Welcome to the 1-Click issue of M&A Daily.
Amazon (NASDAQ:AMZN) management is looking to buy Ocado (OTC:OCDDY). The British online grocer would expand upon Amazon's Pantry service for their Amazon Prime subscribers. This is a great opportunity for Amazon, in part because the threat of Amazon competition served to beat down Ocado shares over the past few years. Amazon wants to enter the UK online grocery market, but they have to make the decision of whether to make or buy their business. Buying Ocado speeds up their entry.
Meanwhile, Amazon has also registered with the Federal Maritime Commission to do business as an ocean freight forwarder in the US. This will make it easier for Fulfillment by Amazon customers to move products into Amazon's existing logistics system. The biggest impact will be on Chinese suppliers for the American consumer markets.
In cutting out the middle man, Amazon's Jeff Bezos wants to reduce costs and protect critical supply chain information. He is acting at an advantageous time - he can move in on the ocean freight business for a low price. Part of the plan to recoup his investment is to take out costs with Amazon's software and automation. Amazon can offer improved efficiencies related to pricing, booking, status tracking, and customs filings. This is bad news for other maritime freight competitors as Amazon will have massive scale and a willingness to price at its marginal cost. It is never easy to compete against someone who is willing and able to forgo a profit for decades.
Once Amazon's ships arrive in the US, they will have a number of new planes to speed up service within the US market. Amazon is buying twenty 767 freighters to begin supplanting United Parcel Service (NYSE:UPS) and FedEx (NYSE:FDX). As with their new oceanic efforts, they will squeeze margins in the air. Who can hold their breath the longest? Probably Jeff Bezos.
I approach consumption just as I approach investing - as a value investor. I shop as little as humanly possible. However, when it is absolutely necessary, I mostly shop on Amazon. Here is when and how to do so as cheaply as possible.
Canadian Oil Sands
Waste Connections (NYSE:WCN) and Progressive Waste (BIN) entered into a definitive agreement to merge in an all-stock deal valued at about $2.7 billion in which WCN holders will own 70% of the combined company, and BIN holders will own 30%. WCN holders get 2.076843 BIN shares (1/0.4815) per share. The deal will be over 20% accretive to free cash flow per share. In addition, this will lower the WCN tax rate. They structured it in a way to avoid the Treasury Department's efforts to harass companies that execute tax inversions.
The HSR waiting period for the Western Digital (NYSE:WDC) acquisition of SanDisk (SNDK) expired on January 15th.
Brookfield (NYSE:BAM) proposed to acquire Rouse (NYSE:RSE) for $17 in cash per share. Brookfield Property Partners LP (NYSE:BPY) would retain its RSE shares. Rouse is working with Bank of America (NYSE:BAC) on both this proposal and other strategic alternatives.
Zhaopin (NYSE:ZPIN) received a preliminary non-binding take-private proposal from CDH V Management and Shanghai Goliath. The buyers want to pay $17.50 in cash per American depositary share, or $8.75 per ordinary share.
Elsewhere on Seeking Alpha & Beyond
- Shares have been in meltdown since the start of the year.
- The industry is consolidating.
- The company is searching for a buyer.
Disclosure: I am/we are long SNDK, WMB, INAP.
I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.
Additional disclosure: Chris DeMuth Jr and Andrew Walker are portfolio managers at Rangeley Capital. Rangeley invests with a margin of safety by buying securities at deep discounts to their intrinsic value and unlocking that value through corporate events. In order to maximize total returns for our investors, we reserve the right to make investment decisions regarding any security without further notification except where such notification is required by law.
Editor's Note: This article discusses one or more securities that do not trade on a major U.S. exchange. Please be aware of the risks associated with these stocks.