Posts for Ticker ‘WWY’

Famous Brands For Sale, Gone But Not Forgotten (GE)(GM)(XOM)(FDX)

Corporations often start a business that becomes a famous brand, or buy companies that already have highly recognized brand names.  Over time these brands often lose their earnings power.
Corporations who find themselves in this situation have few options other than to sell these operations or to spin them off.

Spin-offs are a standard method employed by companies who need to dump divisions that are performing poorly.  Ownership of these spin offs is passed on to the unfortunate shareholders of the parent company, leaving the shareholders with the gift of ownership of a business that often has little valueGe_large.

Under some circumstances corporate boards make a decision to sell branded businesses which have retained much of their value but are no longer a good fit for the evolved core business.
 
Some of the most iconic companies in the world have been cast off by their parent firms. The most recent highly-visible example is GE’s (GE) plans to wash its hands of its industrial and appliance divisions which include the toaster oven and washer-dryer products which have made GE a household name since the 1950s.

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Posted on: August 10, 2008 – 1:37 pm in Mergers and Buy Outs, , , , , , ,

Warren Buffett: A Media & Watcher’s 360 Review Into Annual Meeting (BRK.A, BRK.B, C, WWY)

Everyone loves covering Warren Buffett, rain or shine.  His long-term shareholders love him, the media follows his every move, and everyone on Wall Street either cares about his potential next buyout or cares about the stock positions he discloses in his latest filings.  This weekend is the Annual Meeting for Berskshire Hathaway Inc. (NYSE: BRK.A) (NYSE: BRK.B), so you can just about count on steady weekend coverage too.

There are two important coverage pieces that Buffett fans and financial viewers will want to see today and this weekend.  CNBC has been airing bits of a Becky Quick interview with Warren Buffett on and off today from Omaha ahead of the meeting.  This weekend and on Monday, Fox Business will also be showing some interviews of their own and a live weekend blogging from Liz Claman there in Omaha as well.  But one interview is going to stand out sharply today that is different than others, as Fox Business gets a chance to interview John Freund from Citigroup (NYSE: C) around 3:00 PM EST (media times always subject to change).  This is said to "Buffett’s stock broker."  You can bet money he won’t be giving up any of the Oracle of Omaha’s secrets, but this may be a real first as far as a close Buffett industry source.

This annual meeting We are probably not that far away from seeing the latest round of Berkshire Hathaway’s quarter-end holdings, but here were his last holdings broken down in alphabetical order in 3 groups:

The current climate is actually more of the sort of market that Buffett can thrive in since his buyouts time frame deals with a projected hold time of FOREVER.  He’s plunked down $11 Billion over the last couple months between Marmon Holdings and on his share of the Wm Wrigley Jr Co. (NYSE: WWY).  Earlier this week, Warren Buffett already noted "We are in a recession", noting the difference from the man in the streets versus what the National Bureau of Economic Research gets around to saying.

The real question people may be asking for this weekend is "Will Warren announce a successor?"  While we hope so, we doubt it.  This may stay just as "the four replacements" (three of whom are internal).

Lastly, Mr. Buffett will be heading to Europe mid-month to go tour closely-held companies that can be rolled up or where opportunities are.  He never did do his true "Whale of a deal," but that doesn’t mean it’s ever entirely off the table.

Jon C. Ogg
May 2, 2008

Posted on: May 2, 2008 – 1:27 pm in Buffett, , , ,

Does $80 Wrigley Equal $50 Hershey? (WWY, JPM, GS, HSY, CSG)

When we saw the Mars acquisition of William Wrigley Jr. Co. (NYSE: WWY) in perhaps the largest food merger, the first thing that came to mind besides "what a premium" was "What does this do for the valuation of Hershey Co. (NYSE: HSY)."  JPMorgan (NYSE: JPM) and Goldman Sachs (NYSE: GS) are providing the lion share of the financing for Mars, and the Oracle of Omaha will provide about $6.5 Billion in financing.  The market cap for Wrigley was $17 Billion before the buyout and about $22 Billion after.

Before this deal, Wrigley was almost 15% off of its 52-week lows, and the buyout premium has this one up almost another 25% higher.  This was approximately 20-times EBITDA and about 32-times 2008 consensus EPS estimates. 

Hershey on the other hand closed Friday at $34.74, only 3.5% ahead of $33.54 low over the last year.  Hershey trades at about 19-times 2008 consensus EPS estimates.  According to Capital IQ, Herhey’s market cap is almost $7.9 Billion before any increase today and it notes that the EBITDA multiple is 9.8 based on the most recent data.  Hershey was also only valued at half of the Wrigley market cap, so in theory financing would be easier to round up.

If all these comparisons are correct on an "on the fly" analysis, you could in theory say that the premiums could be 50% to 100% for Hershey.  The problem is that Hershey has an earnings challenge and its stock was battered harder.  Its raw material costs have escalated in recent years and its dependence on chocolate means its core ingredients are under the whims of some unstable regions in Africa.  This would also not be much of a premium to the all-time highs.  Lastly, it is believed by many that the Hershey family and descendants don’t want to ever give up.

What do these stocks have in common other than stickling their products in your mouth?  Founding families still in charge or in at least a dominant role.  When you have founding families in control or when you have dual classes of stock, about the only mergers that work are friendly mergers where the money for them is just too much to say no to.  They generally want to be included for the future in the new company too for posterity.  The only hostile deals that work in these cases are the hostile deals that turn friendly, still reward the families beyond imagination, and keep them at least somewhat on for posterity.   

After looking over all of this with a quick look, we won’t say that Hershey is all of a sudden worth 50% more than it was Friday.  In fact, it may not be worth significantly more than $40.00. But this Wrigley premium probably just raised the floor on Hershey for the time being.

Shares of Cadbury Schwepps plc (NYSE: CSG) are also indicated higher by 3% in pre-market trading.  Hershey shares are indicated up about 5% pre-market.

You can join our open email distribution list to hear about previews for other mergers, spin-offs, break-ups, IPO’s, and other special situations.

Jon C. Ogg
April 28, 2008

Jon Ogg produces and edits the Special Situation Investing Newsletter; he does not own securities in the companies he covers.

Posted on: April 28, 2008 – 8:40 am in Food, Mergers and Buy Outs, , , , ,

Buffett + Chocolate = Gum

The Oracle of Omaha and Mars, the big privately-held chocolate company, will buy gum concern Wrigley (WWY) for $22 billion. The price is a 27% premium over where Wrigley traded in the last session.

On a per-share basis, Wrigley would be going for almost $80. The company’s stock has not been that high, ever. The one comparable company worth a look for valuation is Tootsie Roll (TR). It has a price-to-sales ratio of 2.6. With the premium offer for Wrigley, it will go for 4x, an unusually high valuation.

The deal is hard to fathom for other reasons. Costs savings are not really evident. The Wall Street Journal points out "A deal would expand Mars’s already considerable global reach. Wrigley generates the majority of its sales outside of the U.S."  But, each company appears to have adequate distribution networks in the US and abroad.

Wrigley has been a solid performer over the last several years with both revenue and operating income moving up. But, with the cost of commodities rising, candy company margins will probably not be what they used to be. That would seem to make Wrigley’s prospect worse and not better than they were last year.

Warren Buffett’s Berkshire Hathaway will finance much of the cost of the buy-out. He is famous for rarely being wrong about where he invests his money. But, not everything he has done has worked out.

He does own a newspaper in Buffalo, NY.

Douglas A. McIntyre

Posted on: April 28, 2008 – 4:46 am in Mergers and Buy Outs,

Media Digest 4/28/2008 Reuters, WSJ, NYTimes, FT, Bloomberg

According to Reuters, oil price moved toward $120 on fear for supply interruptions.

Reuters writes that Chrysler is trying to sell two of its North American plants.

Reuters reports that many Wall St. analysts believe that Microsoft (MSFT) will launch a hostile bid for Yahoo! (YHOO).

Reuters writes that Continental (CAL) will not merge with United (UAUA).

Reuters writest that the Fed will probably cut rates but pause from any further reductions.

Reuters reports that Qantas will raise fare due to higher fuel prices.

The Wall Street Journal writes that Berkshire Hathaway (BRK) and Mars are near at $22 billion to wuy Wrigley (WWY).

The Wall Street Journal reports that China may begin to launch satellite for foreign countries.

The Wall Street Journal reports that AMD (AMD) is making a push for getting more small business customers.

The Wall Street Journal writes that profits at China Life (CHL) fell 61%.

The Wall Street Journal writes that Big Oil should report huge profits this week.

The New York Times writes that Google (GOOG) is releasing new software for better image recognition.

The FT writes that investors are pulling huge finds out of large mutual funds.

Douglas A. McIntyre

Posted on: April 28, 2008 – 2:41 am in Press Digest, , , , , , , , ,

Top 10 Pre-Market Analyst Calls (ABK, MBI, SCA, BBBY, BAM, DHT, GFIG, PHG, PCLN, RIMM, SPLS, WWY)

These are not the only analyst calls out there, but these are the top calls that 247WallSt.com is focusing on today:

  • Ambac (ABK), M B I A Inc. (MBI), and Security Capital Assurance (SCA) were downgraded to Neutral from Buy at Banc of America (that was real timely).
  • Bed Bath & Beyond (BBBY) raised to Buy from Neutral at UBS.
  • Brookfield Asset Management (BAM) raised to Outperform from Neutral at Credit Suisse.
  • Double Hull Tankers (DHT) raised to Buy from Hold at Citigroup.
  • GFI Group (GFIG) raised to Buy at Goldman Sachs.
  • Philps Electronics (PHG) downgraded to Underweight from Overweight at Lehman.
  • Priceline.com (PCLN) raised to Buy from Hold at Citigroup.
  • Research in Motion (RIMM) raised to Outperform at Oppenheimer.
  • Staples (SPLS) raised to Buy from Neutral at UBS.
  • Wrigley (WWY) raised to Overweight from Neutral at JPMorgan.

Jon C. Ogg
January 18, 2008

Posted on: January 18, 2008 – 7:41 am in Analyst Calls, , , , , , , , , , , ,

Top 10 Pre-Market Analyst Calls (APD, PX, AMX, GOL, MA, MMM, UTX, MEDX, NEM, UBS, VIP, WWY)

These are not at all the only analyst calls being covered or making an impact in stocks this morning, but these are the ones 247WallSt.com is focusing on initially this morning:

  • Air Products (APD) & Praxair (PX) were both downgraded to Neutral at JPMorgan.
  • Amecia Movil SA (AMX) started as Overweight at HSBC.
  • Gol Intelligent Airlines (GOL) downgraded from Neutral at Sell at UBS.
  • MasterCard (MA) raised to Outperform at Keefe Bruyette Woods.
  • 3M (MMM) & United Technology (UTX) both started as Neutral at Banc of America.
  • Medarex (MEDX) downgraded from Outperform to Peer Perform at Bear Stearns.
  • Newmont Mining (NEM) downgraded from neutral to Underweight at HSBC.
  • UBS (UBS) raised to Outperform at Bear Stearns.
  • Vimpel Communications (VIP) downgraded from Peer Perform to Underperform at Bear Stearns.
  • Wrigley (WWY) downgraded to Equal Weight from Overweight at Lehman Brothers.

See full notes on Starbucks downgrade at Goldman Sachs.

Jon C. Ogg
December 11, 2007

Jon Ogg can be reached at jonogg@247wallst.com; he does not own securities in the companies he covers.

Posted on: December 11, 2007 – 7:43 am in Analyst Calls, , , , , , , , , , , ,

Cramer’s Third and Fourth Transformational CEO’s (WWY, HON)

On Wednesday evening, the third installment of Cramer’s "Top Transformational CEO’s" on Mad Money on CNBC is Dave Cote of Honeywell (HON).  When he came in things were horrible.  They had asbestos issues and there was no integration between Allied Signal.  Morale was low and it didn’t know what sort of company it was, and was rocked by the GE takeover attempt.  It is now up almost 75% since he took over.   

This CEO has definitely helped Honeywell.  No one talks about them being takeover bait any longer because the stock has done well and its valuations are not as dirt cheap as in the past.  Other than that, we’ll have to trust Cramer on this.

The fourth member of Cramer’s "Transformational CEO’s List" is William Perez of Wrigley (WWY-NYSE) is led by a transformational CEO.  He had to figure out how to grow, but not so uch ruffling the chairman of the founding family.  Now they have added more products that are turning out to be wins with added aisle space.  The stock is up roughly 27% and he had run teh private SC Johnson beforehand.  Cramer thinks Wrigley is going to beat estimates from here on out.

Wrigley is a bit of an odd-bird and it was surpising that this one was really chosen.  Hardly anyone ever dicsusses the name even though it is a $15.7 Billion market cap company.  Sometimes there is more safety and more quality in companies like this.  This one is also up roughly 64% in the last year.

Previously Cramer named H-P’s (HPQ) Mark Hurd as one of the transformational CEO’s.  Before Hurd, he also backed Fred Hassan of Schering-Plough (SGP) as the first transformational CEO.

Posted on: May 17, 2007 – 5:20 pm in Cramer, , , ,