Buyout or Sellout?

From tiny acquisitions to massive 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 130,000-plus investors in Motley Fool CAPS. A combination of two companies with high CAPS ratings should bode well for the new company'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

Advent International

NR

Processing unit of Fifth Third Bancorp (Nasdaq: FITB  )

**

$561 million

Navistar International (NYSE: NAV  )

**

Monaco Coach RV

*

$50 million

Terex (NYSE: TEX  )

*****

Fantuzzi Industries

NR

$232 million

Mylan (NYSE: MYL  )

*****

Matrix Labs

NR

$133 million

Western Digital (NYSE: WDC  )

****

SiliconSystems

NR

$65 million

Rackable Systems

***

Silicon Graphics

NR

$25 million

Fidelity National Information Systems

***

Metavante Technologies

****

$2.94 billion

CAPS ratings courtesy of Motley Fool CAPS; NR = not rated.

RVs? MRAPs? P.U.!
Today's recreational vehicle industry is more of a disaster than the 2006 Robin Williams comedy RV. (Not one of his best.) Monaco Coach's bankruptcy filing only preceded a similar declaration from Fleetwood Enterprises by a few days. It's becoming a road well traveled, and with Winnebago Industries (NYSE: WGO  ) losing $10 million in its second quarter, there's not much to laugh about here.

Buying an RV is an exceptionally discretionary purchase. With prices running as high as several hundred thousand dollars for these gas-devouring vehicles, it didn't take many days of $4 a gallon gasoline last year to put the brakes on sales. Add in a credit crunch, recession, and rising unemployment, and you've got an industry going nowhere fast. According to the Recreation Vehicle Industry Association, while 8.5 million families are expected to own an RV by 2010, shipments were down 33% in 2008, and they're expected to fall another 45% this year.

It seems an odd time, then, for Navistar International to move more deeply into the recreational vehicle industry by purchasing Monaco's assets, even if it's getting them rather inexpensively. The truck maker just suffered a setback of its own; it may not win a new Pentagon contract for MRAP vehicles.

As the largest provider of such vehicles for the Pentagon for the war in Iraq, ahead of BAE Systems and Force Protection (Nasdaq: FRPT  ) , MRAPs have been a lucrative contract for Navistar thus far. But with attention being focused on Afghanistan now, it's said the Obama administration is looking for a lighter vehicle than what Navistar manufactures. The company filed a protest with the Pentagon yesterday, causing such investor consternation that trading on its stock was temporarily halted.

Two months ago, top-rated CAPS All-Star elkwingcaddis saw trouble ahead for Navistar:

Capital Intensive Business, Z-Score way under the magic 1.8 number indicating a high risk of bankruptcy, heavy debt load, low cash flow compared to sales and in 2008 half the cash flow was adjustments to income (?). Only positive news is sales of defense related vehicles and Obama is ready to put a damper on that. This company could be headed toward bankruptcy.

A value-added offer
What's your take on these deals? Let us know on Motley Fool CAPS. While you're 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.

Metavante Technologies is a Motley Fool Inside Value selection. The Fool owns shares of Terex. Try any of our Foolish newsletter services free for 30 days.

Fool contributor Rich Duprey does not have a financial position in any of the stocks mentioned in this article. You can see his holdings. The Motley Fool has a disclosure policy.


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