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Dominick Lombardo, CFA
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Dominick Lombardo received his MBA in Management and Finance, and is certified by the CFA Institute. He later received a diploma (Credit Analysis) from New York University. Dominic had received the Series 7 and 63 certification from FINRA when he was a small-cap analyst and economics editor for... More
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Socially Responsible Investing
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Socially Responsible Investing (SRI)
  • Takeover Rumors on GMCR (Social Responsible Investing) 1 comment
    Oct 14, 2010 11:00 PM | about stocks: GMCR
    There was a takeover rumor on Green Mountain Coffee Roasters (NASDAQ:GMCR). 
    I've been noticing this frequently these days, especially for stocks that have taken big dips (such as Adobe's rumor of a link w/ Microsoft). 

    I believe these are unfounded, and appear to be manipulation on the part of some wise-guy investors.   The acquirer is rumored to be Nestle who's oozing to expand into the North American market.  My question is, Why would Nestle buy GMCR in the middle of an SEC investigation ?  Just makes no sense.

    Also, there was a great little WSJ article on the coffee industry, particularly the segment which GMCR is focused on (of course, those little pod one-shots.  aka "Single Serve Coffee").  During a lackluster market for coffee, single-serve growth has been phenomenal, doubling to $176.8MM over the last TTM ended 9/5/10.  However, note how small this market is !  Even GMCR needs to acquire companies to perk-up its business.



    Consequently, an acquisition of GMCR would be too small for Nestle.  Nestle is a food company with over $100Bn in revenues (based on a recently released report, translated into USD from Swiss francs).  It's Nespresso business, which is similar to GMCR's Keurig line, has annualized revenues of nearly $3Bn, so an acquisition of GMCR would not make sense at this point as it would be too small.  For comparison, GMCR's revenues annualize to over $1.2Bn, but, but, but, this is acquisition-related (and not all Keurig based revenue).  Also note from GMCR's 10Q that there are large amounts of inter-company revenues, so I'm not confident in that, 87% of revenues are really Keurig-related, as the company claims. Also note that LaVazza now has a 7% ownership stake in GMCR,  likely turning-off any potential buyers.



    Disclosure: Long GMCR
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  • sandisanmina
    , contributor
    Comments (567) | Send Message
     
    Lombardo,

     

    They have net tangible assets of $50MM and a market cap of $4Billion

     

    Nobody, NOBODY, is stupid enough to believe anyone would pay upwards of $4Bil for a firm with a balance sheet of $600MM GOODWILL & INTANGIBLES and $50MM of net assets.

     

    Well, except maybe for Louiga who plunked down $250MM for 7% of those $50MM net assets.

     

    I hope Louie remembers to add bleach.
    15 Oct 2010, 02:27 PM Reply Like
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