Potential Buyout Candidates

With all the recent takeover deals announced I decided to take a look at some possible buyout targets still left. Some of the stocks are known takeover targets, others might be more speculative buyout targets. The prices listed are as of close on 1/15/10.






MELI-MercadoLibre $42.21

Potential Suitors: AMZN, EBAY

Why: Mercao Libre is the online retail leader in South and Latin America. The company allows users to sell items through auctions and fixed prices. The company grows as broadband connections become more prominent in emerging markets. The internet penetration is just over 30% right now. The company is in 12 countries. The company also has Mercado Pago, which is similar to Paypal. Ebay already owns over 18% of the company so they become the likely acquirer. Amazon is a potential buyer to gain market share in countries it is not as strong in.

Why Not: Ebay could be just fine owning a piece of the company as it similarly does with Craigslist. Partial ownership can keep it less exposed to smaller country’s instability and government regulations.



HANS-Hansen Natural $40.45

Potential Suitors: KO, PEP, DPS

Why: One of the best performing stocks of the last decade, Hansen Natural has always had takeover rumors. Coca-Cola recently took over the distribution of Monster energy drinks, Hansen’s leading product. Coca-Cola got rid of its distribution of Rock Star, which Pepsi took over. I believe that this sets up well for Coca-Cola to test drive the product before it buys it. Dr Pepper Snapple is also a possible suitor as it is not strong in the energy drinks category.

Why Not: Hansen could possibly expand itself by buying out a smaller company such as National Beverage, Jones Soda, or Big Red.



IMAX-IMAX $13.14

Potential Suitors: CNK, RGC, DIS, SNE

Why: Imax is likely to be bought out by a larger company looking to push into the upcoming digital television boom. Sony has a partnership with the company coming for a digital channel. Disney has acquired lots of companies recently. The company trades at a market cap below a billion dollars and is affordable to a large company.

Why Not: Imax has had a hard time earning a profit over the years and could turn some companies away. The company turned down a buyout offer several years ago and is likely to turn one down again.



CIDM-Cinedigm Digital Cinema

Potential Suitors: IMAX, SNE, GOOG, LGF, CNK, RGC

Why: The company currently brings large sporting events to the big screen and concerts from around the world as well. The company also owns an advertising company that shows ads on the big screen before feature presentations. The company is very valuable as theaters continue to convert theaters to digital and more concerts and sporting events are added to the big screen.

Why Not: The company is small and not very noticeable in the larger market. With a market cap of $38 million, it seems small and unlikely to be acquired in this market.



NFLX-Netflix $50.90

Potential Suitors: AMZN, MSFT, GOOG

Why: Netflix has been rumored for years to be under Amazon’s watch. I recently wrote in my Top Ten Stocks for 2010 that I believe the company will be bought out in the next two years. As Movie Gallery and Blockbuster continue to shut down stores, Netflix remains the winner by offering movies through the mail at a fixed monthly price. The company could be acquired for over its $2.75 billion market cap and only has a couple hundred million dollars in debt, which is small for a growing company. I like to think that a deal could bring around $75 a share for the company or the equivalent in stock of the acquirer.

Why not: I believe a buyout is likely to be turned down by Netflix. The CEO Reed Hastings is very confident in his company and continues to grow and expand into digital content.



UA-Under Armour $27.99

Potential Suitors: NKE, VFC, Adidas, LULU

Why: Under Armour is a major player in athletic apparel, and continues to grow and expand into more and more categories. The company is very valuable to a larger apparel company such as Nike, Adidas, or a clothing conglomerate such as VFC, which owns Wrangler, Lee, North Face, and Vans. The shares have traded as high as $66 over its public life and would likely be acquired for $50 or more.

Why Not: The company can continue to expand on its own by opening more retail outlets and entering new markets. The company could also acquire an apparel company.



KNOT-The Knot Inc. $10.04

Potential Suitors: IAC, MSFT, NWS, GOOG

Why: The Knot is the leading online source for those getting married soon. The company has also expanded into housing and baby advice for new couples. The company also releases magazines in their various fields. The company makes lots of money from ads on the site and through the magazine and through selling the products. Wedding don’t seem to be something that will go away and something people are willing to spend money on no matter what kind of economy we have going. The company comes with no debt and could pay off nicely for an acquirer.

Why Not: The company bought a smaller company that was on facebook called weddingbook to expand its social media profile. The company could continue to grow by acquiring others and may remain content on its own.



JSDA-Jones Soda $0.61

Potential Suitors: KO, PEP, DPS, FIZZ, HANS, Big Red, COT

Why: Jones Soda currently has a bid of $0.30 a share from privately held Big Red. I think that the offer will be raised or someone else will come in with a higher bid. Jones Soda had over $30 million in revenue last year. The company operated with a loss but could be turned profitable with better run management and a better distribution system. I think a move by Hansen Natural here could be the best bet as they could grow in the energy drink market and juice market.

Why Not: Well, a deal is likely but at what price. The deal at $0.30 still needs to be voted on by shareholders and could still be rejected.



PBH-Prestige Brand Holdings $7.80

Potential Suitors: PG, JNJ, CHD, Major Drug Companies

Why: The buyouts of Chattem and Bare Essentials recently are proof that companies still love over the counter products that can generate free cash flow. This company has some boring brands like Clear Eyes, Chloraseptic, and Comet that are not market leaders in categories but brands that people know. The acquisition would be cheap for an acquirer at a market cap of under $400 million and similar debt amounts.

Why Not: Dipping in to non market leaders could be risky. Many of the company’s brands were bought from other large companies who wanted to get rid of them in the first part.



LGF-Lions Gate Entertainment $5.48

Potential Suitors: SNE, NWS, DIS, SNI, DISCA

Why: Lions Gate has produced some good movies and owns the valuable Saw franchise, Tyler Perry movie franchise, Mad Men and Weeds television rights. The company also beat several bidders for the Television Guide channel. A larger company could help it finance more pictures a year and make the company more profitable.

Why Not: Movie studios aren’t exactly trying to acquire others. Many are struggling to produce blockbusters on their own and wondered about their own failures.



ETFC-E Trade Financial Corporation $1.84

Suitors: TROW, AMTD, SCHW, Edward Jones

Why: E Trade has a good online trading model and a nice following of users. The company got caught up in bad loans and will likely only survive with a buyout. This provides a great opportunity from a larger firm to double their number of subscribers by taking on some debt.

Why Not: The company has almost $12 billion in debt and currently operates at a loss.



TR-Tootsie Roll $26.97

Potential Suitors: HSY, KFT, Cadbury, Nestle

Why: Tootsie Roll has grown nicely over the last several years and has valuable brands that could be a nice fit to a larger company.

Why Not: The Kraft buyout of Cadbury is likely to get some more bids possibly from Hershey and could keep companies away from making any large purchases.



SAM-Boston Beer $48.20

Potential Suitors: BUD, TAP, Heineken, Ambev, SAB Miller

Why: The market for beer makers is hot right now. Heineken just bought the Femsa Cerveza unit to push into emerging markets. United States is the number one beer market by profits and Boston Beer is one of the largest craft beers in the country. The market cap is under $750 million and could probably be bought for just over a billion. This could be a cheap buy in a high takeover sector.





Disclosure: I own stock in IMAX.