BloggingStocks

The resilience of strategic deals

Tom Taulli — 2008-07-14T14:06:00+00:00

Filed under: Berkshire Hathaway (BRK.A), Private equity, Anheuser-Busch Cos (BUD), Wrigley, (Wm) Jr (WWY), Dow Chemical (DOW)

The credit crunch is not going away, and as a result, there has been a sharp fall-off in leveraged buyouts (LBOs). Basically, only relatively small LBOs -- between $1 billion to $2 billion -- are getting done.

But there is a bright spot: strategic acquisitions. If anything, we are seeing a variety of mega deals in this category. A survey from Dealogic shows that - as of June 25 - there were $597 billion in strategic M&A transactions, only 2% down from last year's total.

Some of the notable deals include: InBev's $49.9 billion play for Anheuser-Busch Cos. (NYSE: BUD), Mars' $23 billion deal for Wm. Wrigley Jr. Co. (NYSE: WWY) and Dow Chemical Co's (NYSE: DOW) $18.8 billion cash purchase of Rohm & Haas Co. (NYSE: ROH). The last two have involved financing from Warren Buffett's Berkshire Hathaway (NYSE: BRK.A).

Why the resilience with strategic deals? Well, there are several key reasons.

First of all, it helps that the equity markets have been in bear mode. No doubt, this makes it easier to get compelling valuations.

Next, there isn't much competition from private equity buyers. Just a few years ago, PE firms essentially crowded out many strategic buyers that couldn't get the kind of financing leverage.

Finally, the drop in the dollar has made U.S. assets pretty cheap. As seen with the Anheuser deal, InBev had little trouble raising its bid from $65 to $70.

Tom Taulli is the author of various books, including The Complete M&A Handbook and The Edgar Online Guide to Decoding Financial Statements. He also operates MergerBook.com.

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Rohm & Haas bows out to Dow

Tom Taulli — 2008-07-11T15:04:00+00:00

Filed under: Berkshire Hathaway (BRK.A), Wrigley, (Wm) Jr (WWY), Dow Chemical (DOW)

When it comes to a mega M&A deal that involves an old-line company and a founding family, Warren Buffett is on speed-dial. For example, his firm, Berkshire Hathaway (NYSE: BRK.A), provided $4.4 billion in financing for the Wrigley Co. (NYSE: WWY) buyout.

Now, Warren is plunking down some more cash on another big deal: Dow Chemical Co's (NYSE: DOW) $18.8 billion cash purchase of Rohm & Haas Co. (NYSE: ROH). In this case, the contribution comes to about $3 billion (in the form of a convertible preferred structure, which has a nice 8.5% coupon rate). As a result, Berkshire will become Dow's largest shareholder.

Yes, the US economy continues to be bleak and there is lots of fear. But, for long-term investors - such as Warren - this is an ideal time to pick up juicy opportunities.

In fact, this is evidence that the smart money sees lots of value from M&A deals - especially transformative ones. Then again, in order to compete on a global scale, there is a need for economies of scale.

For the most part, Dow focuses on petroleum-based chemicals. As for Rohm & Haas, it deals primarily with adhesives, personal care products, paints and so on. In other words, Dow is trying to find ways to diversify things.

Although, the deal for Rohm & Haas is no slam dunk. It's not easy to make such a transaction in a tough economic environment. Plus, Dow is paying a massive premium - thus setting a high bar for performance.

Tom Taulli is the author of various books, including The Complete M&A Handbook and The Edgar Online Guide to Decoding Financial Statements. He also operates MergerBook.com.

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Cramer on BloggingStocks: Dow Chemical shakes things up

Jim Cramer — 2008-07-10T08:30:00+00:00

Filed under: Deals, Market matters, Wrigley, (Wm) Jr (WWY), Dow Chemical (DOW), Cramer on BloggingStocks

TheStreet.com's Jim Cramer says its stunning buy of Rohm & Haas will get people thinking about an energy top.

Just when you thought it was safe to short anything, particularly anything with any commodity exposure, Dow Chemical (NYSE: DOW) (Cramer's Take) comes along and inexplicably pays a gigantic amount of money, $78 in cash, for Rohm & Haas (NYSE: ROH) (Cramer's Take)? My first thought was that it must be a joke. That is inconceivable. A hoax. Something perpetrated by frustrated longs to spook the shorts.

I mean, a chemical company? Two chemical companies? Ground Zero for slowing economic activity and raw costs? People unsure if Dow could even pay its nearly 5% yield? I mean, even last night on my show, I made fun of the idea that people are confusing Becton Dickinson (NYSE: BDX) (Cramer's Take), a medical supply company, with a chemical company because it uses resin.

Amazing.

So now, the whole market re-evaluates for a second and wonders whether Dow thinks oil's gone up enough or sees an economic recovery, or whether stocks are just too darned low and they wanted to take advantage of the declines, which they regard as cyclical and almost over. I say that because ROH's lineup is deeply cyclical and is therefore considered deeply history.

Stunning.

Will it matter? Maybe. But remember Mars and Buffett bought Wrigley (NYSE: WWY) (Cramer's Take), and for a couple of days we had chatter that stocks were too cheap, and where did it get us?

In Mars' defense, that deal marked a near bottom in the defensive stocks. Have you seen where they are?

Maybe this deal will mark a top in energy? That's what Dow needs. Stranger things have happened.

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RELATED LINKS:
Three Stocks With Good Chemistry
Cramer's 'Mad Money' Recap: Get Healthy With Becton Dickinson
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Jim Cramer is a director and co-founder of TheStreet.com. He contributes daily market commentary for TheStreet.com's sites and serves as an adviser to the company's CEO. At the time of publication, Cramer had no positions in the stocks mentioned.

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Cramer on BloggingStocks: The path ahead is down

Jim Cramer — 2008-06-27T09:19:00+00:00

Filed under: Ford Motor (F), General Motors (GM), Market matters, Citigroup Inc. (C), Anheuser-Busch Cos (BUD), Bank of America (BAC), Merrill Lynch (MER), Countrywide Financial (CFC), Wrigley, (Wm) Jr (WWY), Wachovia Corp (WB), Washington Mutual (WM), Cramer on BloggingStocks

From TheStreet.com Network

TheStreet.com's Jim Cramer says with few exceptions, the landscape is littered with corpses.

Sell everything. Nothing's working. Revisit when the prices are adjusted for a big recession, soaring inflation and a crushed consumer. Sell at 12,000 and come back at 10,000. Even better: short it.

Are you going to argue with any of that? Do you have a case against it? What's the counter? Takeovers? We've had a couple: Anheuser-Busch (NYSE: BUD) (Cramer's Take), Wrigley (NYSE: WWY) (Cramer's Take). Good if you owned them.

Lower rates? Can the Fed help? We assume the Fed is done. The odds favor higher rates. Bank turnarounds? How, with short-rates going up? With housing prices going down?

Can oil go down? Only with a worldwide crash, and with a worldwide crash, why would we come back at 10,000?

Can the consumer get more liquid? How? Unemployment's going higher. Wages won't go up in that environment.

That's the environment. It's pretty bulletproof when it comes to its logic.

In fact, there's really only one thing that could be wrong with it. EVERYONE AND HIS BROTHER BELIEVES IN IT. It is the most consensus of consensus views.

Sometimes the consensus is dead right: Housing's been going down and everyone knows it's going down, and it keeps going down.

I have said the same thing about Citigroup (NYSE: C) (Cramer's Take) and Wachovia (NYSE: WB) (Cramer's Take) and Washington Mutual (NYSE: WM) (Cramer's Take) and Bank of America (NYSE: BAC) (Cramer's Take) -- cut the dividend already! -- and GM (NYSE: GM) (Cramer's Take) -- cut the dividend again already! -- and Ford (NYSE: F) (Cramer's Take). That's been right. That's worked.

So you can't just say the consensus is wrong.

The negativity coming into today's session is as thick as I can recall nearing most short-term bottoms. The issue is there is not enough fear out there. Despite the consensus, which obviously creates a need for lower prices before it is worth buying, there isn't a big spike in the VIX, there isn't a gap down, or a crescendo of selling. There isn't even any volume. So while the bearishness is real thick, the selling isn't. (Bloomberg had an excellent piece on this yesterday, noting how much lower the VIX was than at other bottoms.)

I think we lack a climax because we haven't had a climax, some session where people can say, "I don't care how much lower GM goes, I know it is a buy." Same with Citigroup.

That's because unlike most other times in the stock market, the stocks of big companies that are cascading all need capital, and the companies themselves aren't selling anything off except common.

Merrill Lynch (NYSE: MER) (Cramer's Take) should have sold Bloomberg. It is not a core asset. It should have sold its BlackRock (NYSE: BLK) (Cramer's Take) stake. It can make it without it. But no ... nothing.

Citigroup has a lot of core assets, but I now believe that the management of that place is so screwed up it's not redeemable anymore. They just need a 20% Saudi investor. Bank of America will now have to start the process of being the nation's largest mortgage lender in a nation that doesn't have much buying to do. Maybe that will change next year, but by then I suspect the federal government or these state governments will have wiped out Countrywide (NYSE: CFC) (Cramer's Take), which surely would been out of business if BAC had stepped away. The mistakes here have been catastrophic. So what if Wachovia or Washington Mutual have great deposit bases? We know in the end that the FDIC will have to act to protect them and then we will find out what Sheila Bair is made of. I figure she's like everyone else that has surfaced in finance with the feds (except Bob Steel) -- an empty suit.

In the meantime, I cannot disagree with the statement at the top of this piece, except for where it comes to commodity companies that sell into China -- they are the bull market. Anyone who thinks they have to go down too is not in keeping with the way the market works: there's always something that works, it is just the volume of it may be so small that it doesn't matter. That's where we are right now.

All my indicators say that it is extremely dangerous to short here: oscillators, attitudes, polls. They haven't worked either -- or yet. I think the palpable gloom simply does one thing -- it'll be a stair-step down rather than a cascade, where you can make a little money when you are on the stair but then give it back on the next step, until we get to some level that better reflects a GM bankruptcy or a Citigroup collapse, one or the other, or both.

Jim Cramer is a director and co-founder of TheStreet.com. He contributes daily market commentary for TheStreet.com's sites and serves as an adviser to the company's CEO. At the time of publication, Cramer had no positions in the stocks mentioned.

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Can Hershey market its way out of trouble?

Steven Mallas — 2008-06-18T09:09:00+00:00

Filed under: Products and services, Marketing and advertising, Hershey Co (HSY), Wrigley, (Wm) Jr (WWY)

Hershey (NYSE: HSY) is having growth problems. Not only is it tough just navigating this high-inflationary period, but it's difficult keeping up with the competition. Consumers have a lot of candy choices, and even though Hershey is a big brand name in confections, it thinks it can do better in the marketing department. According to this Wall Street Journal (subscription required) piece, Hershey intends on implementing a 20% increase in spending for promotions.

This double-digit jump in marketing is a smart move, but it won't be easy to digest. With the aforementioned inflationary pressures on the rise, Hershey is going to be sufficiently challenged to push growth while balancing the upward trends in input costs. But is there really a choice here? When you have a super brand like Hershey running into trouble, the thing you need to do is get out there and prop up the inherent equity of the product portfolio.

Yet, there's a bit of a conundrum here, I think. Hershey needs to get people to buy its delicious candies (I'm certainly a fan of the awesome Reese's Peanut Butter Cup). Which demographic loves sweets? Younger kids. They would have represented a great group for growth opportunities, but Hershey has to be careful about marketing too much to this demo since the country has, rightly so, been focusing on healthy alternatives to fatty foods. Even though Hershey has been trying to make some of its portfolio healthier, the flagship brands will always be, one assumes, sugary and full of empty calories. In fact, Hershey is more than aware of this issue, as this corporate link demonstrates.

Hershey's management will have to be as creative as possible to produce innovative advertising campaigns that are both fun and aware of who is being targeted. If it were up to me, I'd go after the college-age demo via a crafty, humorous television campaign, something really funny, like those messing-with-Sasquatch ads. Differentiating its brand is more important than ever considering the recent marriage between competitors Mars and Wrigley (NYSE: WWY).

As for the stock, it isn't far from a 52-week low, and although I believe very long-term investors will do well with it considering its yield, I think the shares will be stuck in the basement for a lengthy period of time. Once Hershey gets its act together, things will obviously improve for shareholders, but for now, Hershey is hitting a difficult rough spot.

Disclosure: I don't own any company mentioned; positions can change at any time.

How Goldman brokered the Wrigley buyout

Tom Taulli — 2008-05-25T11:10:00+00:00

Filed under: Berkshire Hathaway (BRK.A), Goldman Sachs Group (GS), Wrigley, (Wm) Jr (WWY)

This past week, Wrigley Co. (NYSE: WWY) filed a proxy statement for its $23 billion sale to Mars. And, if you go to page 18, you'll see an account of the transaction -- and how Goldman Sachs Group (NYSE: GS) was a key player.

Actually, it was back in 2006 that Goldman arranged a meeting between Wrigley and Mars. After signing confidentiality agreements, the parties talked about possible business arrangements (although, a buyout was not mentioned -- but, I'm sure, it was something everyone was thinking about, especially Goldman).

However, by August 2007, Mars and Goldman talked about possible strategic options. One suggestion: buy Wrigley. To this end, Goldman arranged a meeting with Berkshire Hathaway (NYSE: BRK.A) to explore financing possibilities.

By April 2008, Mars had made an overture to William Wrigley, Jr., to discuss a possible transaction. The result: Mars offered $75 per share.

Of course, the price was not enough. As a result, there were several more bids -- with the final one at $80 per share.

Goldman would not only provide advisory services on behalf of Mars, but also finance part of the bid. No doubt, this was a potential conflict of interest, but the parties consented to the arrangement. After all, Goldman had longstanding relationships with Wrigley and Berkshire Hathaway. Besides, the parties wanted to maintain confidentiality and make sure the deal would not slow down.

Throughout the deal process, Goldman demonstrated it's new-fangled model of investment banking -- that is, playing the role of adviser and funder. It's tricky but can be helpful in major deals.

Moreover, it was well worth the effort. Goldman snagged an advisory fee of roughly $46 million.

Tom Taulli is the author of various books, including The Complete M&A Handbook and The Edgar Online Guide to Decoding Financial Statements. He also operates MergerBook.com.

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Campbell snacks on M&A

Tom Taulli — 2008-05-19T17:43:00+00:00

Filed under: Campbell Soup (CPB), Wrigley, (Wm) Jr (WWY)

Late last year, the Campbell Soup Company (NYSE: CPB) sold off Godiva Chocolatier for a cool $850 million. So why give up such a prized brand?

Well, it will mean that Campbell can focus on its core business of soups and snacks. Next, the chocolate market is highly competitive -- especially in light of the recent deal between Mars and Wm. Wrigley Jr. Company (NYSE: WWY).

The deal was also a big help for the Q1 results. Net income went from $217 million, or $0.55 per share, to $532 million, or $1.40 per share. Revenue increased 7.4% to $1.88 billion. Unfortunately, soup revenues were meager, falling 3%. Simply put, Campbell's competitors are getting the upper hand. It also doesn't help that there is commodities inflation.

On the conference call, Campbell was upbeat. After all, the company is launching a variety of health-conscious offerings. But so far, investors aren't convinced. In today's trading, Campbell's shares fell 6% to $33.70. It was the lowest level in eight years.

Tom Taulli is the author of various books, including The Complete M&A Handbook and The Edgar Online Guide to Decoding Financial Statements. He also operates MergerBook.com.

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Cramer on BloggingStocks: Heinz, P&G overcome rising costs

Jim Cramer — 2008-05-01T08:40:00+00:00

Filed under: Market matters, Procter and Gamble (PG), Wrigley, (Wm) Jr (WWY), Stocks to Buy, Cramer on BloggingStocks

TheStreet.com's Jim Cramer says they have successfully increased price, and their stocks have room to run.

It's tough not to be a Pollyanna after talking to Bill Johnson, the CEO of Heinz (NYSE: HNZ) (Cramer's Take), and after reading the Procter & Gamble (NYSE: PG) (Cramer's Take) quarterly transcript. Both of these companies have had to deal with hundreds and hundreds of millions of dollars of raw cost increases, and both have not only come through with flying colors but are more profitable than I bet even they thought they could be.

PG is amazing. Almost every business was up much more than people thought possible, with divisions like razors and hair care (shampoo) so strong that you would think that suddenly a large part of the populace has decided to start shaving and shampooing for the first time.

Innovations, like the Fusion blade, have produced remarkable returns in a short time, as Fusion is yet another billion-dollar brand that didn't exist a couple of years ago.

Most impressive? The price increases have held everywhere, even though times are tougher. One of the reasons is that it is harder than ever to trade down, because the knockoff companies have the same raw cost inputs and can't make it any cheaper. The other is that PG has created a value-added machine. The public, worldwide, believes that PG's products are better, and there is enough proprietary technology in their products to make me agree. Of course, they have the advertising budget to make you think that, but nobody in this industry believes that anyone makes anything better than PG.

Heinz used to be one of the most boring non-innovative companies on the planet. Last year, it introduced 200 new products and is getting double-digit growth worldwide, with more than 20% growth from emerging markets.

Yet it sells at 17 times earnings. This one is better than Wrigley (NYSE: WWY) (Cramer's Take) ever was and is cheaper with a fantastic brand name. Its stock has been stagnant even if management has produced huge value.

Neither of these stocks is expensive. Both have put through enough price increases that I have to believe if we had a month where ethanol was "suspended" you would be seeing profit margins go through the roof.

In the meantime, they are playing as if they are in the penalty box despite the great earnings. (Some of it is currency, so if you think the dollar is about to get strong, it could offset some of the win -- but not all -- that would come from lower input costs.)

The short-selling consensus was that PG couldn't possibly make the number with all of that plastic they have to buy and all of the ingredients that have anything to do with oil. The consensus couldn't have been more wrong.

And now the stock has a lot of room to run.

RELATED LINKS:

Jim Cramer is a director and co-founder of TheStreet.com. He contributes daily market commentary for TheStreet.com's sites and serves as an adviser to the company's CEO. At the time of publication, Cramer had no positions in the stocks mentioned.

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Before the bell: Street awaits Fed (V, DB, GM)

Melly Alazraki — 2008-04-29T07:43:00+00:00

Filed under: Before the bell, Earnings reports, Deals, Ford Motor (F), General Motors (GM), Berkshire Hathaway (BRK.A), Market matters, Wrigley, (Wm) Jr (WWY), Economic data, Housing, Federal Reserve

Stocks futures were lower early Tuesday morning ahead of the Federal Reserve Open Committee two-day meeting set to start today. On Wednesday, Fed chairman Bernanke will announce the policy decided, and while most investors expect a quarter point rate cut, they also expect the Fed to announce a pause in the cuts following some inflationary pressures.

On Monday, stocks finished the day little change ahead of the Fed meeting and despite some big deal news involving candy maker Mars and Warren Buffett's Berkshire Hathaway (NYSE: BRK.A) buying chewing gum maker Wrigley (NYSE: WWY) for some $22 billion. Also, Kirk Kerkorian's Tracinda Corp. announced its intention to purchase 20 million of Ford (NYSE: F)'s shares at $8.50 per share. With that, the Dow industrials ended the day down 20 points, or 0.16%, the S&P 500 fell 1 point, or 0.11%, while the Nasdaq rose 1 point, or 0.06%.

Not many economic releases today. Still, already RealtyTrac reported that foreclosures soared 112% in the first quarter, compared to a year earlier. And still in the housing sector that doesn't seem to be able to find a bottom yet, before the bell, the S&P/Case-Shiller home price index is due for release.
Also today at 10 a.m. EDT, April consumer confidence index will be reported and economists are expecting the index will slide from the previous month. With higher food and energy prices, along with the troubles in the housing sector and the increasing troubles in the labor market, this is far from surprising.

In corporate news we have Visa (NYSE:V), which reported its first quarterly results since going public. While net income climbed 28% and earnings per share of 52 cents handily beat estimates of 45 cents per share, the stock is trading down over 5% in premarket trading as expectations were likely for even better numbers.

Meanwhile, Deutsche Bank AG (NYSE: DB) reported Tuesday its first quarterly loss since 2003 as it announced that it wrote down $4.2 billion during the first quarter. Shares are down 1.2% in premarket trading.

Finally, General Motors Corp. (NYSE: GM) announced it plans to cut one shift each at pickup truck and large sport utility vehicle plants in Flint and Pontiac, Mich.; Janesville, Wis.; and Oshawa, Ontario, resulting in about 3,550 layoffs. GM said it will make about 88,000 fewer pickups and 50,000 fewer big SUVs this calendar year.

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Closing Bell: More news than the quiet tape can show

Jon Ogg — 2008-04-28T16:16:00+00:00

Filed under: Ford Motor (F), Wrigley, (Wm) Jr (WWY), Contl Airlines'B' (CAL), RadioShack Corp (RSH)

Today was a mixed day, which is evident in the tape. Today we had one of the top food deals announced, yet Warren Buffett came out and said we were in a recession. There were also concerns that the housing market will continue to slide along with general credit conditions, and that black stuff in the barrels was up $0.25 at $118.77 on last look.. Here were the unofficial closing levels:

DJIA 12,872.97 (-18.89; -0.15%)
S&P500 1,386.35 (-1.49; -0.11%)
NASDAQ 2,424.40 (+1.47; +0.06%)
10-YR TBond 3.835% (-0.03%)
52-WEEK LOWS
Top 10 Analyst Calls

Bebe Stores, Inc. (NASDAQ: BEBE) fell after a downgrade by Roth Capital Partners from a Buy to a Hold rating, citing disappointing sales and conservative guidance. The company reports earnings Thursday. Shares fell by more than 10% to $9.86 on the news.

Continental Airlines, Inc. (NYSE: CAL) abandoned talks to merge with United Airlines Sunday. News came as a shock to United who has been searching for a merger partner. United and US Airways may pursue a deal while Continental will press ahead with a merger agreement with American Airlines and British Airways. Shares were down 1.5% at $16.96 in the final minutes today.

Ford Motor Company (NYSE: F) rose significantly on news that Kirk Kerkorian's investment vehicle, Tracinda Corp., is to purchase 100 million of Ford's shares, reaching a 5.6% ownership in the company. Shares rose 9% to $9.20 in the final minutes today.

RadioShack Corporation (NYSE: RSH) was down after first quarter margins narrowed due to decreased sales of Sprint-Nextel contracts and increased promotions, missing analyst estimates. They posted a net income of $38.8 million or $0.30 EPS, an 8.7% drop from first quarter last year. Shares were down some 13.5% at $15.13 in the final minutes today.

Sohu.com Inc. (NASDAQ: SOHU) soared after first quarter results showed a 156% increase from a year ago and 30% from last quarter. The Chinese online media company posed revenues of $84.4 million, widely beating estimates and guidance. Shares were up almost 15% at $70.94 in the final minutes.

William Wrigley Jr. Co. (NYSE: WWY) is to be chewed up by candy bar maker Mars bar for $80.00 per share in a merger, for a $23 billion transaction. Financing and investment from Warren Buffet's Berkshire Hathaway and Goldman Sachs will aid the deal. Shares rose 23% to $77.00 at the end of the day. Hershey Co. (NYSE: HSY) and Tootsie Roll (NYSE: TR) both went up 4.5% to $36.30 and 6.3% to $24.74 respectively after the announcement.

Jon Ogg produces and edits the Special Situation Investing Newsletter for 247WallSt.com.

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Will Wrigley deal push Hershey into the arms of Cadbury?

Jonathan Berr — 2008-04-28T12:12:00+00:00

Filed under: Deals, Berkshire Hathaway (BRK.A), Hershey Co (HSY), Wrigley, (Wm) Jr (WWY)

Shares of Hershey Co. (NYSE: HSY) have jumped more than 6% on the news of the $23 billion takeover of Wm. J. Wrigley Co. (NYSE: WWY) by Mars Inc. and Warren Buffett's Berkshire Hathaway Inc. (NYSE: BRK.A) as investors bet that the maker of the eponymous chocolate bar won't stay independent for long.

Hershey, though, is a basket case thanks to soaring commodity costs and hopefully the growing interest in healthier eating. That will heighten the pressure on Hershey management to do a deal with Cadbury Schweppes Plc. or find another sugar daddy (pun intended).

The case for a merger between Cadbury and Hershey are pretty compelling as Reuters notes.

"The deal would have clear strategic logic, as Cadbury, the world's biggest confectionery group, lacks presence in the U.S. chocolate market, while Hershey is looking to expand overseas," according to the news service.

During the first quarter earnings conference call, Chief Executive David West sounded upbeat, saying the company was "making progress, while it is slower than we would like, we do see the initial signs of improving marketplace trends." He has high hopes for new products such as the Hershey Bliss. Investors, though, may not be patient.

The Hershey Trust Co., the chocolate company's largest shareholder, has resisted buyout offers in the past from Wrigley and has vowed to keep the company independent. You have to figure that the trust's board will change its tune at the right price.

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Buffett chews on a mega deal

Tom Taulli — 2008-04-28T11:00:00+00:00

Filed under: Deals, Berkshire Hathaway (BRK.A), Wrigley, (Wm) Jr (WWY)

On CNBC today, Warren Buffett talked about politics, foreign currency - and oh, his financing of Mars's $23 billion deal for Wrigley (NYSE: WWY). He likes the deal for a variety of core reasons: a sustainable long-term business, strong management and the fact that the business is something that's easy to understand (chewing gum is fairly basic, right?)

Yes, this is vintage Buffett.

As usual, the deal started with a phone call to the oracle of Omaha, and he wasted little time in getting things moving.

Wrigley is the largest maker of gum and Mars is a large maker of candies, with Snickers, M&Ms and so on in its arsenal of products. In all likelihood, this deal will spur further M&A activity in the global sector. Such deals will help companies deal with spiking commodities' prices as well as the difficulties in creating new brands.

What's more, both Wrigley and Mars are family dynasties. The former got its start in 1891 and the latter was launched in 1911. Basically, for such firms to link up, it's important that the principals understand the complexities of family dynamics. And, for the most part, Buffett seems to understand such things. In other words, he is a value-added investor who takes the long view. More importantly, he has a war chest of over $40 billion. So as time goes by - and more family businesses look to consolidate -- I'm sure Buffett will get more phone calls.

Tom Taulli is the author of various books, including The Complete M&A Handbook (www.mergerbook.com) and is also a principal in Averiware, which provides an ERP system to small and midsize businesses.

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Option Update: Hershey volatility & share price at the low end of range

Paul Foster — 2008-04-28T09:50:00+00:00

Filed under: Hershey Co (HSY), Wrigley, (Wm) Jr (WWY), Options

Hershey (NYSE: HSY) has a market cap of $7.9 billion with long term debt of $1.5 billion.

HSY reported Q1 consolidated net sales of $1.6 billion on April 24. The Hershey Trust Co. holds the largest stake in HSY.

The WSJ reported Mars and Warren Buffett's Berkshire Hathaway (NYSE: BRK.B) were close to a pact to acquire WM. Wrigley Jr.Co (NYSE: WWY) for more than $22 billion according to people familiar with the situation.

HSY May option implied volatility of 25 is below its 26-week average of 27 according to Track Data, suggesting slightly less price uncertainty.

Options Update is provided by Stock Specialist Paul Foster of theflyonthewall.com

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Option Update: Wrigley volatility flat into WSJ report of Mars-Buffett deal

Paul Foster — 2008-04-28T09:25:00+00:00

Filed under: Deals, Berkshire Hathaway (BRK.A), Wrigley, (Wm) Jr (WWY), Options

Mars Inc. and Warren Buffett's Berkshire Hathaway (NYSE: BRK.B) were close to a pact to acquire WM. Wrigley Jr.Co (NYSE: WWY) for more than $22 billion according to people familiar with the situation at The Wall Street Journal.

WWY over all option implied volatility of 24 is near its 26-week average according to Track Data, suggesting non-directional price risk.

Options Update is provided by Stock Specialist Paul Foster of theflyonthewall.com

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Biggest stock losers, 6 ways to buy checking 'float' time & credit card rates soar higher - Today in Money 4/28

Allan Halprin — 2008-04-28T09:07:00+00:00

Filed under: Google (GOOG), Microsoft (MSFT), Yahoo! (YHOO), Ford Motor (F), Berkshire Hathaway (BRK.A), Sprint Nextel Corp (S), Money and Finance Today, CIT Group (CIT), Countrywide Financial (CFC), NIKE, Inc'B' (NKE), Wrigley, (Wm) Jr (WWY), Verizon Communications (VZ), Washington Mutual (WM), UAL Corp (UAUA), Bear Stearns Cos (BSC)

In the News:

· M&M Mars, Warren Buffett to Buy Wrigley for Over $23B; Merger to Reshape Candy Business

· Kirk Kerkorian Moves in on Ford Motor; Offers to Buy 20 Million More Shares

· Continental Airlines Says No to United Merger; Not Looking for Merger in Near-Term

· Week Ahead Preview: All Eyes on Upcoming Fed Meeting

· Yahoo Ignores Microsoft's Deadline; Merger Bid May Turn Hostile

· AOL's CMO John Burbank Defects to the Nielsen Co.

· Verizon Earnings Meet Expectations

· The Real Threat to Google - Cell Phones

· More People Stealing Gas at Gas Stations as Prices Rise

· Egg Prices Soar

· Converse's All-Star Makeover Since It was Bought By Nike

Biggest Stock Losers
Since the market slump began six months ago, U.S. companies have bled away trillions of dollars in value. 80% of companies in the Standard & Poor's 500-stock index have fallen in value, according to data provider Capital IQ. Here's a damage report. The biggest loser is Bear Stearns which lost $16.7 billion in value. Other big losers include National City Bank, Ambac, CIT, Countrywide, E*Trade, WaMu, Sprint Nextel & Freddie Mac.
The Stock Market's Biggest Losers

6 Ways to Buy Checking 'Float' Time
Is your bank speeding money out of your checking account faster than you can put it in? Do you feel like someone just set your financial hamster wheel on fast-spin? Welcome to the new reality of check "float" -- or lack thereof. Float refers to the time it takes for money to leave your checking account. Nowadays, it's harder to buy extra time to pay your bills. Here are six moves you can make today to reclaim some lost "float" time.
6 ways to buy checking 'float' time -Bankrate.com

Credit Card Rates Soaring Higher
This month, Washington Mutual told some credit card customers that it was raising their rates by as much as 100%. Discover is lifting its penalty rate to 31%, effective May 1, and may apply that maximum to consumers who exceed their credit limit twice in a rolling 12 months. Bank of America raised rates for some customers in March -- triple, in some cases. So even as the Federal Reserve has cut interest rates, financial institutions have sharply raised rates for credit card customers -- even those who pay on time -- as they grapple with losses from other bad consumer loans.
Credit card rates hustle higher - USATODAY.com

A Last Resort for Student Loans
After exploring all other options, students can now turn to peer lenders for help. Here are four things to consider before you seek tuition money on a peer-to-peer lending site.
Peer Lenders: A Last Resort for Student Loans - SmartMoney.com

Antique Shoppers' Best-Kept Secrets
Estate sales can be treasure troves for deeply discounted art and collectibles. What are you waiting for? Here are the secrets to getting your hands on the good stuff and closing the deal.
Secrets of estate sale treasure hunters - MONEY Magazine

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Cramer on BloggingStocks: Nat gas dip was profit-taking, nothing more

Jim Cramer — 2008-04-28T09:05:00+00:00

Filed under: Market matters, Chesapeake Energy (CHK), Wrigley, (Wm) Jr (WWY), Anadarko Petroleum (APC), Oil, Stocks to Buy, Cramer on BloggingStocks

TheStreet.com's Jim Cramer says it's not a strong-dollar sell -- the story here is still too good.

Why did natural gas go down last week? What was that? Inventories were down. The commodity price was up. The fuel itself is green. It is better than ethanol and it is being used to fuel an increasing numbers of cars and trucks.

The whole move down had to have been triggered by something, right? Yeah, how about the fact that the stocks were up a lot and were due for some profit-taking.

Recall that the real "reason" they went down is that the dollar "got strong," and that was supposed to trigger commodity deflation; natural gas is a commodity and is therefore going to go down. (Barron's made this very case this weekend, oblivious to the facts, but loving the theory.)

This kind of thinking is just so stupid that it shows you can get chance after chance after chance to own the fuel that can take care of the nation if we just let it. Of course, the stocks began to come back later in the week as threats of supply cut-offs of crude -- they came true this weekend -- made natural gas declines virtually impossible, despite the "sense" that it peaked. So the money has came back and I believe will continue to come back.

Now, to recap, the quarters that were the best, besides Southwestern (NYSE: SWN) (Cramer's Take) on Friday, were Apache (NYSE: APA) (Cramer's Take) and XTO (NYSE: XTO) (Cramer's Take). Chesapeake's (NYSE: CHK) (Cramer's Take) cheap. I like Andarko (NYSE: APC) (Cramer's Take), too. Questar (NYSE: STR) (Cramer's Take) and Ultra (NYSE: UPL) (Cramer's Take) should not be overlooked, even though they were on fire Friday. Don't forget that Nabors (NYSE: NBR) (Cramer's Take) is the best drilling play for nat gas, too.

Can this rally continue? Why not? We have more natural gas, it can't be imported cheaply, the transportation of it is improving and the stuff's widely abundant from South Dakota to Pennsylvania (Marcellus Shale).

So, the "strong dollar/sell nat gas" trade is over.

Not too late to start buying again.

Random musings: Buffett's supposed to buy cheap. Wrigley's (NYSE: WWY) (Cramer's Take) is perhaps the most expensive packaged-goods company trading. No matter. I bet we hear how cheap it is all day.

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Buffett and Mars to buy Wrigley (WWY)

Douglas McIntyre — 2008-04-28T08:22:00+00:00

Filed under: Deals, Industry, Berkshire Hathaway (BRK.A), Wrigley, (Wm) Jr (WWY)

Why it makes sense to merge two big candy companies is a mystery. Nonetheless, Berkshire Hathaway (NYSE: BRK.A) and privately held Mars plan to spend $22 billion to buy gum company Wrigley (NYSE: WWY).

According to The Wall Street Journal, "Terms of the deal weren't immediately clear, but Wrigley has a stock market value of about $17.3 billion and it appeared that the buyers were prepared to offer a rich premium."

Wrigley does well outside the US while Mars does well in the domestic market.

What exactly Buffett and Mars get is unclear. The buyout would be at a price near the company's two-year high. The gum company's profits and revenue have been steadily rising, but it is not a spectacular growth business.

There would not appear to be a lot of redundant costs between the two firms. One makes mostly chocolate and the other, gum. It is questionable that they can benefit from one another's distribution networks. Both brands are widely available in the US and overseas.

Warren Buffett usually does well with his investments. How this one will work out is difficult to divine.

Douglas A. McIntyre is an editor at 247wallst.com and writes Ten Stocks Under $10.

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Pre-market movers (F) (WWY)

Douglas McIntyre — 2008-04-28T07:57:00+00:00

Filed under: Before the bell, Ford Motor (F), Wrigley, (Wm) Jr (WWY)

Ford (NYSE: F) is up over 7% on news that Kirk Kerkorian has taken a major position in the company.

Sohu (NASDAQ: SOHU) is up over 13% on good earnings.

Wrigley (NYSE: WWY) is up almost 26% on news of a buy-out by Mars and Warren Buffett.

Medarex (NASDAQ: MEDX) is off 12% on news of a delay in FDA action on one of its drugs.

Douglas A. McIntyre is an editor at 247wallst.com and the author of Ten Stocks Under $10.

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Before the bell: Futures higher following deal news; investors await Fed move

Melly Alazraki — 2008-04-28T07:40:00+00:00

Filed under: Before the bell, Earnings reports, Deals, Microsoft (MSFT), Yahoo! (YHOO), Berkshire Hathaway (BRK.A), Market matters, Wrigley, (Wm) Jr (WWY), Verizon Communications (VZ), Contl Airlines'B' (CAL), UAL Corp (UAUA), Tyson Foods'A' (TSN), Economic data, Federal Reserve

Stock futures got a boost this morning from a possible $22 billion deal as Buffett's Berkshire and Mars consider buying Wrigley. Also in on investors' mind is this week's Federal Reserve meeting and rate decision as well as oil nearing $120 a barrel again.

U.S. stocks finished mixed on Friday, with the Dow industrials rising 42 points, or 0.33%, and the S&P 500 up 9 points, or 0.65%. The Nasdaq composite, however, found itself in the red following a cautious outlook from Microsoft the day before, and finished the day down almost 6 points, or 0.25%.

Without much economic news today, investors will focus on the Federal Reserve Open Market Committee two-day meeting starting Tuesday. On Wednesday, Fed chairman Bernanke will announce the policy decided and most economist expect a quarter point rate cut, but also for the Fed to halt the cuts after that as inflationary pressures have been rising.

Also, attention will be on oil prices, which once again hit an all-time high of $119.93 a barrel Monday. A refinery strike closed a pipeline system that delivers a third of Britain's North Sea oil to refineries in the U.K. as well as supply outages in Nigeria have caused oil to climb again despite the strengthening dollar.

Another big new item this morning, and one that helped boost sentiment is that of Mars and Warren Buffett's Berkshire Hathaway (NYSE: BRK.A) nearing a deal to buy chewing gum giant Wm. Wrigley Jr. (NYSE: WWY) for more than $22 billion, according to The Wall Street Journal and The New York Times. Wrigley, which has a market capitalization value of roughly $13.6 billion, is seeing its shares climbing over 23% in premarket trading.

Still in deal news, Microsoft (NASDAQ: MSFT) and Yahoo! (NASDAQ: YHOO). The deadline the software giant gave the internet portal passed on Saturday. As there was no announcement from either side, this leaves Microsoft with two choices, walk away from the deal or engage in a large hostile takeover battle.

And one more item in deal news concerns Continental Airlines Inc. (NYSE: CAL), which said late Sunday it would not be part of any merger in the near future. Many who have speculated the airline could join forces with United Airlines (NASDAQ: UAUA) were surprised. Shares of CAL are down over 5% in premarket trading.

And it's earnings season with Verizon (NYSE: VZ) and Tyson Foods (NYSE: TSN) reporting today.

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Sonoco Products Company (SON): Share price cycling in bullish 'pennant'

Larry Schutts — 2008-04-21T13:51:00+00:00

Filed under: Earnings reports, Wal-Mart (WMT), General Mills (GIS), Wrigley, (Wm) Jr (WWY), Technical Analysis, Stocks to Buy

Sonoco Products Company (NYSE: SON) provides industrial and consumer packaging products, and packaging services. The industrial division makes paper cores, cones and tubes used by customers in the textile, paper, film, and construction industries. The consumer unit manufactures a variety of paper and plastic containers for food, chemicals, and personal care items. The packaging services unit provides supply chain management, artwork and displays. The firm conducts more than 300 operations in 35 countries. Customers include General Mills (NYSE: GIS), Wal-Mart Stores (NYSE: WMT) and William Wrigley Jr. Co. (NYSE: WWY).

Sonoco pleased investors last week, when it reported Q1 EPS of 54 cents and revenues of $1.04 billion. Analysts had been expecting 51 cents and $995.4 million. Management also guided Q2 EPS to 58-61 cents (60 cent consensus) and FY08 EPS to $2.44-$2.47 ($2.42 consensus).

SON shares popped on the news and have since been consolidating the gain in a bullish "pennant" pattern. Prices frequently exit pennants moving in the same direction they were traveling on entry. In this case, that would be to the upside.

Brokers recommend the issue with two "strong buys", two "buys" and two "holds". The SON Price to Sales ratio (0.81) and Price to Book ratio (2.29) compare favorably with industry, sector and S&P 500 averages. Institutional investors hold about 62% of the outstanding shares. The stock is one of those used to calculate the S&P 400 MidCap Index. Over the past 52 weeks, it has traded between $25.97 and $44.91. A stop-loss of $28.90 looks good here.

Larry Schutts is a contributing editor for Theflyonthewall.com and the Vice-President of Stockwinners.com. He does not hold positions in any of the stocks mentioned above.

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