360° Coverage : Corporate Takeovers Draw Cheers From Wall Street, For The Most...

2 Updates

Corporate Takeovers Draw Cheers From Wall Street, For The Most Part

Feb 20 2014, 9:20am CST | by

Merger arbitrageurs used to have an easy calculus. When a big-time corporate takeover was announced they would go long the target, short the acquirer and pick up a few pennies on the dollar for...

Filed under: news

 
 
 

35 weeks ago

Corporate Takeovers Draw Cheers From Wall Street, For The Most Part

Feb 20 2014, 9:20am CST | by

Merger arbitrageurs used to have an easy calculus. When a big-time corporate takeover was announced they would go long the target, short the acquirer and pick up a few pennies on the dollar for their trouble.

These days the trade is going the other way, with corporate buyers being rewarded by Wall Street for having the gumption to use their cash for something beyond dividends and share repurchases. Take the example Wednesday morning, when Signet Jewelers raced higher after agreeing to pony up $1.4 billion for diamond-dealing rival Zale Corporation.

That followed Tuesday’s $25 billion deal between Actavis and Forest Laboratories, which juiced shares of both companies and drew raves from billionaire activist investor Carl Icahn, an agitator for change at Forest.

In January, Google shares rose the day after the company said it would shell out $3.2 billion for Nest Labs, the maker of smart devices for the home.

Rare is the corporate board or management team that wants to go out on a limb, though many would claim to follow the Warren Buffett philosophy of being greedy when others are fearful. The vote of confidence being given to acquirers in the most recent spate of deals is one more reason to expect that some of the hundreds of billions of dollars sitting on corporate balance sheets may be put to use in M&A this year.

Corporate takeovers can often be the equivalent of trades or draft picks in professional sports, meaning that it often takes years to determine whether a deal is a winner or loser. And even with many acquirers rallying on deal news in recent months, positive reception for corporate shopping sprees aren’t universal. Facebook certainly made a splash Wednesday, when it shelled out $19 billion in cash, stock and restricted shares to buy messaging service WhatsApp. But observers expressed reservations over the eye-popping price tag for such a young company. An initial 5% after-hours dip was followed by a decline when trading started Thursday with shares off a bit more than 2% in the first half-hour of trading.

An M&A boom has been something of a white whale for Wall Street in recent years, with predictions for a takeover surge coming like clockwork. This year is off to a decent start on that front, but even a year like 2013, with a nearly uninterrupted bull run, failed to inspire the flood of deals anticipated.

According to a note this week from data provider Dealogic, U.S.-targeted M&A volume tipped the scales at $266 billion through mid-February, the highest level to that point since $278.1 billion in 2000 and 12% ahead of last year’s $234 billion pace.

(There’s a caveat in the Dealogic figures though, as the number includes all targeted M&A volume. So two separate bids for Time Warner Cable — the $69.8 billion offer from Comcast the company agreed to in February and a $62.6 billion bid from John Malone’s Charter Communications announced in January – show up in the figures.)

A long-awaited run of mergers would also come at a time when heavyweight investors have a lot of ammunition. Activists like Icahn are in the middle of a string of mostly-successful pushes for corporate change and are taking on ever-bigger companies, demanding boards pull levers ranging from capital return to breakups to, yes, acquisitions.

Nelson Peltz sent a letter to PepsiCo Wednesday reiterating his desire for the company to split its drinks and beverage business, and in his initial pitch for the move last summer the billionaire said the snacks business should merge with Mondelez.

Elsewhere, Credit Suisse analysts suggested Wednesday that Wal-Mart Stores could “jumpstart” a push to add smaller stores to its roster by shelling out a few billion for Family Dollar.

A rallying stock market breeds an appetite for risk, from investors chasing returns or snapping up newly-issued IPOs and from corporations taking the plunge into dealmaking. Even after a shaky start to 2014, the S&P 500 is down just 1% year-to-date and so long as the companies doing the buying see their stock prices rewarded (for the most part) there will be one less hangup to keep cautious executives from opening their wallets.

Follow @SchaeferStreet

Source: Forbes Business

 
Update
2

7 weeks ago

Khazanah throws MAS RM6b lifeline

Aug 29 2014 5:01pm CDT | Source: Business Times Singapore

August 30, 2014 1:15 AMKHAZANAH Nasional will inject RM6 billion (SS$2.4 billion) over three years to resuscitate loss-making Malaysia Airlines (MAS) under a recovery plan that includes even an Act of Parliament. Other key moves are migrating its operations, assets and liabilities to a new company (NewCo) and slashing the workforce of 20,000 by 30 per c ...
Source: Business Times Singapore   Full article at: Business Times Singapore
 

 
Update
1

8 weeks ago

MAS posts loss of RM307m for Q2

Aug 28 2014 5:00pm CDT | Source: Business Times Singapore

August 29, 2014 1:13 AMMALAYSIA Airlines (MAS) registered a loss of RM307 million (S$122 million) for the second quarter to end-June, but warned of worse to come in the second half when the "full financial impact of the double tragedies of MH370 and MH17 ...
Source: Business Times Singapore   Full article at: Business Times Singapore
 

 

Don't miss ...

 

<a href="/latest_stories/all/all/30" rel="author">Forbes</a>
Forbes is among the most trusted resources for the world's business and investment leaders, providing them the uncompromising commentary, concise analysis, relevant tools and real-time reporting they need to succeed at work, profit from investing and have fun with the rewards of winning.

 

blog comments powered by Disqus

Latest stories

Mali confirms first Ebola case
Bamako, Oct 24 (IANS) The first case of Ebola virus was reported in western Mali town of Kayes, the country's health ministry has said.
 
 
Unesco chief condemns murder of Paraguayan journalists
Paris, Oct 24 (IANS/EFE) Unesco Director-General Irina Bokova Friday condemned the murder of Paraguayan journalist Pablo Medina Velazquez and his assistant Antonia Maribel Almada Chamorro, who were shot dead Oct 16 near Curuguaty in southeastern Paraguay.
 
 
Kidney stones may increase bone fracture risk
Washington, Oct 24 (IANS) People, especially women, who develop kidney stones may be at increased risk of experiencing bone fractures, finds a research.
 
 
India to join Asian infrastructure bank
Beijing, Oct 24 (IANS) Twenty-one Asian countries including India, ready to join the Asian Infrastructure Investment Bank (AIIB) as founding members, Friday signed a MoU on establishing the bank.
 
 
 

Latest from the Network

Second MERS case reported in Qatar
Doha, Oct 23 (IANS) A 43-year-old man in Qatar has tested positive for Middle East Respiratory Syndrome (MERS) in the second confirmed case of the deadly virus in 10 days, media reported Thursday. The patient had...
Read more on Business Balla
 
Two people die in Pakistan bomb blast
Islamabad, Oct 23 (IANS) At least two people were killed and 12 others injured in an explosion that took place in Pakistan's Balochistan province Thursday, media reported. The bomb was planted on a motorcycle, Dawn...
Read more on Politics Balla
 
Trott extends contract with Warwickshire till 2017
London, Oct 23 (IANS) England batsman Jonathan Trott, whose mental issues led to his abrupt departure from last winter's Ashes tour, has confirmed his successful comeback to competitive cricket by signing a new three-...
Read more on Sport Balla
 
Srikanth, Kashyap big movers in BWF rankings
Kuala Lumpur, Oct 23 (IANS) Indian men shuttlers Kidambi Srikanth and Parupalli Kashyap jumped seven places each in the latest Badminton World Federation (BWF) rankings released Thursday while Olympic bronze medallist...
Read more on Sport Balla
 
Alvin Stardust dead
London, Oct 23 (IANS) English singer Alvin Stardust died after a short illness. He was 72. Stardust's manager confirmed the news about his demise Thursday, reports mirror.co.uk. He was recently diagnosed with...
Read more on Celebrity Balla
 
Indian man reunited with family after 40 years
Dubai, Oct 23 (IANS) An Indian man, who had disappeared from his hometown in Kerala nearly 40 years ago, has been found by his family at a hospital in Dubai in the UAE, a newspaper report said. Now in his 60s, Abdulla...
Read more on Politics Balla
 
Srikanth, Kashyap, Saina rise in world rankings
Kala Lumpur, Oct 23 (IANS) Indian men shuttlers Kidambi Srikanth and Parupalli Kashyap jumped seven places each in the latest released Badminton World Federation (BWF) rankings Thursday while Olympic bronze medallist...
Read more on Sport Balla
 
Flintoff signs for Big Bash side Brisbane Heat
Brisbane, Oct 23 (IANS) Former England captain and all-rounder Andrew Flintoff, who retired from international cricket in 2009, Wednesday confirmed that he will play for Brisbane Heat in the Big Bash League (BBL) this...
Read more on Sport Balla
 
OPEC daily basket price falls again
Vienna, Oct 23 (IANS/WAM) The basket of 12 crude oils of the Organization of Petroleum Exporting Countries (OPEC) closed at $81.94 a barrel Wednesday compared to $82.09 Tuesday, the OPEC Secretariat said. The new OPEC...
Read more on Business Balla
 
Lopez to sign multi-million dollar deal?
Los Angeles, Oct 23 (IANS) Singer-actress Jennifer Lopez is reportedly in the final stages of securing a multi-million dollar deal to perform in Las Vegas. The 45-year-old is being offered $350,000 per show at The...
Read more on Celebrity Balla