From tiny acquisitions to massive conglomerate combinations, Wall Street's urge to merge remains strong. How can we tell the dealmakers from the deal breakers?
Breaking down the buildup
To help, we'll turn to the 125,000-plus investors in Motley Fool CAPS. A combination of two companies with high CAPS ratings should bode well for the new firm's future results, while a high-rated company that joins a lower-rated one may benefit one set of investors more than the other.
Despite troubles in the capital markets, the deals won't stop; they simply might involve more stock and less cash. Or, like this week, they might just slow to a trickle. Here are a handful of recently announced deals, and the ratings for each participating company on CAPS' five-star scale:
|
Acquirer
|
CAPS Rating
|
Target
|
CAPS Rating
|
Deal Price
|
|
Medtronic
(NYSE: MDT )
|
****
|
CoreValve
|
NR
|
$700 million
|
|
Medtronic
|
****
|
Ventor Technologies
|
NR
|
$325 million
|
|
International Petroleum
Investments
|
NR
|
Nova Chemicals
(NYSE: NCX )
|
****
|
$499.2 million
|
|
Nuance Communications
(Nasdaq: NUAN )
|
***
|
Zi
|
NR
|
$35 million
|
|
Agrium
(NYSE: AGU )
|
*****
|
CF Industries
(NYSE: CF )
|
****
|
$3.6 billion
|
|
Netezza
(NYSE: NZ )
|
***
|
Tizor Systems
|
NR
|
Undisclosed
|
|
Boyd Gaming
(NYSE: BYD )
|
**
|
Stations Casino
|
NR
|
$950 million
|
CAPS ratings courtesy of Motley Fool CAPS; NR = not rated.
Into it deep
What goes on in Vegas apparently doesn't stay there but instead reverberates throughout the country. Big-time casino operators are down on their luck on the Vegas strip with the Sands, Mirage, and Harrah's all rolling craps. But the wheel of fortune is also spinning out of control for other gambling meccas like Atlantic City and Macau, and glitzy casinos like the Borgata are crapping out, too.
Boyd Gaming's Borgata is Atlantic City's top-grossing casino yet fourth quarter operating income was still half of what it was a year ago and revenues were down 10% at $183.5 million. Overall Boyd swung to a loss in the quarter of $2.51 a share compared to a $0.35 per share profit last year. And it's not just casinos that are going bust, but all forms of gambling. Deathbed candidate Isle of Capri Casinos, for example, is shutting down its Florida harness racing track for the summer for the first time in 10 years while Boyd's jai-alai fronton in the state is imposing layoffs.
It's a situation not all of its own making, and not all of it is related to the recession. To attract more gamblers, gambling houses sought to install slot machines when Florida relaxed restrictions on them, but with the state taxing them at a 50% rate -- the highest in the country -- it's become an untenable situation.
Yet the run of bad luck also presents some opportunities to those that haven't overleveraged themselves. Station Casinos was preparing a bankruptcy filing when Boyd figured adding it to its portfolio of properties would come up aces when the economy finally turns. Where Station was offering bondholders $0.10 to $0.50 on the dollar in exchange for about $2.3 billion of existing bonds, Boyd said it is willing to pay $950 million for all the assets, assuming its due diligence doesn't skew the odds against it. In the event Station does seek bankruptcy protection, Boyd said it was willing to be a "stalking horse" bidder. A "stalking horse" is a friendly bidder chosen by the company to prevent any lowball bids being made for the company's assets.
CAPS member VegasGold is one who thinks that although gambling in Vegas is a sucker's bet at the moment, Boyd is one that can beat the odds. "I know Vegas is in the toilet," says VegasGold, "but Boyd is not leveraged out."
A value-added offer
What's your take on these deals? Let us know on Motley Fool CAPS. And while there, you can start your own research on these or other stocks. Read a company's financial reports, scrutinize key data and charts, and examine the comments your fellow investors have made all from a stock's CAPS page. There's more than you think.
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