5 Attractive Acquisition Targets In 2012
Christopher is a member of The Motley Fool Blog Network -- entries represent the personal opinion of the blogger and are not formally edited.
During February our interests turn to the matter of love. Here are five stocks that could set the pulses racing of companies looking to expand.
Money out to buy a reputation
It was hired by NASA in 1986 to determine the causes of the Space Shuttle Challenger disaster and through the years Exponent, Inc. (NASDAQ: EXPO) has featured in other prominent cases, and continues to be one of the brightest stars in consulting today.
Exponent's services breach across a host of disciplines, it employs scientists, physicians, engineers, and business and regulatory consultants. Successive periods of sustained growth in revenue have boosted the stock from near the $20 mark in July 2007 to where it now approaches $50 per share.
The suitor
During a presentation at Bank of America Merrill Lynch Global Industries Conference, Fluor Corporation (NYSE: FLR) underlined the imperative role it played to come up with solutions for clients. This even happens before projects are awarded and are often the deciding factor that gives it the competitive advantage. Sounds like Exponent'sability to find solutions to complex problems is an ideal fit.
Exponent's stock is trading around $50, just below its one year high of$51.17. The company does not pay a dividend; instead investors have to rely on growth in share price, which it has delivered over the past five years. Expect shareholders though to want a little more return on their investment - we could see an offer around $60 per share.
So many suitors, which one will it be?
Having been around the rumor mill before with regards to mergers and acquisitions, the continued rising results of Radware Ltd. will only pique more interest in this tech stock.
In its latest fiscal quarter, Radware reported a 15% year-over-year quarterly revenue increase of $42.2 million. Earnings per share and operating margins were also the best the company had ever seen.
The suitor
Radware has a unique product that offers network security and delivery solutions for virtual and cloud data centers. The tech firm recently improved the e-commerce capabilities of Papa John's (NASDAQ: PZZA), the world's third largest pizza company.Also among its clients are banks, insurance agencies, and government agencies.
When rumors first surfaced about a possible merger, the names of Cisco and Hewlett-Packard Company were mentioned as potential candidates. But it is with IBM that there already exists a relationship of cooperation; its website says this creates a: "close partnership where Radware and IBM can provide their mutual global customers with bundled,best-of-breed technology and services solutions from market-leading organizations."
Last time rumors started a possible offer of $45 per share was mentioned or $950 million. At that time the stock traded around $28,whereas it is now priced around $32, but I do think we can see a premium being paid in the same range.
Weathering the storm
Undoubtedly the Greek economy is in more of a slump than the rest of the world. There is more bad news for Athens-based Diana Shipping, Inc. though: it has to operate in one of the industries that have been worst affected by the world economic downturn - dry bulk shipping.
It is estimated that demand for dry bulk carriers declined by 85% since 2008; the Baltic Dry Index is now at 26 year lows. In 2011 Diana Shipping lost nearly 37% of its share price as it battles rising debt and the pressures of the downturn.
The suitor
Copenhagen-based Moeller-Maersk is the owner of the world's largest container line with a total of six divisions, dry bulk shipping not amongst them, but it has problems of its own. Its CEO has taken a period of sick leave and it battles with losses in its container division.
The good news is that the problems in shipping are caused by an oversupply of vessels as much as decreased shipping demand - it might weed out competitors to see survivors in a stronger position than before. Adding another division could only further bolster Maersk.
Diana Shipping is trading around $8 per share and has a $671 million market capitalization, but we should see a premium being paid: Despite liabilities of $392.95 million, its total assets are worth $1.58 billion -offers around $1 billion or around $12 per share could square matters.
Voracious growth spurt
The California-based tech company, Newport (NASDAQ: NEWP), supplies high-precision test, measurement, and automation systems and subsystems to manufacturers of fiber optic components,semiconductor capital equipment, industrial metrology, and aerospace.Some think it's all about lasers, but there is quite a wide range of product offering, including: optics, fiber optics, spectroscopy instruments, and motion and vibration control ranges.
The suitor
IPG Photonics (NASDAQ: IPGP) has seen its worth in the eyes of investors rise and plummet and rise again last year, but the recent rally saw it move up by more than 70% on the back of better profit expectations.Earnings per share have grown by 262% since September 2010 while revenues have increased by 78%. Sounds great, doesn't it? I think it would do well though if it diversified while the going is good.
Newport trades around $19 at the moment and its market capitalization is $716.64 million; but you can expect to see an offer made at quite a premium - it might test the $25 level.
Silver and gold
It has its eye on becoming a premier, mid-tier silver producer, but Endeavour Silver Corp. might find themselves in someone else'sline of sight. Mining out of Mexico, 2011 was good for the company,increasing silver production by 14% and gold by 23%, silver volume being 45 times that of gold produced. There are two mines in Mexico and two more projects being developed in Chile. It makes for quite a healthy profit when the average silver sale was $40.72 per ounce and only came at a cost of $5.03.
The suitor
It encountered difficulties extracting due to manganese deposits atone of its Mexican mines, but First Majestic Silver Corp. remains the producer with the greatest price leverage: 96% of revenue is tied to the price of silver.
Gaining quality junior assets in silver isn't easy at the moment, as was admitted by Hecla Mining, also on the prowl in the U.S. and changing tack to gold because of this. Going after a mid-cap producer might be the only solution to First Majestic if they want to expand.
Endeavour holds $94 million in cash and equivalents and heldover 812,000 silver oz and 3,000 gold oz metal inventories after the fourth quarter, reserves that could turn a buyout into a drawn out battle. Currently trading around $11, the price could be pushed to $20.
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