Since the recession, mergers and acquisitions have been on the rise, keeping up the pace through 2011. According to my research this trend will continue throughout 2012 and most of the action will occur in the small cap sector, as valuable players are being snapped up by bigger players.
In today’s analysis we look at five companies that offer strong future prospects that will attract the attention of bigger players. Four of the companies have crossed the line from small-cap into mid-cap territory, but they have not grown enough to ensure safety from potential takeover bids.
Cathay General Bancorp (CATY, Financial) is a California state-chartered commercial bank with the majority of its branches in California, but it also has a presence in New York and other states, Hong Kong, and representative offices in Shanghai and in Taipei. In particular, the bank has shown strong growth in commercial and industrial loans of late, but it’s yet to reap the profits from these efforts.
The Suitor
East West Bancorp (EWBC) operates in three distinct banking segments: retail banking, commercial banking and other banking services. The Retail Banking segment focuses primarily on retail operations through the bank’s branch network.
The commercial banking segment primarily generates commercial loans through its commercial lending offices located in the Bank’s northern and southern California production offices. These offices will provide a very good fit with the branches of Cathay Bancorp in California. This is made extra attractive since the Cathay Bancorp has shown growth in the area of commercial lending.
Cathay Bancorp currently trades around $17 per share for a market capitalization of $1.36 billion, near its 52-week high, but I expect a bid from East West to easily breach the level of $20. According to YCharts Bancorp’s value is estimated at $1.8 billion and an offer should top that mark too. Closer to $25 or $2 billion is where East West Bancorp will see Cathay Bancorp’s true value.
For Growth, It Eyes the Small Screen
The complex and fast paced home entertainment industry is shaking in its boots at the rumored possibilities of Apple (AAPL, Financial) venturing into their field. Before that happens existing players will want to be ready; even if Apple doesn’t come into the market, service providers will consolidate their position through mergers and acquisitions.
TiVo Inc. (TIVO, Financial) is a prime target for a takeover because the nature of its service, subscriptions that are linked to a relatively large capital layout, provides a certain amount of stability.
The Suitor
DirecTV (DTV, Financial) has gained subscriptions from the loss of Dish Network (DISH, Financial), but it appears that Dish Network’s hemorrhage is slowing. To keep up its growth DirecTV will look outward to make gains and TiVo is set firmly in its sights.
TiVo currently trades around $12 and its market capitalization of $1.45 billion is close its enterprise valuation. Still, an offer will beat this mark despite shares trading at a 52 week high. I fully expect an offer to be above $16 per share.
For the Workers of the World
In China 51job Inc. (JOBS, Financial) provides of a range of integrated human resource services across 15 major cities. Apart from recruitment advertising services, it also provides other complementary human resource related services, consisting primarily of business process outsourcing, training and executive search services. The majority of its revenues come in the form of fees from employers for placing job advertisements in print and on its website. Employers can also access its online resume database and engage its other human resource related services.
The Suitor
ManpowerGroup (MAN, Financial), as a workforce solutions and service provider, has a footprint in 82 countries and territories. The company has made strides into China, notably being asked by the Chinese government to draft a report on future labor challenges in China. To increase its penetration into the Chinese market ManpowerGroup will look to acquire 51job and the strong market presence it has.
51job currently trades around $45 for a market capitalization of $1.27 billion, but the share has traded as high as $69.80 in the last year. 51job will make a noteworthy contribution to ManpowerGroup’s Chinese operations and I fully expect an offer to be above $55 per share approaching $60.
The Craft Is an Art
The Boston Beer Company Inc. (SAM, Financial) is the leading brewer of craft beers in the United States, selling more than 2.3 million barrels per year and 31 varieties of beer. Apart from more than 20 Sam Adams brand names, there are also eight flavored malt beverage products and one hard cider product.
The Suitor
The growing craft-beer segment has led to larger brewers moving into this lucrative market. Anheuser-Busch (BUD) has made strides in this direction with its own brews: Bud Light Platinum, Bud Light Lime, and Bud Light Golden Wheat. It does however trail specialist craft beers like the collaboration between Molson Coors (TAP) and SAB Miller which produced Blue Moon. My research points to that Anheuser-Busch will bid on Boston Beer to keep pace with its competitors in this market.
Boston Beer currently trades around $103 for a market capitalization of $928.93 million, but in my opinion Anheuser-Busch will make an offer close to Boston Beer’s 52 week high of around $115 per share.
Additional Cloud Cover
j2 Global (JCOM, Financial) provides cloud-based communication, messaging and data backup services to businesses and individuals in more than 4,300 cities in 49 countries. Its services are principally marketed under the brand names eFax, eVoice, Electric Mail, Campaigner, KeepItSafe and Onebox.
The Suitor
CenturyLink Inc. (CTL, Financial) has been expanding its integrated communications services through acquisitions in the last two years. It has been positioning itself as a one stop communication solution provider; the addition of j2 Global will add further clout to its cloud infrastructure.
J2 Global currently trades around $30 and the share price has been trading in a narrow range over the last 52 weeks. I am confident that an offer will be between $38 and $40 per share, well over j2 Global’s market capitalization of $1.42 billion.
In today’s analysis we look at five companies that offer strong future prospects that will attract the attention of bigger players. Four of the companies have crossed the line from small-cap into mid-cap territory, but they have not grown enough to ensure safety from potential takeover bids.
Cathay General Bancorp (CATY, Financial) is a California state-chartered commercial bank with the majority of its branches in California, but it also has a presence in New York and other states, Hong Kong, and representative offices in Shanghai and in Taipei. In particular, the bank has shown strong growth in commercial and industrial loans of late, but it’s yet to reap the profits from these efforts.
The Suitor
East West Bancorp (EWBC) operates in three distinct banking segments: retail banking, commercial banking and other banking services. The Retail Banking segment focuses primarily on retail operations through the bank’s branch network.
The commercial banking segment primarily generates commercial loans through its commercial lending offices located in the Bank’s northern and southern California production offices. These offices will provide a very good fit with the branches of Cathay Bancorp in California. This is made extra attractive since the Cathay Bancorp has shown growth in the area of commercial lending.
Cathay Bancorp currently trades around $17 per share for a market capitalization of $1.36 billion, near its 52-week high, but I expect a bid from East West to easily breach the level of $20. According to YCharts Bancorp’s value is estimated at $1.8 billion and an offer should top that mark too. Closer to $25 or $2 billion is where East West Bancorp will see Cathay Bancorp’s true value.
For Growth, It Eyes the Small Screen
The complex and fast paced home entertainment industry is shaking in its boots at the rumored possibilities of Apple (AAPL, Financial) venturing into their field. Before that happens existing players will want to be ready; even if Apple doesn’t come into the market, service providers will consolidate their position through mergers and acquisitions.
TiVo Inc. (TIVO, Financial) is a prime target for a takeover because the nature of its service, subscriptions that are linked to a relatively large capital layout, provides a certain amount of stability.
The Suitor
DirecTV (DTV, Financial) has gained subscriptions from the loss of Dish Network (DISH, Financial), but it appears that Dish Network’s hemorrhage is slowing. To keep up its growth DirecTV will look outward to make gains and TiVo is set firmly in its sights.
TiVo currently trades around $12 and its market capitalization of $1.45 billion is close its enterprise valuation. Still, an offer will beat this mark despite shares trading at a 52 week high. I fully expect an offer to be above $16 per share.
For the Workers of the World
In China 51job Inc. (JOBS, Financial) provides of a range of integrated human resource services across 15 major cities. Apart from recruitment advertising services, it also provides other complementary human resource related services, consisting primarily of business process outsourcing, training and executive search services. The majority of its revenues come in the form of fees from employers for placing job advertisements in print and on its website. Employers can also access its online resume database and engage its other human resource related services.
The Suitor
ManpowerGroup (MAN, Financial), as a workforce solutions and service provider, has a footprint in 82 countries and territories. The company has made strides into China, notably being asked by the Chinese government to draft a report on future labor challenges in China. To increase its penetration into the Chinese market ManpowerGroup will look to acquire 51job and the strong market presence it has.
51job currently trades around $45 for a market capitalization of $1.27 billion, but the share has traded as high as $69.80 in the last year. 51job will make a noteworthy contribution to ManpowerGroup’s Chinese operations and I fully expect an offer to be above $55 per share approaching $60.
The Craft Is an Art
The Boston Beer Company Inc. (SAM, Financial) is the leading brewer of craft beers in the United States, selling more than 2.3 million barrels per year and 31 varieties of beer. Apart from more than 20 Sam Adams brand names, there are also eight flavored malt beverage products and one hard cider product.
The Suitor
The growing craft-beer segment has led to larger brewers moving into this lucrative market. Anheuser-Busch (BUD) has made strides in this direction with its own brews: Bud Light Platinum, Bud Light Lime, and Bud Light Golden Wheat. It does however trail specialist craft beers like the collaboration between Molson Coors (TAP) and SAB Miller which produced Blue Moon. My research points to that Anheuser-Busch will bid on Boston Beer to keep pace with its competitors in this market.
Boston Beer currently trades around $103 for a market capitalization of $928.93 million, but in my opinion Anheuser-Busch will make an offer close to Boston Beer’s 52 week high of around $115 per share.
Additional Cloud Cover
j2 Global (JCOM, Financial) provides cloud-based communication, messaging and data backup services to businesses and individuals in more than 4,300 cities in 49 countries. Its services are principally marketed under the brand names eFax, eVoice, Electric Mail, Campaigner, KeepItSafe and Onebox.
The Suitor
CenturyLink Inc. (CTL, Financial) has been expanding its integrated communications services through acquisitions in the last two years. It has been positioning itself as a one stop communication solution provider; the addition of j2 Global will add further clout to its cloud infrastructure.
J2 Global currently trades around $30 and the share price has been trading in a narrow range over the last 52 weeks. I am confident that an offer will be between $38 and $40 per share, well over j2 Global’s market capitalization of $1.42 billion.
