On August 14th, Skechers USA, Inc. (NASDAQ: SKX) made public its offer to acquire Heelys, Inc. (NASDAQ: HLYS) at a price of $5.25 per share. At the time I wrote that the offer seemed low, and Heelys' management seems to agree, issuing a press release stating that "The Board believes the $5.25 offering price does not reflect the value of Heelys and that entering into discussions with Skechers based on their unsolicited proposal is premature at this time."
Today Skechers shot back with its own press release, with chairman and CEO Robert Greenberg stating that "We are particularly disappointed that, after repeated contacts over several months, Heelys will not agree even to discussions or provide us with an opportunity to conduct due diligence. . . We are very interested in continuing our dialogue and, as discussed in Skechers' letter of August 13, we may also be prepared to refine our proposal if additional value can be identified during the due diligence."
So why won't Heelys at least engage in discussions, given that Skechers is indicating that it might raise its bid? This looks like a replay of the Yahoo, Inc. (NASDAQ: YHOO) - Microsoft Corporation (NASDAQ: MSFT) takeover battle on a much smaller scale, with Heelys' brass not inclined to talk about a deal, even if it is in the best interests of shareholders.
If Skechers gets bored with the slow pace of negotiations and walks away, Heelys will have some splainin' to do. Given that the company went public at over $30 per share and now sits at $5.25, it's pretty clear that the management team doesn't know enough about shareholder value to reject a takeover offer without further discussions.
According to people familiar with the situation, the Wall Street Journal reported that Yahoo! Inc (NASDAQ: YHOO) is again talking to Time Warner Inc (NYSE: TWX), this time about taking over AOL, with Time Warner taking a stake in the combined entity. News Corporation (NYSE: NWS) has its eye on any Yahoo moves. Meanwhile, Microsoft Corporation (NASDAQ: MSFT) is considering what its next move against Yahoo might be and is talking to News Corp.
The Wall Street Journal also reported that, as part of the company's plan to cut costs, Tribune Co's Los Angeles Times newspaper may look to cut about 250 jobs, including about 17% of its news staff.
The Financial Times reported that Chrysler, which has been searching for foreign partnerships, signed with China's Great Wall Motor a memorandum of understanding to explore long-term business ties in areas that include technology, distribution and components.
OTHER PAPERS:
According to the Dallas News, AMR Corporation's (NYSE: AMR) American Airlines informed its flight attendants' union that is may lay off 900 flight attendants on August 31.
WEB SITES:
Yonhap reported that LG Electronics will release "Dare," a new touch-screen mobile phone in the U.S. that will compete with Apple Inc's (NASDAQ: AAPL) latest iPhone models.
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.
The newspaper industry has been struggling of late, battling online classified sites, job listings, and free blogs. While readership of offline paper has been steadily decreasing, readers have been drawn more and more to the online versions of newspapers.
Last Thursday, Reuters published the results of a recent study from the Newspaper Association of America reporting the number of unique visitors to newspaper websites last year rose more than 6% to a monthly average of 60 million.
So, it's not surprising to see that one hedge fund in particular is reported to be readying itself for a proxy battle to make a move for the New York Times Co. (NYSE: NYT). Marketwatch reports that the New York Times has said that Harbinger Capital Partners Master Fund has recently informed them of plans to seek seats on their board.
Rio Tinto (NYSE: RTP) might accept a higher takeover bid from rival BHP Billiton (NYSE: BHP). So far, Rio has told the markets that a deal is not possible.
Perhaps Rio's shareholders are putting some pressure on management. After rising to $484 on BHP's initial bid, RTP shares have fallen as low as $341 in the last week. That's a lot of money out the window. Management at Rio Tinto says it can improve returns at the company to get its share price up, but Wall Street clearly does not believe that.
According to Reuters, "Rio Tinto Chief Executive Tom Albanese on Sunday left the door open to a sweetened takeover offer from BHP."
A merger of the two companies has every chance of failing. Even with its recent dip, Rio Tinto's shares have moved from a 52-week low of $200 to $367. If a premium offer is made to close the deal, the price could be well over $400 a share. Commodities prices would have to continue to rise to justify such a high price for the miner, and a global slowdown could actually cause prices to retreat. RTP's shares are also up more than BHP's in the past year, so, if the deal is mostly done in stock, the acquirer will pay an especially rich price.
No wonder most mergers don't work.
Douglas A. McIntyre is an editor at 247wallst.com.
With today's rumors of Bank of America Corporation (NYSE: BAC) in talks to buy Countrywide Financial Corporation (NYSE: CFC), here are two more stocks that have gotten crushed, which may be targeted as M&A candidates. Here are 2 financial stocks that I think have a fairly good chance of getting taken over by the end of '08.
E Trade Financial Corporation (NASDAQ: ETFC), the online brokerage, has lost investors tons of money. The company is shedding non-core divisions and getting back to basics. Etrade usually is involved in rumors of either joining or buying TD Ameritrade Holding Corporation Corp. (NASDAQ: AMTD), and I think that we are going to see some movement in terms of selling the online brokerage firm. At just around $4/share, these stocks are beginning to look interesting again.
Washington Mutual, Inc. (NYSE: WM) has seen its stock drop by some 75% over the last year. The stock is trading with a PE of a bit more the 4, and has a dividend yield over 17%. Now I would guess that most analysts believe the dividend is going to be cut. I wouldn't be at all surprised to see a foreign bank that wants to get a big foothold in the US to make a play for the bank.
With stocks so low, look for cash rich companies to be on the prowl for interesting financial companies.
Aaron Katsman is the lead Portfolio Manager and Managing Director of America Israel Investment Associates, LLC. and Senior Editor of IsraelNewsletter.com. DISCLOSURE: Writer's fund has a position and owns stock in ETFC and is long the stock. He has no positions in any other stock mentioned as of 1/10/08.
Alcoa (NYSE: AA) shares are rising this morning after BHP Billiton (NYSE: BHP) disclosed it had made a bid for rival miner Rio Tinto (NYSE: RTP). According to financial analysts, BHP's willingness to pay a premium for Rio and a rise in BHP's stock were bullish signals that demand for commodities was strong. This eased financial worries in the commodities sector, which in turn lifted AA. If you think that the company won't fall by too much in the coming months, then now could be a good time to look at a bullish hedged trade on AA.
The stock hit a one-year high of $48.77 in July after reaching a one-year low of 27.69 last November. AA opened this morning at $39.00. So far today the stock has hit a low of $38.29 and a high of $39.35. As of 10:40, AA is trading at $38.60, up $1.20 (3.2%). The chart for AA looks bullish and steady, while S&P gives the stock a neutral 3 STARS (out of 5) hold rating.
Oracle Corp. (NASDAQ: ORCL) stock is relatively flat after announcing a $6.7 billion offer to buy BEA Systems (NASDAQ: BEAS). Activist shareholder Carl Icahn has been pressuring BEAS to put itself up for sale, though company officials have said recently that they have no plans to sell. However, investors have driven the share price of BEAS up 32% since the announcement, almost a dollar above ORCL's $17 per share offer price, suggesting expectations of a potential rival bid. CNBC's Jim Cramer predicted earlier this week that SAP AG (NYSE: SAP) would make a bid for BEAS to boost its strength against ORCL. If a rival bid appears, Oracle could end up overpaying for BEAS. If you think this stock won't be rising too far in the coming months, then it could be a good time to look at a bearish hedged play on ORCL.
ORCL stock has been strong over the past few months, hitting a one-year high of $23.00 yesterday. This morning, ORCL opened at $22.40. So far today the stock has hit a low of $22.11 and a high of $22.58. As of 11:05, ORCL is trading at $22.48, up 0.02 (0.1%). The chart for ORCL looks bullish and steady, while S&P gives the stock a very positive 5 STARS (out of 5) strong buy rating.
For a bearish hedged play on this stock, I would consider a December bear-call credit spread above the $25 range. A bear-call credit spread is an options position that combines the purchase and sale of call 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 5.3% return in 10 weeks as long as ORCL is below $25 at December expiration. Oracle would have to rise by more than 11% before we would start to lose money. Learn more about this type of trade here.
ORCL has not been above $25 since 2001 and has shown some resistance around $23 recently. This trade could be risky if the company's earnings (due out in mid-December) are a positive surprise, but even if that happens, this position could be protected by the resistance the stock formed when it topped around $23.
This is the fourth time AirTran has raised its bid for Midwest since December. Despite AirTran receiving support from nearly 63% of Midwest shareholders, management refused to relinquish control to the Orlando-based discount airline. Midwest's Board said it would "take AirTran's revised offer under consideration."
While the Board deliberates, let's take a look at exactly what would happen to Midwest if they were to be acquired by either AirTran or TPG/Northwest:
AirTran wants to rebrand the airline under its own name and integrate Midwest's operations into its broader network.
Under the TPG offer, Midwest would maintain its brand name and its current management. Northwest, a company that has had nothing but problem after problem since it emerged from bankruptcy earlier this year, would not participate in the management or have any direct control over Midwest. Instead, Northwest hopes to explore cost reduction strategies like joint fuel purchasing.
AirTran President Bob Fornaro said the Midwest Board is required to not only consider the price of a takeover offer but also the effect on employees and the community, according to USA Today. But what about the shareholders? A total of 63% of Midwest shareholders were willing to side with AirTran after a $15.75 offer, and now the offer has been improved to $16.25. It seems pretty clear who the shareholders want to be with.
In another lap tray to the belly, customers of Milwaukee-based Midwest Air Group (NYSE: MEH), repeatedly named as one of the nation's best airlines for customer service and comfort, learned today that the airline will be purchased by a group led by TPG Capital. The investor group includes Midwest's competitor Northwest Airlines (NYSE: NWA), which is reviled by passengers for its cattle-car seating, lack of timeliness and failure to understand the concept of customer service
The acquisition offers little in the way of synergy to the two airlines. They duplicate many routes, and Midwest flies the Boing 717, while Northwest uses 747s and 757s. What the deal does accomplish is to block the expansion of a potential competitor in Northwest's upper midwest routes. While the deal secures the present management of Midwest, I suspect it's just a matter of time before the malaise reaches Milwaukee.
Midwest has been fighting off suitor Airtran Holdings' (NYSE: AAI) hostile takeover attempt, which reached $15.75 and $389 million before it folded its cards late last week. TPG, which grew out of the Continental Airlines (NYSE: CAL) takeover in 1993, is offering $16 per share, or over $400 million, to take the company private. The Midwest board voted Sunday to go forward with the TPG offer, and an agreement is expected by midweek.
The lone positive that an investor might come away with from Yahoo Inc's (NASDAQ: YHOO) first quarter results is that at least Microsoft Corporation (NASDAQ: MSFT) could come back to the table and buy the company. News reports circulated in June that the former search-engine leader was in partnership discussions with the Redmond-based software giant.
The biggest concern regarding Yahoo is its organic growth rate, with so many acquisitions having been completed over the years. Also, serious questions remain about Yahoo's branding-focused versus its weak showing in direct-support advertising. There is also little evidence that Project Panama will successfully address this issue.
Further, there has to be management-cohesion questions of West Coast (Jerry Yang) versus East Coast (Sue Decker). The full management issue at Yahoo might not be fully resolved. Yang spoke of ecosystems and openness, which sounds more Google-like. Decker continued to focus more on piling products on top of each other.
At the end of the day, Yahoo! Japan, Alibaba and its Korean search assets comprise $6 per share in value, according to Yahoo's new CFO. Further, the company is a free cash flow machine and has a franchise name the can be revived with the right management. It is worth chipping away at the company, as it has traded very nicely on poor earnings news. I'd look at getting into it now and selling into any speculation that the company is about to acquired.
Here's a talked about possible takeover target that deserves attention. The customer is always right, right? Not here. Complain about a problem, don't get results, complain some more, and bam!, they cut you off. That's right. Ask the first lucky 1,000 complainers-soon-to-be-former customers if they're happy with their new carrier. Bet they are. What this company needs is a new leader. And don't forget Mr. Gary D. Forsee, chairman, president and CEO, what goes around, comes around. Time to hand those triple titles over to new management and move out of the way. What a country.
Being number two not good enough? How about number three? It hasn't hit the newswire yet, but don't be surprised if Edward J. Zander, chairman and CEO, is pushed out. Another case of bad customer relations? Sure is. First falling behind Nokia Corporation (NYSE: NOK), and now Samsung, is a matter of a lack of sales in a booming wireless market. No easy fete, that. The company is losing money, shaking the management tree, and firing employees in droves. And they have no new phone coming out of the pipeline. The question is: When does Mr. Zander get his number called?
Is a private equity firm interested in this investment products company? Since last month, when Nuveen Investments Inc (NYSE: JNC) was sold to Madison Dearborn Partners, Waddell & Reed has been the subject of a buyout. The speculation hasn't gone away, and the stock continues to trade near its 52 week high of $27.80. TRAVELZOO INC (NASDAQ: TZOO)
FedEx Corp. (NYSE: FDX)'s dream of entering India's domestic logistics business has failed with the withdrawal of its bid for SafeExpress, one of the largest Indian logistics companies. Had the deal been approved, it would have given FedEx quite a large chunk of the express cargo, third party logistics and warehousing segment.
Instead, FedEx wasn't willing to pay the high price that SafeExpress demanded, sources close to the deal told The Economic Times. SafeExpress founder and managing director Pawan Jain valued his company at Rs2000 crore, nearly $500 million. FedEx was willing to spend up to Rs1800 crore, or $445 million, for the Indian logistics company.
The move hurts FedEx's chances of successfully entering India's domestic logistics segment through a strategic acquisition. Competitors DHL and TNT (OTC: TNTTY) have already been successful in finding a logistics company in India, with DHL acquiring 81% of Blue Dart for Rs 730 crore, or $181 million, in 2004 and TNT's acquisition of Speedage, a division of ARC India last year, for Rs200 crore, or $50 million.
The lack of an acquisition also hurt SafeExpress, after a multitude of regional managers and operational leaders from various divisions have left the company in the past eight months, unsure of the company's future. On the topic of acquisitions, this weekend Barron's said that FedEx themselves could be a private-equity target.
As the stock shot up 14% the other day, it was revealed that the warm and fuzzy big bear hired Lehman Brothers to "explore strategic alternatives." Some analysts think an LBO is what will happen, and range the valuation at from $34 to $36. Very recently the company reduced its second quarter per share profit expectations to 7 cents to 10 cents, down from 15 cents to 19 cents, because of slow sales at stores that have been opened for at least a year. Here's a bear to be bullish on.
It's troubled times for the nation's largest mortgage lender. Earlier in the week the shares began to fall when it was revealed that they may be a part of a government investigation into subprime loans. It certainly doesn't help that three former company executives pleaded guilty to conducting insider trading in shares of Countrywide. The heat is on.
Two Texas investment groups, HBK Investments and Lone Star Funds, who between them own about 9.5% of the company, are said to be interested in digesting the whole dang thing. The 490 restaurant chain that has operations in 20 states just saw their most recent quarterly profit drop 30% from the previous year, as same store sales fell 4.7%. Gentlemen that they are though, they'll only pursue the sizzle if the board cooks it up with them.
Jana Partners and S.A.C. Capital Advisors, who have about an 8.4% combined ownership of AMTD, are keeping the pressure on for the firm to partner up with another brokerage firm, and have now formalized their demands.
BUZZ
DJO INCORPORATED (NYSE: DJO): MMI Investments purchased 9.4% of the company's shares. When they buy in, they usually see the company acquired...Pride International Inc (NYSE: PDE): Spin off of foreign assets, or a possible takeover, has attracted interest...Legg Mason Inc (NYSE: LM): Pershing Square Capital, whose activist leader William Ackman has tried to push around McDonald's Corporation (NYSE: MCD) and Wendy's, has taken a 1.5% share of the company.
The champagne may be on ice, but is it premature to believe that News Corporation (NYSE: NWS) will succeed in its $5B, $60 a share takeover of Dow Jones & Company Inc (NYSE: DJ)?
While both sides appear close to a deal, the stumbling block remains the editorial independence of the Wall Street Journal. If both sides can reach an acceptable agreement, there's no one else to block News Corp. Late last week, General Electric Company (NYSE: GE) and Pearson, who had teamed up to make a bid, dropped out. But if they can't reach a common ground, and there are plenty of reasons to believe why Rupert Murdoch won't agree to the controlling shareholders -- the Bancroft's -- requirement for the deal to work (Think: Murdoch's editorial independence). It has been reported that News Corp.'s offer would reduce the Bancroft's involvement, but that Dow Jones was set to offer an alternative proposal, as early as today.
No matter what Rupert Murdoch wants, and he very badly wants the Wall Street Journal, the Bancroft family can still walk away and not sell.
On August 14th, Skechers USA, Inc. (NASDAQ: SKX) made public its offer to acquire Heelys, Inc. (NASDAQ: HLYS) at a price of $5.25 per share. At the time I wrote that the offer seemed low, and Heelys' management seems to agree, issuing a press release stating that "The Board believes the $5.25 offering price does not reflect the value of Heelys and that entering into discussions with Skechers based on their unsolicited proposal is premature at this time.".gif){kind=logo}
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 
The newspaper industry has been struggling of late, battling online classified sites, job listings, and free blogs. While readership of offline paper has been steadily decreasing, readers have been drawn more and more to the online versions of newspapers.
AirTran Holdings 
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Is a second stimulus check up ahead?
Coke (KO) moving up nicely following Q3 earnings
Will Lehman bankruptcy drop a $400 billion shoe on October 21st?
