This is another in a series of articles wherein we profile companies that have been the subjects of takeover chatter that we think represent compelling investments even in the absence of a takeover bid. To that end, here is our list of takeover targets that we find attractive on a "stand alone" basis:
Digital Generation, Inc. (DGIT)
Digital Generation is a $342 million market cap company based in Irving, Texas, that provides digital technology services that enable the electronic delivery of advertisements, syndicated programs and video news to both traditional broadcasters and online outlets. Some may recall the company used to be known as DG FastChannel, Inc.
The company is being shopped and according to various reports the company turned down a $20 per share offer from rival Extreme Reach, Inc. due to potential antitrust concerns. We look for the company to be taken over by a private equity firm. In the meantime, the stock trades at a 65% discount to its 52-week high of $33.17 and at less than book value.
Fusion-io, Inc. (FIO)
Fusion-io is a $1.8 billion market cap company based in Salt Lake City, Utah that develops markets and sells storage memory platforms for data decentralization in the United States. The company trades an average of 3.1 million shares per day. The company has been the subject of recurring merger and acquisition rumors all year. We think after a "test run" of the recently signed OEM agreement that Cisco will make a move on this company. In the meantime, even with the recent bounce this stock is trading at less than half of its 52-week high of $41.74.
Navistar International Corporation (NAV)
Navistar is an old-line American company, f/k/a International Harvester, that manufactures, sells and leases commercial and military trucks, buses, diesel engines and recreational vehicles. The company is based in Lisle, Illinois.
Navistar has a $1.9 billion market cap and trades an average of 2.3 million shares per day. Although the company has been mentioned in M&A circles periodically, speculation has really heated up recently as Carl Icahn increased his position in the company to 12% and MHR Fund Management acquired a 13.6% interest. Navistar is down from a 52-week high of $58.50.
With Icahn and MHR Fund Management circling and management under fire for failure to get the needed EPA diesel engine certification and out of control warranty expenses, we would not be surprised to see management do a friendly deal with an industry player like Fiat or Volkswagen.
NetApp, Inc. (NTAP)
NetApp (formerly known as Network Appliance, Inc) is an $11.1 billion market cap company that trades 8.5 million shares per day. NetApp designs, manufactures and sells networked storage solutions. The company is headquartered in Sunnyvale, California. The company has been a rumored takeover candidate for years. Now, with valuation at a reasonable level, and, with the company estimated to earn $2.08 per share this year and $2.44 next year, it may be an opportune time for IBM, Cisco or Oracle to step up to the plate and buy NetApp.
Rackspace Hosting, Inc. (RAX)
Rackspace is a $5.9 billion market cap company that hosts websites, web-based IT systems and computing as a service. The stock trades 2.4 million shares per day. Takeover chatter has been circulating for months with AT&T and IBM being most commonly mentioned as suitors. Earnings are estimated at $.80 per share this year and $1.15 next year. The stock is available today for a 25% discount from its 52-week high of $60.55.