Sunday, July 31, 2005

2 more deals on their way

Late last week 2 more deals were rumored to be in the works.

Saks (SKS) could be on the block, though the company had initially wanted to sell only a few stores and wasn't planning to sell the entire company. I have mentioned Saks in this blog before, and have been buying shares in small numbers, mostly in the $12-14 range. Saks may ultimately go for ~$25/share. Apart from the brand name, Saks is also a good way to bet on a Japanese recovery, given their large presence there.

CP Ships (TEU) has confirmed that it is in talks, without disclosing any further details. CP Ships is a spinoff of Canadian Pacific. It has been paying more attention to the Asia/Australasia sea lanes lately. One party rumored to be interested in buying CP Ships is China Shipping, a state-owned enterprise. This seems a natural progression for the Chinese government. It needs to own resources (Unocal) and increasingly the means to transport them. The US Congress has reacted irrationally so far to Chinese attempts to buy US assets. Canada on the other hand is openly courting China and the response is likely to be in the form of more such purchases of Canadian mining/transportation assets. The US is turning out to be the loser, since the dollars for those deals come mostly from US consumers and the US should be doing everything it can to get those dollars back.

I own a few CP Ships shares bought at around $12/share. The shares may ultimately fetch $20/share, or more, if a competing bidder shows up.

For those of you interested it trivia, the ticker, TEU, stands for Total Equivalent Units, the unit for measuring a vessel's capacity.

After a long dry spell, the shipping industry has attracted huge investor attention over the last 3/4 years. A number of them have gone public in these past years, with atleast 3 (that I know of) having their initial offerings this year. This industry will go through a huge consolidation phase in the coming years as even more goods get manufactured away from their eventual area of consumption.


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