Five Rumored Takeover Targets

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Wall Street appears to have become swept up in yet another wave of merger mania. With companies such as Heinz and Dell getting takeover offers, and mergers like Office Depot/Office Max, 2013 is shaping up to be a big year for corporate deals.

Trying to guess the next big deal is probably a futile endeavor. That said, here are five companies that have been rumored to be on the block in the past. Perhaps 2013 will finally be the year they are bought out.

Chesapeake Energy could be an attractive natural gas play
Given Chesapeake’s (NYSE: CHK) extensive natural gas resources, the company could be an attractive target for an energy giant. Since Chesapeake’s debt issues came to light last year, there have been a flurry of articles arguing that the company should be sold (including this May 2012 article from MarketWatch).

Because of the extensive debt burden, Chesapeake has been forced to sell off some of its assets. In addition, the debt may have been a contributing factor to CEO and founder Aubrey McClendon’s resignation.

McClendon will step down April 1, and with him out of the way, possible buyers might include ExxonMobil, Total, or BHP Billiton.

Walter Energy has long been seen as a cheap play on coal
Shares of Walter Energy (NYSE: WLT) have spiked several times over the last few years, as periodic market chatter has placed the company on the takeover block. An October 2011 article from Investment U (citing various Bloomberg and London Times pieces) suggests a number of possible acquirers, including Anglo American and Vale. A May 2012 piece in The Telegraph links the company to BHP Billiton.

Of course, over the past two years, Walter Energy shares have performed abysmally. Coal demand simply hasn’t been there, and shares have slumped over 70%. What might have been a “cheap” coal play in October 2011 has only gotten cheaper.

Joy Global has been linked to GE frequently in the past
Like Walter Energy, Joy Global (NYSE: JOY) has seen occasional trading sessions where shares surge on chatter of an imminent deal. But unlike Walter Energy, most of the rumors around Joy Global have tied the company to one buyer: General Electric.

GE has said it plans to build a mining equipment division through acquisitions, and Joy Global fits that profile perfectly. For its part, Joy Global hasn’t shied away from the rumor:  Joy’s CEO told The Business Journal in October that he would “do the right thing for our shareholders.”

Monster Beverage would offer access to the growing energy drink market
Shares of Monster Beverage (NASDAQ: MNST) shot up in April of 2012 after a Wall Street Journal article linked the company to Coca-Cola (a rumor Coke subsequently denied). Still, Monster might be a target for a consumer staples giant hoping to cash in on the growing energy drink business.

Monster surpassed market leader Red Bull in terms of total U.S. sales volume last year. Beverage giants Coke and Pepsi have tried to crack into the market, but have had little success.

Carl Icahn thinks Netflix should be sold
Activist investor Carl Icahn bought about 10% of the Internet streaming giant last fall. In a 13D filing, Icahn revealed that he believed “Netflix (NASDAQ: NFLX) may hold significant strategic value for a variety of significantly larger companies.”

Netflix was linked to Microsoft in the past, after Netflix CEO Reed Hastings stepped down from Microsoft’s board. The Windows maker might want Netflix to embolden its push into the entertainment space.

Invest based on takeover hope?
CNBC’s Jim Cramer is fond of telling investors never to buy stock simply because they believe the company will be taken over. That’s probably prudent advice, given that someone who bought (and held onto) Walter Energy shares in 2011 has likely lost a tremendous amount of capital.

That said, investors with stakes in these companies (or short sellers betting against them) should be aware of the chatter. Shares of these companies could see sudden, random spikes on seemingly no news if the rumors resurface. Of course, there’s always the possibility that one of the rumors actually comes to fruition -- and shareholders might enjoy a quick pay day.


joekurtz is short shares of Netflix. The Motley Fool recommends Monster Beverage and Netflix. The Motley Fool owns shares of Monster Beverage and Netflix and has the following options: Long Jan 2014 $20 Calls on Chesapeake Energy, Long Jan 2014 $30 Calls on Chesapeake Energy, and Short Jan 2014 $15 Puts on Chesapeake Energy. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. Is this post wrong? Click here. Think you can do better? Join us and write your own!

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