If there was ever a slow, snail-like process in business, it’s one company buying another, especially when both are publicly traded. Regulators and government agencies sift through mountains of material, while risk arbitrage accounts buy the company being acquired and sell-short the acquiring company in an attempt to squeeze out some gains as they handicap the likelihood of the deal actually being completed.
This year has seen a plethora of huge deals being announced, and we decided to sift through the group via our 24/7 Wall St. research database, looking for the ones most likely to actually be completed. While there are no guarantees either way, we found four that look solid and offer investors a chance to buy the companies below the actual acquisition price.
While a huge deal with Halliburton fell apart earlier this year, the company recently announced a merger with General Electric. Baker Hughes Inc. (NYSE: BHI) is engaged in the oilfield services industry and is a supplier of oilfield services, products, technology and systems used in the oil and natural gas industry around the world. It also provides industrial products and services for other businesses, including downstream chemicals and process and pipeline services. It conducts its operations through its subsidiaries, affiliates, ventures and alliances.
Baker Hughes has four geographic operating segments: North America, Latin America, Europe/Africa/Russia Caspian and Middle East/Asia Pacific. It also has an Industrial Services segment, which includes the downstream chemicals and the process and pipeline services businesses. The company’s oilfield products and services are of approximately two categories: Drilling and Evaluation or Completion and Production.
The markets were somewhat stunned when a huge deal was announced to combine GE’s Oil & Gas business with Baker Hughes to create a leader in oil and gas equipment, technology and services with $32 billion in revenue that can leverage GE’s digital and technology expertise and Baker Hughes domain knowledge, capabilities and presence in oilfield services. Under the terms of the agreement, Baker Hughes shareholders will receive a special one-time cash dividend of $17.50 per share and 37.5% of the new company. GE will own 62.5% of the new company. The stock spiked on the deal but has pulled back, offering a nice entry point.
Baker Hughes investors are paid a 1.16% dividend. The Wall Street consensus price target for the stock is $60.78. Shares closed Tuesday at $58.86.
This high-profile tech stock was purchased by Microsoft after being a momentum trader’s dream for years. LinkedIn Corp. (NYSE: LNKD) operates an online professional network worldwide. Through its proprietary platform, the company allows members to create, manage and share their professional identity online; build and engage with their professional networks; access shared knowledge and insights; and find business opportunities.
It also offers LinkedIn mobile applications across a range of platforms and languages, including iOS for iPhone and iPad, Android, BlackBerry, Nokia Asha and Windows Mobile; and a public website that allows developers to integrate its content and services into their applications.
Microsoft announced in mid-summer a gigantic all cash $196 per share offer for LinkedIn. While some on Wall Street gasped at the huge premium paid, Microsoft continues to expand its product line and cut its dependence on software sales. While it remains to be seen how the fit will be, the analysts like the overall product synergies the deal brings.
The consensus price target for the stock is set at $187.45. The shares closed Tuesday at $191.32.