Investing

Ten Huge Global Brands The Chinese May Buy

Douglas A. McIntyre

6. Kodak – EK
> Value of Brand: N/A
> Market Cap: $864.46 Million
> Stock 5 Year Performance: 90% Below S&P
> 5 Year High: $29.31
> 2010 Revenue: $7.187 Billion
> Sales Outside of US: 57%

Kodak became a registered trademark in 1888 which makes it one of the oldest major brands in the United States. Its parent, Eastman Kodak, a long-time maker of cameras, film, and printing machines was late in its transition to the digital age. The company’s market capitalization is below $1 billion. Revenue was $13.4 billion in 2006 compared to $7.2 billion last year.  Kodak still has a presence in the digital camera and digital printing business. It also has a relatively healthy scanner operation. The company suffered a substantial setback when its patent action against Apple and RIM was ruled invalid by the ITC. Kodak’s single most value able asset is its brand which is still recognized around the world. Levovo is the most likely buyer of Kodak.

Also Read: China Passes U.S. as World’s Largest Manufacturer

7. Footlocker – FL
> Value of Brand: N/A
> Market Cap: $3.11 Billion
> Stock 5 Year Performance: 16% Below S&P
> 5 Year High: $26.53
> 2010 Revenue: $4.854 Billion
> Sales Outside of US: 29%

Footlocker operates 3,426 stores in 21 countries and has little presence in Asia. The shoe retailer barely made a profit in the fourth quarter of 2010– only $57 million. Footlocker’s major problem is that it has to compete with big box retailers like Wal-Mart and Target both of which have tremendous website traffic and strong balance sheets. Footlocker’s big advantage is that it has distribution relationships with Nike, Adidas, Under Armour, and Reebok–the strongest brands in the athletic wear industry. If Footlocker had a large presence in China, it could sharply increase sales. The most logical buyer in the People’s Republic is retailer Dashang Group.

8. Chrysler
> Value of Brand: N/A (Comparable: Ford $7.195 Billion (Interbrand)
> Market Cap: N/A
> Stock 5 Year Performance: N/A
> 5 Year High: N/A
> 2010 Revenue: $41.9 Billion
> Sales Outside of US: N/A

Chrysler may emerge from Chapter 11 this year, but it is still by far the weakest of America’s three largest car companies and has only about 10% of its home market. Its sales overseas are very modest. Chrysler will find it nearly impossible to compete globally against Ford, GM, Toyota, VW, and Honda. It has no upscale brand to challenge BMW, Mercedes, Infiniti, Lexus, or Cadillac. Chrysler’s relationship with it managing shareholder Fiat has born little fruit. Chrysler would certainly have a chance to compete in the world’s largest car market–China–if it had an owner in the People’s Republic. None of the China-based car companies have a global brand like Chysler’s which dates back to the 1920s. It is difficult to value Chrysler’s brand. Interbrand values Ford ad over $7 billion. Chrysler might be worth half of that. The firm still loses money, but had sales of $40 billion last year. Chrysler needs an owner with deep pockets and access to a large manufacturing base which is relatively inexpensive. Geely and SAIC would both be potential buyers.

9. Subway
> Value of Brand: $12.032 Billion (Brandz)
> Market Cap:
> Stock 5 Year Performance:
> 5 Year High:
> 2010 Revenue: $15.2 Billion
> Sales Outside of US: 31%

Subway is privately owned and has 34,264 locations in 96 counties. Its presence in China, where it has 199 stores, it small compared to McDonald’s and Yum Brand’s operations which include Kentucky Fried Chicken and Pizza Hut. Subway is owned by Doctor’s Brands which is controlled by the food chain’s founders. Subway’s sales are larger than Yum!’s by about 40% but because of Subway’s franchise system, it is hard to peg a value for the company. Food retail firm Tingyi would be a logical buyer. Yum! must be considered at target as well, to some extent because of its spectacular success in China. But, Subway is the more likely target because as a private company, it needs no shareholder approval

10. Domino’s – DPZ
> Value of Brand: (Comparabe: Pizza Hut: $3.973 Billion (interbrand])
> Market Cap: $1.05 Billion
> Stock 5 Year Performance: 39% Below S&P
> 5 Year High: $33.52
> 2010 Revenue: $1.57 Billion
> Sales Outside of US: 11%

Domino’s brand value is probably very close to that of Pizza Hut, its primary rival. That would put the figure at about $4 billion. Even if the Domino’s number is 50% of Pizza Hut’s, its brand would be worth double its $1 billion market cap and slightly more than one times its revenue. That makes the company a bargain in comparison to its brand value, if most other large publicly held companies are an indication. Domino’s has a large store count with over 9,000 outlets.  One of the attractions Domino’s has to a Chinese owner is that it has very little presence in China, which is unusual for a US based fast food company. If an owner in the People’s Republic could duplicate the success of Yum!, Domino’s value, and sales, would soar. Tingyi would be a logical buyer for Domino’s

Douglas A. McIntyre and Charles Stockdale