A Few Current Examples Of Take-Overs, Take-Downs, And Take-Ons

by: Marc Courtenay

"If I had my life to live over again, I would elect to be a trader of goods rather than a student of science. I think barter is a noble thing." Albert Einstein (Physicist and 1921 Nobel Prize Recipient, 1879-1955)

There are very few things in the investment world more exciting than talk of a company that may be "fair game" to be taken over. Rumors have been flying about a technology company that has grown its money-making capacities through timely acquisitions and stellar organic growth.

Citrix Systems (CTXS) knows, believes, and has said, "The cloud era is here", and it is emerging as a dominant force. That's the driving reason behind its upcoming conference intriguingly dubbed "Synergy 2012" for customers and potential customers both big and small.

Citrix seems brilliant at making this "cloudy" topic clear and relevant. It describes Synergy 2012 as an experience that "...will deliver an expanded choice of technical and business breakouts to help understand how to enable mobile workstyles and power cloud services for your business."

CTXS has grown its own business on the idea of making its technologies and products highly focused for as large a target-market as possible.

Whether its "enterprise cloud networks" or "mobile workstyles" which includes "...innovations and technologies to support today's increasingly mobile workforce", CTXS wants to be a top competitor.

Just looking at a menu of the products and you'll see why CTXS has such a lucrative business model. It's ramping up that model by unveiling the next phase of its popular "CloudStack Strategy".

This just makes CTXS a more valuable company, and that's why, in the words of the company's press release, it is:

"Elevating CloudStack into a full open source Apache project [that] will further accelerate its mission of delivering a powerful, proven, hypervisor-agnostic platform that helps customers of all sizes build true Amazon-style clouds."

"CloudStack brings to Apache more than 30,000 community members, thousands of certified apps, and hundreds of production clouds, collectively generating more than $1 billion in cloud revenue from some of the biggest brands in the industry."

This must make "cloud-centric" Oracle (ORCL), the $146 billion dollar market cap company whose CEO (Safra Catz) said in a recent Forbes interview that "Oracle is The Cloud", begin to salivate and take notice.

CTXS is one-tenth the size of ORCL, and a timely acquisition would make ORCL one of the undisputed market leaders in the cloud products industry.

Microsoft (MSFT) with its huge cash coffers and $268 billion market cap would be another potential acquirer. A "dark horse" predator might be the likes of Cisco Systems (CSCO) which desperately needs to diversify into products and services compatible to its core areas of expertise.

Cloud computing is a big money-maker, and that's why acquisitions in this area are on-going. Recently Dell (DELL) acquired privately-held Wyse Technology apparently to grab a hold of their cloud capacities.

A Brilliant "Take-down" at Comcast Corporation

It's impressive to read about this diversified giant in the media industry. Comcast Corporation (CMCSA, CMCSK) (www.comcast.com) is one of the world's leading media, entertainment and communications powerhouses.

Comcast is principally involved in the operation of cable systems through Comcast Cable and in the development, production and distribution of entertainment, news, sports and other content for global audiences through NBCUniversal. It is also one of the nation's largest video,high-speed Internet and phone providers.

Now tComcast has struck a distribution deal for the Oprah Winfrey Network (OWN); 17 million Comcast subscribers will be able to watch OWN and Comcast will evidently be paying subscriber fees for the privilege. This should boost both OWN's number of viewers and Comcast's subscriber base.

OWN is partly-owned by Discovery Communications (DISCA), which has had its own joint-venture deal going on with Oprah. She will generate more fans then ever and her popularity should be a positive for CMCSA.

Can a "take-on" like Jose Cuervo make financial sense?

Apparently Diageo plc (DEO) thinks so? Diageo's profile is already an alcoholic-beverage-lovers fantasy. And its Key Financial Statistics show that it knows how to generate earnings, revenues and lots of cash.

It is also not afraid of debt, as it evidently has over $15 billion in total debt (most recent quarter). That puts its Total Debt-to-Equity ratio at a breathtaking 157.49. But that's not stopping it from investigating how much more it'd have to spend to add the Jose Cuervo name to its array of products.

Bloomberg reported on Monday, April 2, that DEO, the world's largest liquor maker, has hired Goldman Sachs Group Inc. (GS) and HSBC Holdings Plc (HBC) for guidance about "taking-on" Jose Cuervo.

The report said that, "Cuervo, owned by Mexico's Beckmann family, is expected to be valued at more than $3 billion and family sellers may gain cash or shares in Diageo as part of the deal, said the people, who declined to be identified because the talks are private."

If DEO succeeds in this acquisition, it may allow investors to buy the stock at lower valuations due to the expenses that would be incurred and the possibility of dilution as well as increased debt at DEO.

The take-away from all this illustrates some of the ways that companies grow their franchise, their money-engines, and their value of their name brands. These examples will be worth watching - carefully.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.