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Early Movers for Wednesday Feb. 20, 2013
Posted by: earningsyield (IP Logged)
Date: February 20, 2013 09:52AM

Markets continue to slowly grind higher despite news of a merger between two office supply retailers OfficeMax (OMX) and Office Depot (ODP) with Office Depot purchasing Office Max in all stock deal worth $1.2 billion or $13.50 per share. OfficeMax shareholders will receive 2.69 shares of Office Depot stock for each of their Office Max shares. The deal was prematurely announced Wednesday morning via a Press Release on Office Depot’s website but was immediately taken down as certain details were not complete. If the merger eventually goes through, it would be one of handful of mergers that have been completed in the past couple of weeks. These deals include:
  • U.S. Airways (LCC) merger with the parent of American Airlines (AAMRQ)
  • Brazilian private equity firm 3G and Warren Buffett’s purchase of Heinz (HNZ)
  • Comcast (CMCS.A) paying $16.7 Billion for the other 49% of NBC Universal from General Electric (GE)
And while still facing headwinds, Michael Dell and private equity group Silver Lake Partners plan to take PC maker Dell (DELL) private at $13.65.


Speaking of the PC maker, Dell (DELL) announced fourth quarter EPS of $0.40 per share versus analyst estimates of $0.39. Not too many people were looking forward to the results. Analysts and investors attention were looking forward to any comments Michael Dell would make in regards to the proposed deal. They were immediately disappointed as Dell didn’t discuss the proposed transaction on the conference call yesterday, and CEO Dell didn’t address analysts as he usually does.

In a smaller deal, debit card provider NetSpend Holdings (NTSP) is being bought out by Total Systems Service (TSS) for $1.4 billion in cash or $16 per share. That’s a nice 30% premium to Tuesday’s closing price.

No Gurus own NetSpend (NTSP) with Ron Baron of the Baron Funds and Gotham Capital’s Joel Greenblatt recently selling out of their positions.

Home builder Toll Brothers (TOL) shares are under pressure after the homebuilder reported a quarterly profit of $0.03 per share. Despite reversing last year’s loss, the results were below analysts estimates and thus the reason for the stock being lower in early trading. On a positive note, Toll Brothers did mention new orders jumped 49% to 973 homes and plans to enter the apartment rental business to take advantage of current market conditions of rising rents and low supply.

Gurus who have recently purchased or added to Toll Brothers include Ron Baron and Schneider Capital Management’s (SCM) Arnold Schneider with Schneider purchasing shares last quarter that had a 2.24% impact to the SCM portfolio.

Finally, Citi has upgraded shares of (SPLS) from “Sell” to “Neutral” on industry consolidation. I bring this small note up to point out how silly Wall Street is with their ratings. Just because the industry consolidates does not change Staple’s position in the office supply industry. On the contrary, it might face more competition from a stronger rival in Office Depot and Office Max. Not too mention Amazon (AMZN), Wal-Mart (WMT) and Costco (COST).

Disclosure: None

Guru Discussed: Ron Baron: Current Portfolio, Stock Picks
Michael Dell: Current Portfolio, Stock Picks
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