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The writer is a long term value investor (over 10 years experience) seeking both value in long and short ideas. Besides stock positions, the writer likes to work with options to enhance the risk/return profile of the ideas. Disclaimer: This article provides opinions and information, but does not... More
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  • Merger And Acquisition Recap - Part VII 0 comments
    Jul 16, 2012 9:58 PM | about stocks: WLP, CPB, FX, TRI, WLP

    This week I will discuss the most important merger and acquisition announcements for the week of July 9th - July 13nd. With summer holidays approaching, the number and size of the announced deals were rather moderate compared to recent weeks.

    Thomson Reuters (TRI) the provider of information for businesses and professionals announced the acquisition of FXall (FX) for $22 per share, or $625 million in total. FXall is a leading independent global provider of electronic foreign exchange trading solutions for some 1,300 businesses and asset managers. FXall's Chairman Weisberg and its CFO Cooley which combined hold 32.5% of the company's shares have already agreed to tender their shares. Both firms hope that the combination of their activities will provide its customers with its services throughout the lifecycle of trades. The $22 bid per share represents a 40% premium compared to the close on the day before the announcement, marking year to date gains of 62%. FXall generates $118 million in annual revenues on which it earns $12 million per year. The acquisition which is expected to close in the third quarter of this year, will add merely 1% to Thomson Reuters' $13.8 billion in annual revenues. Shares of Thomson Reuters rose 2% this week, marking year to date gains of 8%.

    WellPoint (WLP) the health care insurer announced the acquisition of Amerigroup Corporation (AGP) in a deal valuing the company at $4.9 billion. WellPoint is offering $92 per share for the company, a premium of roughly 42% compared to the day before the announcement. The combination will provide Medicaid to 4.5 million members, making it the largest Medicaid provider of the country. WellPoint, known from its Blue Shield coverage program, decided to make a knock-out offer for the company to avoid a bidding war. WellPoint expects the deal to be accretive to 2013's earnings and add over $1 per share to 2015's earnings. Analysts already predicted a consolidation wave after "Obamacare" survived in the Supreme Court a couple of weeks ago. The acquisition of Amerigroup which generates $6.3 billion in annual revenues will result in pro-forma revenues of $67 billion for the combination. Investors react positively and shares of WellPoint rose 3.5% on the day of the announcement on Monday.

    Campbell Soup (CPB) the manufacturer of convenience foods announced the acquisition of Bolthouse Farms for $1.55 billion in an all-cash transaction. The company which holds leading positions in the markets for fresh carrots, salad dressings and premium beverages is currently owned by Madison Dearborn Partners LLC. The acquisition of Bolthouse Farms creates a $1.2 billion platform in healthy beverages when combined with Campbell's "V8" beverages. Bolthouse generated annual revenues of $689 million on which it reported adjusted EBIT of $92 million. In comparison, Campbell Soup generated annual revenues of $7.7 billion for 2011, on which it net earned $805 million.

    The deal which values Bolthouse at 2.2 times annual revenues will be funded by short and long term borrowings and is expected to close by the end of the summer. Campbell expects that the acquisition increases 2013's annual earnings per share by $0.05-$0.07, excluding transaction costs. Shares of Campbell Soup hardly reacted on the news with shares trading roughly flat for the week and the year.

    Last week was a reasonably active week in terms of active levels and deal size. The total announced deal size in the sample above came in around $7 billion. Merely 3 large acquisition have been announced, including some larger deals.

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

    Themes: quick-picks-lists Stocks: WLP, CPB, FX, TRI, WLP
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