments. LDK auditing report on the investigation of allegations of inaccurate inventory is expected in early December. LDK has said the company has correctly reported its inventories. LDK is expected to report Q3 EPS in mid-December. LDK December option implied volatility is at 165 and March is at 133; above its 21-week average of 98, according to Track Data, suggesting larger risk.
Daily Options Update is provided by Stock Specialist Paul Foster of theflyonthewall.com
On Friday, the board of Anheuser-Busch Cos. Inc. (NYSE: BUD) met and discussed the $46.3 billion unsolicited bid from rival InBev NV. However, there was nothing announced to its eager shareholders.
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Founded in 2000, 
This past week, 
When it comes to M&A, 
For the past year, 
Just a few weeks ago, it looked like the $19.4 billion buyout of 
Since the onset of the credit crunch, it's been hard times for merger arbitrageurs. Simply put, there have been a variety of high-profile deals that have imploded.
In January, 
Discretion is the better part of valor -- that's what I was always taught. Perhaps the time for a strategic withdrawal has come in the battle of 
As I fully expected, I've received a fair amount of comments on a recent blog post in which I proudly took a stance in favor of Exxon's court backed demand that the government of Hugo Chavez immediately ante up for 
Bill Miller, the investment guru at Legg Mason Capital Management, has published a 
It's been a tough year for 
Tribune
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