By now you've all heard the news: Bank of America (NYSE: BAC) is buying MBNA (NYSE: KRB).
And you've heard the pundits: "A wave of consolidation will break upon the banking sector." "Buy stock in XYZ Corp., ABC Savings & Trust, and 19% Interest Credit Cards R Us -- quick, before Wachovia (NYSE: WB) announces its buyout offer!"
You love the idea of buying stock in a bank that's about to get acquired and cashing out at a hefty premium when the buyout offer is announced. You just can't figure out who it is that's going to up and get bought -- there are so darn many banks to choose from. And so you come to your trusty Fools for advice.
Here it is: Forget about the banks. You're right -- there are too many players in the game for you to waste time running around guessing who's going to be tapped for the winning team next. Focus instead on an industry ripe for consolidation -- one in which there are only a handful of companies of any size worth considering. Check out the data brokers, for instance.
In a companion column to this article, I'll be discussing ValueAct Capital's buyout offer for shares of Acxiom (Nasdaq: ACXM) -- and why it's unlikely Acxiom will sell for anything less than twice what ValueAct's offering.
And that's not the only deal in the works. Acxiom competitor infoUSA (Nasdaq: IUSA) is also on the block, and its own CEO is the one pulling the trigger, offering to take the company private.
CEO Vin Gupta, a.k.a. Vin Gupta & Co. LLC, has offered to buy the company out for the basement price of $11.75 per share. The company's board is still considering the offer, but chances are it will go through unless another company comes along and ups it. While I won't lay odds on whether that will happen, I can say that as a result of the company's Q2 2005 earnings report released yesterday, those odds have just increased.
You might not think it from looking at the company's stock's performance in the wake of the earnings news, but the report looked pretty darn good, coming as it does from a management team that has real incentive to make things look bleak enough to scare off competing bidders and depress the price of its acquisition.
Sales were up 15% year-to-date over the year-ago period. Profits per diluted share nearly doubled. And the company has slashed its debt load by 19%, or $44 million. So if infoUSA was supposedly worth $11.75 when only management knew of its success, how much do you want to bet it's worth more now that the good news is common knowledge?
And why, exactly, is it that companies like infoUSA and Acxiom are selling for such bargain prices?
Read more about summer sales:
Fool contributor
Rich Smith
has no financial position in any of the companies mentioned in this article.
Terms & Conditions
RSS Headlines
Fool UK