It's a big world out there, full of companies that are looking to get bigger. That's why I'm starting this periodic buyout breakdown to review all the deals and steals you need to know about.
First up is what could potentially be one of the biggest buyouts in recent history. Last Monday news broke that Best Buy (NYSE: BBY ) founder Richard Schulze has made an offer to purchase his struggling old company. This is a pretty swift turnaround from only months ago, when Schulze was forced out of his chairmanship of the electronics retailer when it came out that he knew about former CEO Brian Dunn's improper relationship with a subordinate.
Now Schulze wants back in, and he's willing to pay for the privilege. His offering price of $24-$26 per share is 20% higher than Best Buy's current share price of $19.36. With Best Buy treading water while it gets drowned by online competition, a buyout may be the best thing to happen to the company. And if a buyout occurs, investors who get in now may make a killing.
But don't click "buy" just yet! Fool analysts Austin Smith and Brenton Flynn are doubtful that the buyout will take place at all. Of course, this skepticism is especially warranted after the news broke yesterday that Best Buy's board has hired Hubert Joly as the new CEO. This could quickly derail any chances of Schulze completing his buyout, but the founder has stated that he will go forward with his proposal nonetheless.
If the buyout falls through, investors who bought into the hype will find themselves clutching the stock of a company that is quickly becoming irrelevant. Don't be that foolish (small "f").
May the (Sales)Force be with you
Also on last Monday, salesforce.com (NYSE: CRM ) announced that it has completed its acquisition of Buddy Media. For those not in the know, Salesforce focuses on cloud technology, social media applications for companies, and various other services that make businesses more efficient. All of these factors combine to make Salesforce the most innovative company in the world, according to Forbes.
The acquisition of Buddy Media, a social media advertising company, will only strengthen Salesforce's position as top dog. Buddy Media will combine its talents with Radian6, Salesforce's social media analytics platform, to enhance the abilities of its customers to interact, engage, and analyze their social media presence.
So what do your fellow Fools think? Opinions on Salesforce at Motley Fool CAPS are the closest I've ever seen; both regular players and All-Star players are split nearly 50/50, with a slight favor toward outperform.
Considering Salesforce has increased revenue 28% in the last year, which has helped the company achieve returns of 38.6% in the last 12 months, I'm firmly in the outperform camp.
Last week, Google (Nasdaq: GOOG ) announced it intended to acquire Frommer's Travel Guides, the classic guidebook and trip-tips company, for a rumored $23 million. While that may sound like a lot to you and me, it's a drop in the bucket for Google to pay for a company that could have a significant impact on Google's push into producing information, and not just finding it.
Last September, Google acquired Zagat, and has since incorporated the company into its search engine; whenever you Google a restaurant, for instance, the Zagat review automatically comes up as well. With Frommer's, Google will add thousands of reviews and ratings for new locations, essentially (or at least Google is hoping) making sites like priceline.com, TripAdvisor, and Yelp nonessential.
In the short term, Google spends a pittance to acquire a well-known and well-respected name in travel. In the long term this acquisition sets Google up as an even bigger player in the travel sector than it already is. But most important, Frommer's may help bolster Google's revenue.
Google gets the majority of its revenue from advertisements on its search engine. Unfortunately, in the last year or so, the company has seen a 10% decrease in the cost-per-click, thanks to varying currency rates and an increase in mobile users (who don't click on ads as often as PC users do). With the purchase of Frommer's, it seems like Google is trying to generate more clicks by running not only the advertising but the content as well; by controlling not only the content but also the advertising for that content, Google should be able to make a bit more from each click. It's a good idea, and with a deal like this, Google looks like a surefire buy to me, but Fool Sean Williams thinks that Google has lost its way.
Time Warner scores a touchdown
Finally, let's turn back the clock two weeks to when Turner Broadcasting Systems, a division of Time Warner (NYSE: TWX ) , announced that it was buying the website Bleacher Report for somewhere in the neighborhood of $200 million. For those not in the know, Bleacher Report is a sports-centric website that was founded in 2006. The site has grown exponentially since then, earning around 10 million users per month, which makes it the third most popular sports website in the world (behind ESPN and Yahoo!). The twist that makes Bleacher Report so popular is its accessibility; the site lets anyone write for it, and because of this has nearly 6,000 contributors (the majority of whom write for free).
It's not just Bleacher Report's status on the Internet or its cheap business strategy that makes this an excellent acquisition for Time Warner; it's the site's connection with its community. So many corporations these days try to connect with their customer bases online through social media and ad tracking (heck, that's the entirety of Salesforce's business). Bleacher Report does it differently by letting users come to the site on their own, instead of chasing them. This means that contributors on the site want to be there, want their voices to be heard, and most important, want to interact with one another through the medium of Bleacher Report.
Time Warner just cut out the middleman and found a way to connect directly with the massive number of sports fans in America. The company already has several connections with this fan base: TBS and TNT sports coverage for television, and Sports Illustrated for print. Bleacher Report only adds strength to this already impressive sports portfolio.
These companies have been busy, and there are plenty more where they came from. Tune in next time for more companies wheelin' and dealin' here on Buyout Breakdown!
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