Hit #180 (United Rentals)

United Rentals (URI) is being taken out by private equity group Cerberus in a $6.6 billion deal. The cash offer, of $34.5/share, represents a gain of 133.9% over my average cost per share of $14.75.

Given the rapid deceleration in construction spending, both residential, and (soon) commercial, it seems that Cerberus could not have picked a worse time. The offer represented a tiny premium to its previous day's close, and that may be a consolation.

The only other smaller, independent construction equipment rental company seems to be H&E Equipment Services (HEES), which went public earlier last year. Shares look attractively priced, but I will be waiting for more sure signals from the construction industry before buying.

One name that you will see often on URI leased vehicles is JLG, a prominent manufacturer of various lift vehicles. JLG was acquired earlier this year by Oshkosh Truck (OSK) - see my post on a construction peak sign. The latter remains a good long-term bet on a worldwide construction/mining/resource boom.

The resource boom has led to sharp appreciation in stocks of other heavy construction and earth-moving vehicle manufacturers. For believers in a new era in resources, these are still a good bet, though I would rather wait for a global slowdown and the resulting pullback to add in volume. But a prolonged slowdown and an equipment glut may threaten some of them. Here is a list of potential buys in the sector:

• Joy Global (JOYG): Prefer waiting for a better entry point.
  
• Bucyrus International (BUCY): Insider activity indicates that a small position can be opened right away, adding more as opportunities arise.
  
• Terex (TEX): Same comment as for Bucyrus. Also has a much higher chance of surviving a severe/prolonged downturn.
  
• Agco (AG): Agco manufactures as well as distributes mostly agricultural equipment. This has been a good turnaround story so far, and makes for a perfect target for a larger strategic buyer.
  
• CNH Global (CNH): A sound long-term bet. Also a possible buyer of Agco.
  
• Deere (DE): I prefer waiting for a better price.
  
• Caterpillar (CAT): See comment on Deere.
  
• ASV Inc. (ASVI):The most promising bet in the sector. Insider activity is bullish. ASV is a sitting duck for an acquirer.
  
• Kubota (KUB): I do not know enough about this Japanese manufacturer to make any recommendation.

Ingersoll-Rand (IR) just got out of this sector altogether by selling its Bobcat division to Doosan Infracore of Korea. Only time will tell if they got out at the top!

Looking much farther into the future, companies making underwater navigation equipment may have a new market to tap - ocean-bed mining. Players include Teledyne (TDY) (via its Benthos acquisition a while ago), Oceaneering International (OII) and Acergy (ACGY).

Extending coverage a bit more, Force Protection (FRPT), a maker of heavy-duty impact-resistant military vehicles should be acquired in the near future. The stock has had a spectacular run over the last few months, but could still get a substantial premium in the event of a takeover.

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Previous hit - Neoware (#179)

Hit #179 (Neoware)

On the same day that HP bought Opsware (see Hit #177), it also announced a deal to buy Neoware (NWRE). The cash offer, of $16.25/share, makes for a 36.8% gain over my average cost of $11.88.

I had mentioned Neoware in an earlier post (Hit #44) when Tarantella was acquired by Sun. Neoware has been one of my largest holdings, driven mainly by its takeover potential as well as its cash hoard. Given that Neoware had around $6/share in cash, the offer undervalues the company and its potential. Like with other such deals where investors got the short end of the stick, insiders must have gotten away with much more for agreeing to such a low price.

It is surprising that there haven't been other bidders. IBM, Sun, but especially Citrix, should be making an attempt to go after Neoware.

As noted in the post on Tarantella, Citrix itself remains a target - for IBM, Computer Associates or Symantec. But given its latest acquisition, of XenSource, it is unlikely to sell itself soon. Citrix now represents an alternative play on the growing virtualization trend. The leader in that sector, VMWare (VMW), just got spun off from EMC in a blockbuster IPO. Having been a huge fan of virtualization/VMWare for a while, I see tremendous long-term potential here. Citrix could deliver some magic if it were to successfully integrate its existing solutions with XenSource.

As for my proceeds from Neoware, I reinvested all of it into GateHouse Media (GHS), and promptly lost almost 15% - ouch! It wasn't meant to be a short-term investment, and hence will remain in my portfolio for a long time. As long as the dividend yield stays at or around 10%, I wouldn't have much to complain. GateHouse Media's large holder, Fortress Investment Group (FIG), is also a good value buy right now, given the depressed level of this stock following the turmoil in the credit markets, and the resulting increased potential for trouble in private equity land. Recent negative news related to Fortress' involvement in lending to Katrina victims hasn't helped either. But Fortress remains a saner alternative to the other public private equity group, Blackstone (BX).

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Previous hit - Playtex (#178)

Hit #178 (Playtex)

Playtex (PYX) is being bought by Energizer for $1.2 billion in a cash deal. The $18.3/share offer makes for a 77.8% profit over my average cost of $10.29.

I had mentioned Playtex as a buyout candidate when J. Jill was rumored to be a target. The only thing surprising was that Playtex, mostly known for tampons, is being bought by a company that is primarily known for batteries. While I like the premium I am getting here, this combine doesn't seem to be a natural fit at all!

There was atleast one public indicator that a takeover was coming when the CFO canceled an appearance at a conference, supposedly due to a scheduling conflict. As detailed in the WSJ report, quite a few traders may have walked away with big profits. This indicator isn't anywhere near being as interesting as the MBNA/copter crash incident.

Warner Chilcott (WCRX), which makes women's healthcare/dermatology products, could be another target, for the likes of Johnson & Johnson. The stock, in spite of the debt, looks relatively cheap.

Like with Cytyc mentioned earlier, Playtex falls into a category that is uncomfortable for many investors to talk about, let alone invest in. And for that very reason, I have fun bringing it up every time somebody touts Google or Apple. The reaction varies from person to person, but it is always memorable!

Spectrum Brands (SPC), a company similar in profile to Energizer, but in very bad shape right now, is a good speculative bet for the brave!

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Previous hit - Opsware (#177)

Hit #177 (Opsware)

Opsware (OPSW) is being taken out - finally! HP is putting down $1.6 billion in a cash deal, valuing shares at $14.25 a piece. That offer makes for a 141.5% gain over my average cost of $5.9.

I have repeatedly mentioned Opsware as a target in the past, including in a post titled What should HP do ?. There I said - HP should buy one or all of these players - Veritas (VRTS), Opsware (OPSW), Altiris (ATRS)! More than 2 and a half years later, HP decided to act!

While the offer is fair, I am stunned by the lack of competing bids. Companies from EMC (see EMC trips) to Symantec and BMC to Macrovision (see A tech heavyweight in the making) should be going after Opsware!

Read more about the deal directly from Marc Andreessen - HP buys my company ....

With this deal, there aren't any more targets left in this sector. Companies like BMC and Macrovision can themselves be targets, but for shareholders they are better off as standalone companies given the growth potential in the sector.

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Previous hit - DJO (#176)

Hit #176 (DJO)

DJO (DJO), formerly called dj Orthopedics, is being acquired by Blackstone Group for $1.6 billion in cash. The offer, of $50.25/share makes for a gain of 190% over my average cost of $17.31.

This comes just weeks after Blackstone, with others, bought another related public company, Biomet (BMET). Among the remaining, Smith & Nephew (SNN) looks like the next likely target in the sector.

For those looking at speculative smaller players, Alphatec (ATEC), Hanger Orthopedic (HGR) and Langer (GAIT) provide growth opportunities, with Hanger looking like a sound bet for the long term.

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Previous hit - Rural Cellular (#175)