The Never Ending Rumor

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A company's stock surged, and it wasn't because of a partnership, new technology developments, or the announcement of a new customer or market. It was another buyout rumor. Some companies are clearly more viable and attractive takeover targets than others--but among these companies, there are a few that exist under the perpetual rumor of a coming buyout. This takeover limbo can exist for weeks, months, or even years. Here we will take a look at three wildly different companies that live everyday in this about-to-be-bought life.

No need for takeoff

Airline mergers have been a major trend reshaping a multi billion dollar industry over the past several years. With the tie-up between US Airways and American Airlines this trend is being brought to the forefront once again. However, during the course of this airline buyout fever, Hawaiian Holdings (NASDAQ: HA), parent company of Hawaiian Airlines, has frequently been the next airline to be bought out--yet it never has.

Arguments for a buyout include the access Hawaiian Airlines has to the Hawaiian and emerging Asian markets. Additionally, Hawaiian does not currently have a place in any airline alliance, making it even more of a free agent among airlines. But Hawaiian has been the subject of buyout rumors by most major airlines at one time or another, so much so that Hawaiian rarely bothers to comment on these speculative rumors today.

Compared to the legacy carriers and even Southwest Airlines and Alaska Airlines, Hawaiian is a dwarf in a land of giants. With a market capitalization of under $300 million, Hawaiian is not prohibitively expensive for a takeover by a major carrier, many of which are sitting on billions in cash. But Hawaiian appears to want to continue growing organically. The airline placed a nearly $3 billion order for a new fleet of Airbus jets and continues with its expansion plans into the Asian markets and across North America. Based on Hawaiian's size, a buyout of this airline would not shake up the industry as a US Airways American Airlines deal would; rather it would be more on the scale of the equity purchase of Virgin Airways by Delta Air Lines, which resulted in around $360 million changing hands.

Getting the cheap phone

It appears that Research in Motion is finally finished. However, Blackberry (NASDAQ: BBRY) will pick up where RIM left off. After falling from nearly $150 per share in 2008, RIM shareholders were looking at a loss of over 90 percent--that is until the stock began to rebound on news surrounding the new launch of Blackberry 10. While the stock has certainly been volatile, it is still up well over 100 percent from its $6 lows.

For companies looking to enter the smartphone business, Blackberry has frequently been used as an example for a buyout. The hardware and software company has a huge patent portfolio, connections in the business world, and a user base of around 80 million people. For a second, it appeared that a takeover was closer when Chinese manufacturer Lenovo implied that RIM was on its list of potential takeover targets. However, Lenovo dispelled the rumor shortly thereafter and RIM returned to its pre-rumor stock value.

When one assesses the chances of a Blackberry takeover they need to factor in more than the user base and the patent portfolio. Investors must also factor in that the Canadian government would carefully examine any deal and has previously stated that it wants Blackberry to grow "organically." For Blackberry, a partnership deal is more likely to be announced than a full buyout as the company rolls out its new line of BB10 devices.

Charged up for sales

Which car manufacturer cannot build enough cars to meet demand, has thousands of reservations, and is looking to triple the number of models it produces over the next few years? It's Tesla Motors (NASDAQ: TSLA). This Silicon Valley car maker prides itself on defying industry convention by producing an electric car people want to drive and selling it in Apple-esque stores located in shopping malls.

In a time where automotive giants spend billions yearly on R&D, Tesla could be an excellent takeover target for a car company looking to strongly enter the electric car segment. The names Toyota and Daimler have both been cited as potential buyers for these manufacturer's connections to Tesla through partnerships and stock purchases. But since Tesla is both automotive and technological, the names of Google and Apple have even been tossed out by some.

However, Tesla shareholders believe their company is capable of much more than it has been able to show so far. Many see a full line of Teslas spanning from mass production economy to high end exotics. For this reason, shareholders would demand a significant premium over the current share price to be willing to sell. Despite the rumors that pop up on Tesla, Apple, or Toyota blogs and websites, Tesla appears to want to grow by itself. After all, being different from the giants it what makes Tesla Tesla.

Company for sale

While some buyout rumors prove to be legitimate, many others are just tossed into the market and quickly dispelled by the would-be parties in the deal. Hawaiian Holdings, Blackberry, and Tesla Motors are just three examples of companies living in a perpetual state of a soon-to-be taken over. While all three possess real characteristics that make them attractive for a buyout, investors should remain cautious surrounding buyout rumors of these three companies. But beyond the buyout, investors need to assess the companies themselves and determine if they should be a part of their portfolio, takeover or not.


TulipSpeculator1 has a position in BlackBerry and Tesla Motors. The Motley Fool recommends Tesla Motors . The Motley Fool owns shares of Tesla Motors . 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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