Yesterday turned out to be an eventful day for mergers and acquisition (M&A) deals. The following stocks moved on the news:
The shareholders of the Swiss mining company approved the Glencore deal yesterday. Before the vote, SBG securities had already stated that there was a 90% chance the acquisition will be approved. The $31 billion deal will be the largest takeover of the year. Approval of European and Chinese regulators is now the only hurdle remaining in the accomplishment of the deal. The deal will help Glencore's CEO to form the fourth largest mining company in the world after adding coal, nickel, zinc and copper operations of Xstrata to his commodities trading empire. Glencore Xstrata Plc (XTA.L), the new name for the company, will have interest in about 35 coal mines in Columbia, Africa and Australia. After the acquisition, the company will become the world's largest exporter of coal burned by power stations.
After the announcement, both stocks rallied upwards. At day's end, XTA.L's share price was almost treble to Glencore's share price. The combined company will form 2.1 percent of the UK's benchmark FTSE Index. Also, it will become the 13th largest constituent of the aforementioned index. According to Liberum Capital, the transaction is expected to be closed in early 2013.
Yesterday the shares of the shopping website operator went up 9%, after a hedge fund acquired 9.9 percent stake in the company. The acquirer, Tiger Global Management LLC , already has stakes in struggling Internet portal Yahoo! (YHOO) and Facebook (FB), operator of the world's largest social network. This shows that the hedge fund bets on the technology companies that are attempting turnarounds.
The share price of GRPN has declined 84 percent since its IPO in November 2011. The company became famous after it multiplied its revenues by 5 times in the year 2010-2011. The revenues increased from $312 million to $1.6 billion in that year. The company's forward multiple tells us that the current valuations are cheap.
Currently, 10% of the total float has been shorted. I believe margins have a key role to play in the long-term performance of this stock. The margins are expected to improve in the future, as the company improves its ecosystem by offering incentives to its partners. (By incentives, I mean promotions like Groupon Payments).
Schiff Nutrition International (SHF)
Bayer (OTCPK:BAYRY) is not interested in participating in a bidding war for SHF, the manufacturer of branded and private-label vitamins. On 31st October, Bayer offered to pay $34 per share for SHF. However, unexpectedly, Reckitt Benckiser Group entered the scene and raised the offer to $42 per share. Bayer explained that entering a bidding war would result in a price well out of its pre-determined financial criteria. Bayer's CEO wanted to add SHF's faster growing vitamin and supplements to its consumer health product line.
The share price surged from $23 to $44 in 20 days (from 30th October to 19th November). After Bayer's decision of withdrawing from the bidding war, SHF's stock price has tumbled by more than 5%. Investors, in an anticipation of a potential bidding war, had pushed the share price above Reckitt's offer.
To me, SHF seems an attractive deal. The revenues for SHF are projected to increase by 43-46% through 2013. The company has displayed a compound annual growth rate of 7.9% in the last five year period. The company reported a 46% YoY increase in sales in its last month's earnings release. The EBITDA improved by 81%. According to Financial Times, the vitamins, minerals and supplements (VMS) market is estimated to be worth $30 billion and is growing fast in the U.S. RB's CEO Rakesh Kapoor believes that this acquisition would provide a powerful entryway into the lucrative VMS market.