A Review of UBS's Top Potential Takeover Picks

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Includes: BWA, EXXIQ, HAIN, JACK, PNX
by: Rougemont

The Swiss based financial giant, UBS (NYSE:UBS), published a list of its top potential takeover targets. This report was released on September 14, 2010, and while that was about 6 months ago, very recent deals like the buyout offer for GSI Commerce (NASDAQ:GSIC) and Marshall & Ilsley (NYSE:MI) shows that the information in the report is still very relevant. It takes time for deals to develop and many of the names in the report could still be very much in play at some point.

This report lists which stocks they believe are takeover targets as well as which companies might be likely to buy them. The most recent takeover that was on their list is GSI Commerce, Inc., which just had a takeover offer from eBay, Inc. (NASDAQ:EBAY) in a deal valued at $2.4 billion. When the deal was announced, these shares surged, from about $19.39 per share on March 25, 2011 to the current price of about $29. You can read about the deal here.

Also on the list was Marshall & Ilsey, a bank which received a takeover offer from BMO Financial (NYSE:BMO). You can read about that deal here.

As these deals show, investing in takeover candidates can lead to huge potential gains for shareholders. You can see all the potential takeover stocks and read the report from UBS here. Some of the names from the UBS report, which I believe are worth looking at are:

Phoenix Companies, Inc. (NYSE:PNX) is trading at $2.47. Phoenix is a life insurance and annuity company. The 50 day moving average is $2.53 and the 200 day moving average is $2.30. PNX is estimated to earn about 43 cents per share this year. This puts the P/E ratio at about 6. The book value is reported at $9.95.

Why Phoenix could be an attractive target: As UBS states, a larger insurance company could acquire PNX. If they did, a highly rated firm could boost the ratings for Phoenix which would help them with their sales.

The Hain Celestial Group, Inc. (NASDAQ:HAIN) shares are trading at $32.39. Hain is a leading maker of natural and organic food. The 50 day moving average is about $29.24 and the 200 day moving average is about $25.27. Earnings estimates for HAIN are at $1.29 per share in 2011 and $1.48 for 2012. The book value is reported at $18.76.

Why HAIN could be an attractive target: The UBS report states that companies like Unilever (NYSE:UL) or Nestle (OTCPK:NSRGY) might be interested in acquiring HAIN. These shares look expensive when you consider the P/E ratio, so I question if this company is attractive in terms of valuation for a buyout. When UBS released this report, HAIN shares were trading around $24 so the rise in the share price might have reduced the chance of a buyout.

Energy XXI (EXXI) is trading around $33.77. Energy XXI is an independent oil and gas company, based in Bermuda. These shares have traded in a range between $12.68 to $34.73 in the last 52 weeks. The 50 day moving average is $31.43 and the 200 day moving average is $24.18. EXXI is estimated to earn about 65 cents per share in 2011.

Why Energy XXI could be an attractive target: Analysts see earnings estimates for EXXI jumping from 65 cents to $1.81 in 2012, as new wells come into play and rising energy prices boost profit margins. Also, this company should benefit as waiting times and regulations for drilling permits in the Gulf of Mexico improve. The UBS report states a larger oil and gas company might be a buyer for this company.

Borg Warner Inc. (NYSE:BWA) is trading at $78.61. Borg Warner is a leading auto parts maker. These shares have traded in a range between $33.93 to $81.07 in the last 52 weeks. The 50 day moving average is $74.04 and the 200 day moving average is $58.41. BWA is estimated to earn about $4.17 per share this year.

Why Borg Warner could be an attractive target: The economy has improved and that is boosting sales for BWA. The UBS report says a company like Bosch or Continental could be interested in this company. This company has operations in Japan and has been affected by the crisis there, so I doubt a takeover offer would come until the facts become more clear.

Jack in the Box (NASDAQ:JACK) is trading around $22.87. Jack in the Box is a leading fast food restaurant, based in California. These shares have traded in a range between $18.42 to $26.37 in the last 52 weeks. The 50 day moving average is $22.80 and the 200 day moving average is $21.64. JACK is estimated to earn about $1.57 per share in 2011 and $1.87 for 2012.

Why JACK could be an attractive target: The UBS reports states a private equity company might be a buyer for this company. Another fast food chain, Burger King, was acquired so it would not be surprising to see JACK as a target as well.

The data is sourced from Yahoo Finance.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. The information and data is believed to be accurate, but no guarantees or representations are made. I am not a registered investment advisor and does not provide specific investment advice. The information contained herein is for informational purposes.