5 Stocks That Could Be Buyout Targets: Valentine's Day Edition

by: Stock Croc

In keeping with Valentine's Day theme of love and lovers joining each other, I look at another five companies that could become the object of affection for bigger firms.

A foreign affair

After weathering the storm of debt and banking crises (that's right - it's plural) from 1973 to 1989, Latin American banks now seem to be on track. Although fourth quarter results gave Oriental Financial Group, Inc. (NYSE:OFG) shareholders little to smile about, the drop in share price could provide an opening for a U.S. bank with an eye on Latin America.

Oriental Financial, with a strong presence in Puerto Rico, but also holdings in Florida, mainly targets middle to upper class clients, from professionals to small- and medium-sized business owners. Despite reporting a loss, it isn't all bad. Currently trading with an 11.07 trailing price earnings ratio and a forward price earnings ratio of 7.29, it seems there is quite a bit of upside expected.

The suitor

It has been aggressively expanding through acquisitions since 2009 and US Bancorp (NYSE:USB) could add to its list of hook-ups. The list is already quite impressive: there's FBOP of Chicago, the Nevada operations of BB&T Corp (NYSE:BBT), the U.S. and Europe-based securitization trust administration businesses of Bank of America Corp. (NYSE:BAC), and this week, the banking operations of BankEast, a subsidiary of BankEast Corporation.

Acquiring Oriental Financial would see US Bancorp expand its Florida operations and give it a footprint in Latin America. Expect a premium to be paid on top of its $490.2 million market capitalization, given the positive expectations for this stock. Having fallen below $11.50, we could see an offer around $12.25 per share.

For the man who has everything

A company that recently announced the acquisition of a fellow medical device maker, Landauer, Inc. (NYSE:LDR), might find itself in the crosshairs of someone bigger soon. With its purchase of IZI Medical Products, Landauer strategically expanded into its core business of radiation monitoring and safety.

The suitor

Browsing through the seemingly endless list of products offered by Johnson & Johnson (NYSE:JNJ) - from its consumer health care division, through pharmaceuticals to medical devices and diagnostics - it appears as though the company has everything medically related covered. Not so; it hasn't ventured into the radiation dosimetry field where occupational and environmental radiation safety is determined. Not yet, in any case.

Landauer will come at a certain premium though; it pays out quite a handy dividend and despite having lost 14% of its share price over the course of 2011, shareholders will remember their stock has a 3.75% dividend yield. Landauer currently trades around $57, and has an enterprise value of $541 million which is also close to its market capitalization. An offer around $65 should compensate shareholders for their loss.

Too good to pass by

OYO Geospace Corp (OYOG) is a company that certainly knows its business. Its seismic products division impresses in the way it meets the needs of big payers who can't seem to do it for themselves. It manufactures technology that acquires and processes seismic data, mainly utilized in the characterization and monitoring of gas and oil reservoirs. So good is the company that it might just make it worthwhile for someone to consider vertical integration.

The suitor

Big money is at stake in the energy industry and offers might come from any of several marks. Any one of ExxonMobil (NYSE:XOM), BP plc (ADR) (NYSE:BP), or PetroChina (NYSE:PTR) could find value in adding a leader in the geophysical exploration field to their holdings.

Oyo Geospace's share price is nothing if not volatile. It currently trades around $86, but its 52-week trade reached highs of $109.99 and also plunged to $51.74. A big energy buyout would have to be willing to pay anything in the region of $100 a share.

A debutante going for a song

Since its initial public offering, Lone Pine Resources (LPR) shares have dropped more than 47%. Despite some hefty insider buys, the independent Canadian natural gas and light oil company continued to lose ground on the back of a soft gas market. As a result, Lone Pine has allocated approximately 80% of its 2012 capital budget to light oil. But it might be in natural gas that its allure lies.

The suitor

According to Forbes, ExxonMobil is one energy giant that has made strides into the gas market. According to an Exxon study, natural gas will overtake coal as the number two energy source by 2025. Lone Pine's resources would make a welcome addition to Exxon's reserves.

Lone Pine's enterprise value is estimated at $845.77 million which amounts to a share price of more than $11; levels not seen since August from where it declined rapidly. Currently trading around $6.50, shareholders will be happy if they are paid between $8.50 and $9.00.

Scanning for opportunity

A company closely involved with the safety and security of rail and air passengers, American Science & Engineering, Inc. (NASDAQ:ASEI) manufactures sophisticated X-ray inspection products that can be used to inspect goods, containers, and also people.

Despite being in an industry that seems vital to the entire transport industry, American Science shares have traded rather listlessly around $70, down from its 1-year high of $94.90. This creates the perfect entry point for a buyout.

The suitor

Defense contractors have had it tough since the recession and the need to diversify is now greater than before. The Boeing Company (NYSE:BA) should see sufficient synergy to acquire the manufacturer of a product that is so closely related to the flight and defense industries.

With an enterprise value of $633.51 million which is currently below market capitalization, American Science shareholders should be prone to agreement around $75 per share.

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