Tuesday, September 19, 2006

Hit #114

Symbol Technologies (SBL), the leading maker of barcode scanners, is being acquired by Motorola for $3.9 billion in an all-cash deal. The offer being made, at $15/share, represents a gain of 27% over my average cost of $11.83/share.

I had written in the past about Motorola scouting for acquisitions and had singled out Symbol as a target for Motorola in this post.

The deal rumors were first reported by the Wall Street Journal on Sunday evening, and I had mentioned it here. Motorola is getting Symbol at a bargain price if the expected growth in RFID market materializes over the next few years. I would have preferred Motorola shares to cash, or better still, I would have liked this takeover even more if it came a couple of years from now, with Symbol shares at a much higher level.

Motorola's acquisition spree is just starting. Apart from its own cash pile, it has gained handsomely with the recent private equity buyout of Freescale Semiconductor, a Motorola spinoff. Companies like Nortel (NT), Palm (PALM), Research In Motion (RIMM) are all likely candidates, with Nortel being the best bargain available right now.

I will be looking into reinvesting the Symbol takeover proceeds in point-of-sale terminal makers / payment processors like Par Technology(PTC), Hypercom (HYC), Radiant Systems (RADS).

Previous hit - Windrose Properties (#113)

Monday, September 18, 2006

Weekend M&A notes

  • The rumored Freescale (FSL) deal is finally here. THe final price tag - $17.6 billion, or $40/share.
  • Herb Greenberg writes about the Freescale takeover saying it indicates the reckless/impatient state of private equity groups which are now throwing money at all sorts of targets. I believe that the price may have been a bit high, but this deal makes more sense than the HCA buyout.
  • Here is a fictional piece written in 2017 looking back at the golden age of M&A - 2006-2016. I am definitely ready for it having been preparing for it for almost 4 years now!
  • Symbol Technologies (SBL) is rumored to be close to a sale, possibly to Motorola. I will mark this as a hit when it is confirmed. For Motorola this would be a great buy assuming the price is right. I don't mind getting Motorola shares at a discount, since I believe they are headed much higher as the turnaround proceeds.

Sunday, September 17, 2006

Hit #113

Windrose Medical Properties (WRS), an REIT focused on hospitals and other medical facilities was acquired last week by its larger competitor Health Care REIT (HCN), in an all stock deal. The buyout values Windrose at $18.06/share, a premium of 33.7% over my average cost of $13.5/share.

While a cash deal would have been equally welcome, this deal is still attractive for holders of Windrose with a much lower cost-basis than the buy price, as they will effectively get a higher yield on their new HCN shares. HCN, at its current price, yields around 6%.

A few other REITs still remain attractive, though in the non-specialty office sector the recent M&A binge has reduced the number of publicly traded companies dramatically. Well over half of all office REITs have disappeared over the last 2 years. I had last posted on this topic when Prentiss Properties got bought out. Another office REIT I had been watching for a while, but never found a good enough entry point for, was Glenborough Realty (GLB), some of whose properties I passed by everyday. They got acquired around 2 weeks ago by a Morgan Stanley group.

Among the remaining ones, here is a short list of attractive or worth-watching candidates:
  • Mission West Properties(MSW) : I now own a few shares. The insider trading pattern is mixed and a better entry point may present itself.
  • Digital Realty (DLR): The stock looks expensive without supporting insider activity. I will be waiting for a much better price.
  • Extra Space Storage (EXR): The storage space sector has seen its own version of a mini consolidation boom. Extra Space seems to have some prominent locations. The insider buying is extremely strong. I have just recently opened a small position and will be looking to add more. Two other small players, U-Store-It (YSI) and Sovran Self Storage (SSS) are worth watching. The former has some strong insider buying of late.
  • Trustreet Properties (TSY) : Owns mainly restaurant properties. Nothing to recommend this currently.
  • Educational Realty (EDR) : an REIT focused on campus housing. Still looks attractive, along with the other player, American Campus Communities (ACC). Both have insider buying recently. GMH Communities (GCT), another campus housing REIT, also looks interesting, especially with Vornado Realty owning a sizable stake.
  • Senior residence REITs: I have not yet looked into this subsector, but it should be another promising area for consolidation as well as a way for other REITs to diversify via acquisitions. Will post more when I have some picks.
  • Mills Corp (MLS): This troubled REIT owning retail properties could be acquired or could see a huge gain from here if the recently uncovered problems turn out to be less severe than expected. Highly speculative and recommended only to those with a strong stomach for high risk plays.

Previous hit - Internet Security Systems (#112)

Tuesday, September 12, 2006

One by one, the records fall

I have been repeating, ad nauseam some might say, that we will see a few records falling before this M&A boom is over. Well, with today's news of an impending deal for Freescale, three records that do matter have fallen in as many months, thus placing this boom confidently higher than the earlier boom.
  • HCA (HCA): the largest leveraged buyout, LBO, ever, beating the RJR record, though if you account for inflation the earlier record still stands (just give it some time!).
  • Kinder Morgan (KMI): the largest mangement-led buyout, MBO, ever.
  • Freescale Semiconductor(FSL): News out today indicated that two different private equity groups are bidding. The deal would be worth atleast $16 billion, making it the largest tech buyout ever, and by a huge margin. I have a few shares that I received when it was spun off from Motorola, but I won't be marking it as a hit. The earlier record is held by Sungard Data Systems, another early hit for me.
I will make yet another, foolishly bold, forecast - we will see all these three records falling again, by the end of this year, with just over 3 months to go! And again, over the next year. And then again, shall I say ad nauseam!

Revisiting Arizona and Stockmen's Bank

In an earlier post detailing a road trip around Arizona, I had mentioned a few takeover targets, including privately-held Stockmen's Bank.

Well, I don't get to wait for it go public! Zions Bancorp (ZION) today announced that it is buying Stockmen's for around $200 million.

This is a good buy for Zions, which itself, as I mentioned in the same post, is a takeover target for Bank of America, Washington Mutual or Wells Fargo, as it is the best vehicle to enter the Utah and now, with this acquisition, Northern Arizona, markets. Zions stock isn't cheap and so, I will be waiting for a better price, hoping it won't get acquired by then.

Saturday, September 09, 2006

Viacom and Yahoo walking down the aisle ?

The recent turn of events at Viacom has had a number of analysts and media watchers speculating about a possible sale/merger in the near future.

Some of what I say here comes from reading, between the lines, Sumner Redstone's autobiography. Redstone would want to go out with a mega deal. I initially guessed that a Viacom - Electronic Arts merger would be perfect. Redstone's bio shows that he is interested in the gaming business. After buying regularly on the open market, Redstone and his National Amusements company, already own around 75% of game maker Midway (MWY). That must be just one stepping stone on the aisle.

A Viacom / Yahoo merger, as suggested by a few watchers, will definitely meet the criteria in terms of size and impact that Redstone likely would want to see. But, unless the price tag and the expectations are kept under control, that would be an extremely risky deal, just like the bad marriage between AOL / Time Warner a few years ago.

A Viacom / EA deal is less risky, while still being large enough to get attention from the media. I would definitely vote for such a deal.

Update: the speculation continues. I came across another piece where a Comcast/Viacom merger was picked as a likely end result. I can't say much about this except that the other two I mentioned earlier look better in comparison.